totse.com | American Injustice

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The information contained in this series is based on my personal experiences and those I have interviewed for this series, throughout this whole ordeal. It is my goal in writing this to present you with the facts surrounding our struggles because I believe only the truth and the facts that will extricate us from this mess.

When I decided to publish this series I contacted people those stories I felt would be most compelling for you to hear. Several of them, David Oxenford in particular, played a major role in what happened with HR 5469. They initially agreed to participate in interviews with me but later did not respond to my requests to schedule a time for the interview to take place.

So in speaking and referencing them I can only give you my side of the story based on my interactions with them.

To David and all the others involved in the struggle of 5469, I want you to know the door is open for you to tell your story to our audience. If you would like your voice to be heard please contact me and give our readers a chance to hear from you so they can better understand the true picture of what really transpired.

I first became involved in the Internet back in 1997 and even then it was the promise of streaming media that intrigued me most.

More than 5 years later, as the owner of Gabriel Media Inc., a company that specializes in streaming media and the production of live, on location events, the endless possibilities are still intriguing me.

I have produced and hosted many live events over the last several years, including New Year's Eve 1998 on Fremont Street in Las Vegas and many entertainment and technology-related events including annual productions of COMDEX, CES, Networld+Interop and NAB.

So when the opportunity presented itself for me to produce and host a live, Las Vegas-based webcast designed to raise money to help Save Internet Radio, I thought it would be the perfect event. Little did I know the ramifications this experience would end up having on me personally and the webcasting industry as a whole.

Making the decision to go public with the events that led up to this point has not been an easy one for me. But in light of everything that has happened I honestly believe it is best the entire situation comes out in the open, because the real story of 5469 goes beyond what has already made it into print and people need to know that.

This is the story of an industry struggling to grow against all the odds. It's a story of the people, the technologies, the laws and the circumstances that exist and how an entire industry has been rocked to the core by the American legislative system.

There are enough acronyms to make your head spin: DMCA (Digital Millennium Copyright Act), CARP (Copyright Arbitration Royalty Panel), LOC (Librarian of Congress), RIAA (Recording Industry Association of America), IWA (International Webcasting Association), VOW (Voice of Webcasters), NAB (National Association of Broadcasters).

And then there are the "technical" terms" - P2P File Sharing (sometimes referred to as just file sharing), Downloading, Live Streaming, On-Demand streaming and the one this story is all about - Internet Radio.

If I hadn't lived through these last months and witnessed for myself what happened, I would have a hard time believing it was true. But I did live through it; I did see what this has done to the webcasting community - and now I need to back up my statement with actions and bring the truth and the facts to light.

There are some people along the way who have tried to challenge my credibility in regard to the very public stand I have taken against this injustice and in speaking out for the entire community. Some have suggested that since my "business" really isn't affected by HR 5469 I have no authority to speak out on behalf on the industry as a whole. To those who have questioned me I say two things: First HR 5469 in its present form affects everyone in the webcasting industry, even companies who don't stream content on the Internet. This is a fact. Second, even though the main focus for business within Gabriel Media, Inc. is special event broadcasting, if I choose to stream music, unless it is music entirely from Independent Artists, then I am subjected to paying either the current CARP Rates or being bound under HR 5469.

I took a very public stand in this matter because I was witness to a tremendous violation of trust. I could not stand by and watch the industry I love be buried under the burden of bad legislation. I was asked to respond to a need within the industry for a voice that would be heard. An industry that needs a champion. Someone who will not just stand silently by and watch - too paralyzed by fear to make a move in any direction.

And while I can share with you my perspectives, my thoughts and my feelings as things evolved, it is really my goal to share with you the people and events that were responsible for bringing us to where we are now.

Over the course of this series you'll hear from people representing all different segments of the webcasting industry. You'll hear their stories, their thoughts, their opinions and their problems with HR 5469 as it stands in its current form. You'll wade through the army of acronyms, see how they all fit together, and hopefully be able to understand the challenges that are facing the webcasting industry and how we are working to overcome them. You'll hear about Congressman Jay Inslee who worked hard to introduce legislation that would have benefitted our industry greatly - legislation that was unceremoniously tossed aside; Congressman James Sensenbrenner who introduced HR 5469; and Senator Jesse Helms who refused to be swayed by pressure to allow HR 5469 to pass on the Senate Floor.

You'll learn how a group of people entered into negotiating a private deal with the RIAA, then ended up being forced into a situation beyond their control, under pressure from all sides to try and set a standard based on those negotiations for an entire industry that was neither included in or represented at the negotiating table.

Yes, this story has it all - greed, scandal, betrayal, politics, lies and deception. But beyond the ignominy stands the one thing that makes any story worth telling, hearing and believing. And that is LOVE. This story is filled with love. The love from the people whose stories you'll come to know for an industry they have chosen to embrace as their own.

There is no other explanation for why we webcasters do what we do, other than for love. We love our jobs, we love our audience, we love the artists whose music we chose to play. We love our industry, we love the Internet and we love the technologies that make it all possible.

But our pockets are not deep, our war chest not well-funded. We don't have the backing of major companies with fat wallets and sometimes confusing agendas.

Our resources may be limited but our efforts are sincere, our words are heartfelt and our intentions are clear. We want you to hear us and take our "David and Goliath" story to heart. We want you to realize that what is happening to us now could dramatically affect your choices and alternatives on the Internet in the future. If you believe in the Internet we are asking you to believe in us, the webcasting community. Bring our story into your life, join your voices with ours and help us reach the Congressional and Senatorial leaders who are making the laws today and the laws that will dramatically affect the applications of tomorrow!

Every story has a cast of characters, including a hero, and this one is no different. In part two of this multi-part report I will introduce you to the players, the terms, the legislation and our hero Senator Jesse Helms as we set the stage for the American Injustice series.

Back in October of 1998, Congress passed a law called the "Digital Millennium Copyright Act" (DMCA) which, among other things, provided a means for record labels and recording artists to collect royalties when their copyrighted works were played via digital media. The term "digital media" includes Internet radio and satellite radio transmissions and the royalty fees to be collected are in addition to the fees that are also required to be paid to ASCAP (American Society of Composers, Authors, and Publishers), BMI (Broadcast Music International) and SESAC (SESAC at one time was in fact an acronym for Society of European Stage Authors & Composers; They are now known as "SESAC" and now represent American song writers & publishers and have done so for some time).

Historically, terrestrial radio stations have always had to pay royalties to composers. The total amount of those fees range from 3% to 5% of revenues and are paid directly to ASCAP, BMI and SESAC. Terrestrial radio stations have never paid performance royalties to record companies or artists, because Congress recognized that the performing artists and the record companies benefited sufficiently from the promotional value of radio airplay.

The promotional value comes when the radio stations place a song in rotation on their playlist, the station listeners hear the song and then (theoretically) go out and buy the CD or tickets to an upcoming concert.

It seems only obvious that the same rules would apply to Internet radio stations also, doesn't it? But unfortunately that isn't the case. The argument from the RIAA is that Internet radio has no "promotional value" and that is why the additional fees need to be paid. The interesting thing about this argument is that this same decree applies to terrestrial radio stations who also stream their content on the Internet. How can that be and how can anyone put this forth as a logical argument?

Let me give you a good analogy. My favorite radio station here in Las Vegas is MIX 94.1. I listen to MIX 94.1 every chance I get, but most often when I am driving in my car. MIX 94.1 does not broadcast over the Internet, but if they did, I would listen to them while I was working on my computer, also.

So how is it that the promotional value of my listening to MIX 94.1 in my car is any greater than my listening to MIX 94.1 on the Internet? It seems to me that the promotional value of an Internet listener would be even greater because the power of the Internet gives me instant interactivity. If I was sitting at my computer and I heard a new song from my favorite artist I would probably go to the artists' web site and check for information on their new CD. I would take the opportunity to sample a few sound clips from some of the other songs on the CD, read about the making of the album, upcoming tour dates, view concert pictures and reviews, and if I liked what I saw and heard, would buy a copy of the CD, possibly some other promotional items like posters, t-shirts, etc. I can't do all that on an impulse driving down the freeway!

Doesn't this sound like a classic demonstration of promotional value? The artists agree - (see the Janis Ian audio interview below!) But under the DMCA, if MIX 94.1 was broadcasting both on the air and over the Internet, then they would be required to pay both the standard ASCAP, BMI and SESAC rates and the additional fees for Internet transmissions. Same music, same station, same listener, but additional fees for the delivery medium?

The second reason has to do with what is referred to as a "perfect digital copy." This is based on the premise that when you transmit music over the airwaves (terrestrial radio) what the listener is hearing is an analog performance and not a perfect digital copy of the performance. The justification given for charging Internet Radio stations a separate fee under the DMCA is for compensation to the artist for that transmission which is considered a perfect digital copy.

If you understand anything at all about the Internet, then you know how incredibly silly this supposition is right now. Most Internet radio stations encode and stream their feed at 28.8 and the idea of listening to a transmission streamed at 28.8 and being able to hear anything close to a perfect digital copy is more than just a stretch of the imagination.

When broadband becomes prevalent then the perfect digital copy argument could be valid. But today, given the circumstances and technology that exists on both sides of the streaming feed, it is by far a point that can't reasonably be addressed.

And what happens in the near future when radio stations begin digital broadcasts? Will the rules change again? Will the argument for the promotional value of terrestrial radio outweigh the argument for additional compensation in the transmission of a perfect digital copy?

Once the DMCA was passed, the U.S. Copyright Office, which reports to the Librarian of Congress, was given the task of determining the appropriate royalty rate for the statutory license. They gave record companies and webcasters a chance to negotiate an agreement among themselves. Record companies asked for 15% of revenues whereas webcasters wanted to pay something closer to the 3% of revenues that they pay composers. They could not come to terms.

The U.S. Copyright Office therefore, in 2001, established a "Copyright Arbitration Royalty Panel (CARP)" -- a panel of three arbitrators to resolve the issue. The standard for an appropriate rate was determined by the Copyright Office to be the rate that a "willing buyer/willing seller" would agree upon. Dozens of witnesses representing both copyright owners, represented as a group by the RIAA, and webcasters (primarily the large corporate entities, like AOL and Clear Channel, who are members of DiMA, and not the thousands of smaller independent webcasters) testified. The CARP determined that the only example of a "willing buy/willing seller" was a deal cut between Yahoo! (which had recently paid $5 billion for Broadcast.com) and the RIAA in July 2000 (while the dotcom craze had not yet crashed) and based their ruling largely on the terms of that deal.

For most webcasters, the critical issues in the ruling are (A) that the CARP arbitrators set a rate far higher than the rate for composers' royalties, based largely on the Yahoo!/RIAA deal, and (B) they rejected the "percentage of revenues" royalty concept that both sides had previously been willing to accept and which most webcasters were counting on to stay in business.

Fees Determined by the Librarian of Congress (LOC) On July 8, 2002. the Copyright Office and Librarian of Congress announced the fees at $.0007 per song, per listener for all but FCC licensed non-commercial stations. FCC licensed non-commercial stations will pay a fee of $.0002 per song per listener. There is an additional fee of 8.8% of the per song, per listener fee for the ephemeral license. The annual minimum fee is $500.

In addition to the rates, and also in compliance with the DMCA reporting requirements, the US Copyright Office has proposed that stations on the Internet must produce reports containing over 50 pieces of information about every song they air. At present the technology does not even exist to meet these requirements, let alone begin the reporting process, although several companies are working on developing solutions that would help stations streaming their content over the Internet comply.

Who is the RIAA? The mission statement on their web site says: "The Recording Industry Association of America is the trade group that represents the U.S. recording industry. Its mission is to foster a business and legal climate that supports and promotes our members creative and financial vitality. Its members are the record companies that comprise the most vibrant national music industry in the world. RIAA members create, manufacture and/or distribute approximately 90% of all legitimate sound recordings produced and sold in the United States."

The RIAA is the 22nd largest lobbying group in Washington DC, up from 40th in 1999.

The RIAA is the group that threatens American corporations whose employees may download music.

The RIAA is the group that successfully won the right to gain confidential subscriber information from Verizon with suspicions of peer-to-peer file sharing.

The RIAA is the group that went to the table to negotiate an independent deal with a group of individual webcasters - the deal that ended up being written up as an amended HR 5469, passed through Congress on October 7, 2002, and touted as an "alternative" to the CARP rates.

The RIAA is the group whose Chairman refers to negotiations with webcasters as "turning chicken shit into chicken salad."

The RIAA is the group that got the AFL/CIO involved in killing the original six-month stay version of HR 5469 - saying it would delay payments to "artists and their families" - then the following week slipped a provision into the HR 5469 that would allow them to recoup all personal and administrative expenses from the royalties collected before paying the artists they represent. Congressman Berman (D-CA) asked Mr. Sensenbrenner on the House floor before the passage of the amended HR 5469: "Is this standard business practice?" Congressman Sensenbrenner answered him: "It's my understanding that it is."

I cannot speculate on the RIAA motives. But I can tell you I seriously question the level of interest the RIAA has in working with the webcasting community as a whole when I witness over and over again what could be construed as a complete lack of respect for those in our industry and the artists they represent!

Sound Exchange is the Royalty Collection Arm of the RIAA. To date, Sound Exchange still has not been set up as a separate company, and to the best of my understanding does not yet have the infrastructure in place to begin the collection and distribution of the royalties they are seeking to collect from the webcasting community.

The National Association of Broadcasters (NAB) is the trade association that represents the interests of free, over-the-air radio and television broadcasters.

The Voice of Webcasters (VOW) is the name used by the group of individual webcasters who began independent negotiations with the RIAA to seek relief from the October 20, 2002 retroactive royalty rates.

The Voice Of Webcasters web site is a site created to help give webcasters a central place to come together on issues related to the webcasting industry. The VOW is not a trade organization and states that the VOW web site was created as a neutral place to share information and ideas to promote and defend the interests of the webcasting industry.

As an important note, the press release that was issued on the agreement that became the wording for the amended HR 5469 was issued in the name of the RIAA and VOW.

The International Webcasting Association (IWA) web site states that: The IWA is the largest worldwide non-profit trade organization dedicated to the growth and development webcasting and streaming media over the Internet and other networks. The IWA serves as a forum for the ideas, people and issues shaping the future of the webcasting industry. IWA represents webcasters, streaming media companies, entrepreneurs, individuals and academics throughout the United States, Europe, Asia, Canada and Australia.

The IWA is the trade organization I was part of, and the IWA legislative committee is the committee I was on until I resigned on October 8, 2002.

The Negotiating Team is a group of people who retained an attorney (David Oxenford of Shaw Pittman in Washington DC) and began negotiations with the RIAA in mid-2002 in an effort to strike an independent deal for royalties and retroactive rates. The members of the negotiating team were:

Kevin Shively of www.Beethoven.com
Wanda and Jim Atkinson of www.3wk.com
Mike Hays of www.Twangcast.com
Ron Rubin of www.BoomerRadio.com
Mary McCann of www.iMNetworks.com
Dave Landis of www.Ultimate-80s.com
Steve Wolf of www.Wolffm.com
Mike Roe of www.radioio.com
Gary Dobek of Digitally Imported
Bill Goldsmith of www.RadioParadise.com
Bob Ottoway of Classical Music Detroit
and a representative from www.OnionRiverRadio.com

From time to time in some of the text or in an audio interview you may also hear the negotiating team referred to as the "Sensenbrenner 13". This is the name given to the team by some in the webcasting industry after they began negotiations with Congressman Sensenbrenner's office on September 30, 2002.

HR 5285, otherwise known as the Internet Radio Fairness Act, was introduced by Congressman Jay Inslee in July of 2002. 5285 was the original Bill supported by the webcasting community and the Bill for which members of the webcasting community participated in the September Hill Walk for. The goal of the September Hill Walk was to raise awareness of the issues facing webcasters and to gather Congressional support for 5285.

By October 1, 2002, the support for 5285 had grown from the original 3 sponsors of the Bill to 39 co-sponsors.

HR 5469, otherwise known as the Small Webcasters Amendment Act, was penned originally on September 26, 2002 by Congressman James Sensenbrenner. When introduced in its original form, HR 5469 was a one-paragraph Bill that asked for a 6-month stay which applied to the entire webcasting community.

It is also referred to as the "Bait and Switch" Bill after it was pulled from the bills to be introduced on the Congressional Floor on October 1 and then formally introduced a week later and passed through the House, having morphed from its original one paragraph to more than 30 pages of language approved (I am told) only by Congressman Sensenbrenner's office and the RIAA. I have also been told that even the original Congressional co-sponsors on this Bill were not aware of the changes in the language before the Bill was passed.

This is one of the major reasons I felt compelled to bring this story to light. Tens of thousands of people who care about Internet Radio responded to the appeal made by the webcasting community to support the original version of HR 5469. They called, faxed and emailed their Congressional and Senatorial leaders asking them to support HR 5469.

As Americans, we believed in the integrity of our Congressional leaders. We believed that the introduction of HR 5469 was sincerely meant to help our community as a whole. But now it appears that HR 5469 was actually introduced as a stalking horse, a means to raise hope and generate support for a Bill that was never intended to be passed in its original form. In fact, Congressman Sensenbrenner was actually praised on the House floor by fellow congressmen on his tactical approach of forcing the two sides of the issue to the negotiation table. Does this approach deserve praise?

I can only give you the facts, as I know them and as they have been related to me. It is up to you, the reader, to come to your own conclusions based on what really happened. I believe that the perversion of HR 5469 from its original for into its current amended form is something that is simply not acceptable to me as an American. Consider the following facts and see if they are acceptable to you:

#1) Congressman James Sensenbrenner penned a piece of legislation which stated a specific purpose (calling for a 6-month stay in rates for the entire webcasting community) and based on that original language the American public and other Congressional leaders supported that legislation and worked to have it passed through the house.

#3) It was completely overhauled in forced marathon negotiations session between the RIAA and 13 small commercial webcasters. It was the intent of the small commercial webcasters to negotiate a deal with the RIAA that would apply only to them and give them some relief from the retroactive royalty rates due on October 20, 2002.

#4) When the two sides could not come to an agreement, Sensenbrenner's office took charge and wrote their own "deal."

#5) The Bill in its revised form passed in less than 7 minutes discussion on the House floor during a "rules suspension" session. The Bill was not read into the minutes before a vote was taken. I spoke with a few of the co-sponsors of the original Bill who told us they had not been made aware of any revisions, nor had they been given a copy of the new Bill prior its introduction on the House floor.

I will have much more in depth information to relate on the negotiations and what led up to the changes in 5469 later in this series.

The Bill was then moved to the Senate. A unanimous agreement on the Bill was required before the Bill could be brought to the floor. Several senators expressed objections on behalf of several factions of the webcasting community, which the RIAA and VOW rallied to satisfy. One Senator could not be convinced this was a good Bill.

After HR 5469 failed to make it to the Senate floor, it was Senator Jesse Helms who addressed the webcasting community and spoke out about the inequity of HR 5469 in a letter dated October 21, 2002:

Thanks for letting me know of your opposition to the so-called "webcasting" bill (HR 5469) currently pending in the Senate. I agree that this bill is dangerous for the fledgling internet broadcasting industry, and I am deeply concerned that small webcasters will not be able to remain viable if the royalties proscribed under this legislation take effect.

Like many of my colleagues, I was appalled at the outcome of arbitration before the Library of Congress, which set royalty payments at an exorbitantly high rate. I supported the original incarnation of HR 5469, which placed a six-month moratorium on the bill taking effect.

Unfortunately, the recording industry was able convince House leaders to replace this moratorium with a far-ranging rate structure it negotiated with a small fraction of disadvantaged webcasters. The resulting bill threatens the future of many small webcasters whose views were never considered during the negotiation process.

I certainly hope that a solution can be found that is fair for the recording industry, the artists it represents, and the hard-working entrepreneurs that make up the webcasting industry.

It is solely because of Senator Helms that the entire webcasting community and Internet radio listeners now have an opportunity to bring to light the disgrace that took place with HR 5469. Senator Helms refused to let a bad legislation be turned into law and we will never forget that.

In part three of American Injustice: The Story of HR 5469 we'll take a look at the International Webcasting Association (IWA), the negotiating team and examine more of the facts that led to the huge divide in the webcasting community.

Because this part of the expose is so integral to what happened within the IWA and with the negotiating team, it was difficult for me to decide how best to describe the events surrounding this portion of the series.

First, read the resignation letter I wrote in October below. The words still reflect my feelings as I reread it now, weeks later.

Second, the events leading up to and during the Save Internet Radio live webcast are described in conversational terms in my audio interview for this segment. This information has not been made public before.

Third, an audio interview with Susan Pickering, former Executive Director of the IWA, clearly spells out IWA charter, intentions and actions regarding working with the RIAA. Some eye-opening comments here!

When all is said and done, the IWA played a big part in this story, both through actions and inactions. Some of the details are not pleasant, but it is my sincere hope that this information helps the webcasting community move forward and grow. Knowledge is power. I hope that this information takes our readers behind closed doors and clarifies more thoroughly the players, technologies, legislations and challenges facing the streaming media community.

#1) David Oxenford of Shaw Pittman represented both the IWA and the 13 who were negotiating an independent deal.

#2) The IWA Legal Defense Fund was set up to cover the legal costs of negotiations that were intended to benefit IWA members, not independent webcasters seeking relief through a private deal.

#3) Susan Pickering clearly states that the IWA tried several times during the spring and summer of 2002 to get to the negotiating table with the RIAA. David Oxenford was supposed to represent the IWA in those negotiations.

#4) While the IWA never made it to the negotiating table with the RIAA, David Oxenford did indeed represent a group of independent representatives, some of which were IWA members in negotiations with the RIAA that began during the late spring of 2002 and ran through October 2002.

#5) Susan Pickering, who was the Executive Director of the IWA at the time, was not aware that these private negotiations had begun or were taking place.

#6) 4 of the 9 members of the negotiating team were on the IWA legislative committee.

#7) It was clearly stated that the monies raised for the IWA Legal Defense fund were to be earmarked as payment to David Oxenford for his services.

To the IWA Board of Directors, The IWA Legislative Committee, David Oxenford at Shaw-Pittman, CARP-List Members, Members at large of the Streaming Media Community and the Press:

On October 1, 2002, at 12:00 pm Pacific Time, I began a 10-hour per day live broadcast with the intent to draw attention to the plight of Internet Radio broadcasters and raise money to benefit the IWA Legal Defense Fund.

I did this based on the belief I was working to support HR 5469 as it was originally introduced into Congress; a bill calling for a stay in the rates imposed by the Librarian of Congress and due on October 20, 2002; and because I believed that Shaw-Pittman, the law firm involved in negotiating the deal with the RIAA was working on behalf of the International Webcasting Association (IWA).

I am appalled, outraged and disgusted by the turn of events I have witnessed over the last week and will no longer sit and watch the blood, sweat and tears of the many be drown out by the disingenuous hue and cry of the few.

I will NOT support HR 5469 as it was introduced and passed on the floor of Congress on October 6, 2002, nor will I encourage anyone who asks me to support it. I will immediately turn my attention to contacting every Senator I can, both by telephone and by fax, to let them know about the grave injustice that has been carried out in the name of the small webcasting community.

Regardless of the stand the IWA takes on this issue, I, today, resign my membership in the IWA. I cannot stand by and continue to support an organization that allows its members to be bullied into accepting legislation that was negotiated one, under duress and two, by a team which originally set out to negotiate a private deal for themselves with the RIAA.

I call on the members-at-large of the webcasting community to ask themselves why the press release about the deal on HR 5469 was done in the name of the RIAA and the Voice of Webcasters. I contend that the IWA was not represented here and its members are not responsible for the legal bills incurred by Shaw-Pittman. It is my belief that this was not a deal negotiated on behalf of the IWA or all of its members.

I have been asked by many in the webcasting community how this could have happened. I think it is time for me to respond, and to let the webcasting community know all the facts about how HR 5469 could change from one paragraph as it was originally introduced, to a 30-plus page bill serving only the RIAA and a few on the negotiating team.

I believe I have an obligation to tell the truth NOW, as I know it, to the many who have banded together to fight for a common cause. They have seen their hopes go up in smoke because of a backroom deal negotiated under duress by a team that did not set out to represent webcasters at large and does not accept that the RIAA has a complete lack of respect for the webcasting community and never intended to deal fairly, honestly or forthrightly with the issues facing webcasters today.

American Injustice

by Ann Gabriel