By this time next year, the compact disc will be in hospice. Perhaps it'll keep breathing for awhile, persisting like vinyl records in indie retail shops, but after next Christmas you can bet that Best Buy will be scaling back their CD sections to stay in touch with consumer trends.
Music collections are migrating from the Case Logic book onto our hard drives, and our listening habits rely increasingly on our computers. Corresponding with that shift is an explosion of music availability on the web. As consumers become accustomed to accessing exactly the song they want to hear from 80,000 stored snugly in their pocket, tolerance is dwindling for a skip from a scratched CD or a three-minute commercial break on FM radio.
Bunky Odom, founder of the web station RadioFreeCharleston.com, believes that the future of music distribution is on the web. "The CD is going to be a promotional tool for a band," he says. "The Grateful Dead did that from the beginning: 'Here's our music, enjoy it, and if you can, come buy a ticket and some merchandise.' If you're a good band, people will pay their dollar to hear you."
Odom should know. As the vice president of a Macon, Ga., music firm that shared office space with Capricorn Records, he managed Marshall Tucker, Dr. John, and the Allman Brothers. Now settled on Sullivan's Island, the close friend of Col. Bruce Hampton and Derek Trucks hopes to make his station Charleston's go-to place to hear and learn about Americana and independent music.
"I got tired of hearing my friends bitch about FM radio, so I started doing some demographics about what's missing in the Charleston market," says Odom. One Sunday, sitting at Bert's Bar, Odom asked to borrow their music collection, spreading out the albums on a booth table. Surveying the piles of Southern roots and rock music, not the sounds typically heard on the Clear Channel airwaves, RadioFree was born in Odom's mind. "WNCW (the public radio station in Western N.C.) is why Asheville is so hip," he says. "Our market is really starving, and this station is going to provide."
RadioFree's logo reads "Nothing Matters But the Music," and Odom personally approves every song that's put into rotation. Unfortunately for RadioFree and thousands of other web stations across the country, the major record labels feel differently about what matters. Under heavy lobbying from the industry giants, the Copyright Royalty Board (CRB) announced on March 2 of this year that webcasters would be subject to a "per play, per user" fee on every song beginning this past May 15, retroactive through the beginning of 2006. For the majority of stations, that fee would have ranged from 100 to 1200 percent of their income.
The new rates, which increase annually over five years, would cost a station averaging 16 songs/hour 1.28 cents per listener-hour in back payments for 2006, and 3.04 cents per listener-hour by the time the rates double in 2010, effectively forcing the little guy off the air. A well-run station with advertising spots and banner ads might hope to make 1.0 or 1.2 cents revenue per listener-hour. The math indicates that even at the 2006 base rate, royalty costs exceed income.
Facing the immediate and effective death of web radio, the commencement date of the new fees was pushed back to July 15 after SaveNetRadio.org put together a lobbying campaign in Washington. House Bill 2060, which would nullify the fee hike, already has 111 cosponsors (over a quarter of the representatives), and a similar Senate bill has bipartisan support. "Some senators and congressmen have had more e-mails about this than on the war or immigration," says Odom, although in S.C., John Spratt (D-District 5) is the only of our six representatives to cosponsor thus far.
Broadcast stations with a heavy online streaming presence would also feel the brunt of the increase. Last week, National Public Radio filed a joint petition with the Small Commercial Webcasters to the U.S. Court of Appeals, requesting an emergency stay on the Royalty Board's ruling. If nothing happens before the July 15 "Internet radio D-Day," stations like RadioFreeCharleston will very likely go off the air.
The majority of internet radio broadcasters are not "pirate" stations. Under the current system, RadioFree pays a monthly fee based on their income and expenses to the Recording Industry Association of America's (RIAA) digital music fee collection body SoundExchange, who then distributes the payment to the record companies and labels.
"It would be extremely detrimental to have to pay per-song, per-listener," says Carl Hubbard, the Charleston attorney who represents RadioFree. "It will no longer make financial sense to do this." Webcasters are hoping Congress will adopt a royalty rate of 7.5 percent of revenue, the rate currently paid by XM and Sirius satellite radio. Hubbard estimates that royalties to publishing groups and lyric-owners would put the station's payments at around 12 percent of revenue, which he considers fair and manageable.
If the Royalty Board's rate hike stands, web stations would have the option of cutting deals with individual record labels and artists. FM broadcasters already pay no royalties to record labels, who consider them a marketing tool to sell CDs. A similar symbiotic relationship exists between web stations and smaller labels — RadioFree already receives a dozen or so albums a week from artists hoping for airplay. Over 80 percent of RadioFree's catalog is from independent labels, who would be ostensibly hurt by a web radio genocide. Still, the complications of negotiating multiple contracts and keeping song-by-song fee charts from playlists would likely discourage many stations from staying on the air.
Since the Digital Media Copyright Act was implemented in 1998, web radio stations have been limited in ways that satellite and FM broadcasts are not. RadioFree could never host a "Bob Dylan" hour — an artist is allowed to be played only three times per three-hour block of airtime. They're not allowed to reveal what the next song will be, a means of discouraging users from recording the stream. Pandora, an online station that allows users to design a radio station tailored to their taste, recently ceased serving users outside of the U.S. in response to legal pressure about interactivity on web stations.
On May 22, SoundExchange proposed a compromise to small webcasters to provide "additional time to build their businesses." Stations with annual revenues below $1.25 million would pay 10 percent in royalties up to $250,000, after which they'd pay 12 percent. Those making more would be subject to the Royalty Board's new rates. SaveNet-Radio opposes the plan, citing Internet broadcaster AccuRadio, who made just $5,000 less than the $1.25 million cap in 2006. They'd have owed $144,000 in royalties, but $5,000 more in advertising sales would have upped their bill to $1.8 million.
Web radio advocates claim the compromise plan would discourage innovation and promotion by stations hesitant to grow. RadioFree attorney Hubbard says they could possibly handle the rates with their daily listenership where it is now in the hundreds, but a quick increase to 10,000 if they catch on would immediately put them under. "We want to create awareness for the Americana genre of music and help artists grow," he says. "We're all about protecting artists' rights and making sure they're compensated." RadioFree and thousands of stations like them are hoping they don't get milked for all their worth, crossing their fingers that Congress adopts the 7.5 percent rate.
The Future of Radio
Despite regulations, web radio is growing, and the rate hike is an indication that major record labels want to get a handle on it before they experience revenue loss. Labels need a medium to survive on when music ceases to be physically distributed on a large scale, and most recognize that satellite radio is not the answer. "XM and Sirius are dead in the water," says Ed Seeger, the president and CEO of American Media Services (AMS), a Charleston-based nationwide developer and broker of radio properties. "I don't know many businesses today that can lose $145 million in a quarter, pay their CEO $35 million, and then pay some jock (Howard Stern) $500 million to say 'Dick', 'peter', and 'pussy,' on the air."
Seeger's company helps broadcast stations increase their value, primarily by establishing a presence on the web. He criticizes satellite radio's business plan of "pigeonholing traditional radio as being a dinosaur and dead," citing that broadcast radio still has 250 million weekly listeners to satellite's 15 million.
For $229, consumers can purchase the Torian InFusion, a pocket web radio smaller than an iPod that can stream internet broadcasts anywhere a wireless connection is available. In his car, Seeger can stream web radio from his cellphone onto his car stereo. AMS is currently building TheRadio.com, a site that will let users view a satellite map, then click on a geographic area to zero in on local web stations.
With the technology already in place and about to go mainstream, web radio is poised to become the primary free means of listening to music. Legislation has put file-sharing sites like Napster under wraps, but with streams growing in popularity, it makes sense that the industry is scrambling to regulate. The problem lies in creating order without monopolizing the industry and stifling creative thought.
"The beneficiaries of the proposed increase are not the artists and songwriters sitting in Nashville and Austin," says Seeger. "It's the management and the record companies." He agrees that an organized fee system is needed, but says that "somebody got a little greedy with the numbers." Still, Seeger feels that web radio's potential to generate revenue assures that politicians won't let it be killed off. He just worries if they'll do it in time to save the existing stations, before legislatures take off for summer vacation.
Nothing Matters but the Music
If the politicos in Washington can settle on a fair rate, expect to hear more from Radio Free Charleston in the coming months. They've recruited the Charleston Crystal Ball (local web streamers of concerts and surf reports ) to build their site and manage their server, which is currently growing to include nearly 10,000 songs.
Advertising on the station will be in 20-second segments, with no more than four spots an hour, a far cry from the long blocks of booming-voiced car commercials on broadcast stations. "FM radio has been their own worst enemy," says Odom. "When you're going down the road and commercials or a long-winded DJ come on, you click to another station. They're losing listeners every day."
Just as he does with songs, Odom plans to pick and choose who advertises on RadioFree. Half Moon Outfitters plans to begin airing spots in the near future. "It's great that there's a locally-owned station playing noncommercial, interesting music," says Half Moon's Katherine Smith. The store has hosted the "Blue Moon Jazz Hour" on USC's student station in Columbia and hopes to put together a similar show for RadioFree.
Although DJs will never be chatting away on RadioFree, Odom hopes to incorporate tailored shows in the future such as local music showcases and airings of live concerts from area venues.
So far, RadioFree has attracted older listeners yearning for quality, new, Southern roots rock and songwriting, but Odom sees the crowds that frequent the Pour House, the Windjammer, and Fiery Ron's as his target demographic. The station puts artists with upcoming local concerts in heavy rotation, and the web format allows listeners to instantly go to a performer's site and learn more about them.
"I was very impressed by the Old Crow Medicine Show's turnout at the Music Farm this spring," says Odom. "Here's a band that gets absolutely no FM radio play, yet they sell out the Music Farm on a Sunday night. There's an underground movement here, and that's 1,000 people who would like what's on Radio Free Charleston." Odom wants RadioFree to serve as a platform for independent artists to let people know about them, creating buzz for a concert before they come to town.
SaveNetRadio.org has over 400 artist testimonies posted on their site, each detailing how web radio has benefited their careers. Musicians want to succeed, but many can't stand big business and just want to build an audience and make a living. "We regularly get e-mails from people thanking us for introducing them to new music," says Odom. "Web radio has to build a community with its audience."
The internet has opened the floodgates of musical accessibility for both artists and listeners alike, and the big dogs at the top of the music industry food chain are fearful that they're losing their share. Odom rightly points out that most people aren't going to the web to search out the newest Mariah Carey or big country hit they can hear on FM radio; they're looking for something new. If it can weather the royalty storm, Radio Free Charleston hopes to provide that, always keeping in mind their golden rule of the web: "The music has to be great."