Webcasting Legally

by Jamie Zawinski
Updated March 2007


Today's word is ``labyrinthine.'' Keep it in mind.

The laws related to the reproduction and distribution of music are very complicated, and there are a number of different organizations responsible for collecting royalties on behalf of the artists. In order to operate an internet radio station legally, one has to deal with a lot of different groups.

And of course, because we live in interesting times (just like that ancient Chinese curse) the rules are constantly changing: as of this writing, there is currently a proposal for a new fee structure out, which will likely become law soon.

I'm going to try and explain how all this works (in the United States, at least), but it's going to take a while. I'll start off with some definitions.

Copyrights:

There are two distinct copyrights associated with a song, one that covers the song itself, and one that covers a particular recording of the song. For example, the author of a song might hold the copyright on the words and music; while the person who actually performed the song might hold a copyright on the actual recording of them playing the song.

In order to perform a given song, the performer would need the permission of the holder of the copyright on the song itself. In order to distribute a recording of a given song, the distributor would, in addition, need the permission of the holder of the copyright on that particular recording.

Traditionally, the distribution of a recording, and the public performance of a recording were treated differently: to distribute a recording, you needed the permission of both copyright holders; but to play a recording in public (e.g., at a business or on the radio) you only need the permission of the copyright holder of the song, not of the recording. This is because the copyright was considered to apply to a physical recording of a song, and not the sounds themselves. So the reality was, if you were playing a song aloud, you were not violating the copyright of the owner of the recording. It was only considered a violation if you were making a copy of the recording onto some media (like pressing a record or burning a CD.)

One of the complications with internet broadcasts is that various parties are arguing over whether they should be considered performances of recordings, or the distribution of recordings. Is it a broadcast, or is it a copy?

Note that you need the permission of the copyright holder of the song for any performance of it: if you own a restaurant, and you play CDs, you're expected to pay for the right to do that.

Copyright holders:

These days, it is usually not the case that the author of a song is the copyright holder of that song. Usually the copyrights are held by a record label instead, since the performer's contract will usually involve them signing over their rights to the company. Likewise, the copyright on the recordings are also usually owned by a record label.

So when you hear a song by your favorite band being used to pimp beer and cars on television, chances are that they didn't have anything to do with that: they don't own or control their own songs, the record company does.

The organization that represents the interests of the record labels is RIAA, the Recording Industry Association of America. In this case, what ``represents the interests of'' means is that RIAA is the set of lawyers and lobbyists who are collectively funded by the five companies who control more than 90% of the global music market. (Those companies being, at last count: Universal, EMI, BMG, AOL/Time-Warner, and Sony.)

Performance Rights Licensing Agencies:

There are three major organizations that represent the copyright holders of songs. When you pay for the right to perform a song, you do so by paying one or all of these organizations, rather than by paying the actual copyright holder directly. This simplifies things to some extent, since you don't have to figure out who the eventual copyright holder of each song is: you merely write a check to these three organizations, and trust them to figure it out.

These organizations are:

  • ASCAP: American Society of Composers, Authors and Publishers;
  • BMI: Broadcast Music Incorporated;
  • SESAC: Society of European Stage Authors & Composers.

Despite the odd names, all three companies do the same thing. ASCAP and BMI control somewhere in the neighborhood of 98% of this business. Artists and/or their record labels get to choose which of the organizations they will allow to represent them; from the point of view of someone licensing the music, it's fairly random. You can't really predict which of these organizations any given band will have chosen.

So, when you want to perform music, you pay all three of these organizations. Rather than asking you which particular songs you're playing, they just charge you a blanket rate for access to their entire catalog; and then they make their own decision on how much of your money to pass along to the various copyright holders. They do this statistically, by looking at the popular music charts: rather than paying the particular artists you've played, they just assume that almost all of your money should go to the most popular stars.

And yes, you have to pay all three of them. Though they each represent disjoint sets of artists, they each represent a very large number of artists: so many that they just assume that you're playing something by someone they represent. So if you're not paying them, then they will sue you.

The performance rights licensing agencies are all about the copyright on songs, not on recordings. The organization that represents the owners of recording copyrights is RIAA, described above.

One of the more absurd things about this system is the triple-billing that occurs. Consider the scenario of a retail store that has the radio on. That store is expected to pay ASCAP/BMI for the privilege of playing music. But here's what you get when you do the math:

When you buy a CD, what exactly did you buy? Very little. You certainly don't own that copy of the music, as you are far from free to do what you like with it. After you've bought it, it does not appear to be ``yours'' in any meaningful sense.


Anyway, moving right along. That's how copyrights and payments have worked throughout the roughly seventy year history of The Music Industry. (There was music before the 1930s, of course: there just wasn't much of an industry.)

Prior to 1996, the rules for webcasts were the same as for radio stations: pay a fee to ASCAP, BMI, and SESAC, and do your thing.

In 1996 and 1998, the rules changed, with the passage of the Digital Performance Right in Sound Recordings Act (the ``DPRA'') and the Digital Millennium Copyright Act (the ``DMCA''). These new laws made it so that webcasters would be required to pay a special license fee in order to ``perform'' music over the Internet. In addition to paying ASCAP, BMI, and SESAC, webcasters are now also required to pay a license fee to the owner of the copyright on the recordings themselves.

In other words, in addition to having to pay ASCAP, BMI, and SESAC (the performance rights agencies) webcasters are now expected to also pay RIAA (the representative of the copyright holders.) This only makes sense if you accept that webcasting is a kind of publishing (like pressing a CD) rather than a kind of broadcasting (like a radio station.)

When reading about this stuff, you'll come across two terms, ``compulsory license'' (also known as a ``statutory license'') and ``voluntary license'' (also known as a ``negotiated license''.) A compulsory license is one where the license fee is fixed: you pay the fee, you get the license, no muss, no fuss. The reason it's called ``compulsory'' is that the licensor has no choice but to grant you the license if you pay the fee. A voluntary license is one where you negotiate the terms of the license on a case by case basis, and they don't have to grant you the license at all if they don't feel like it. So generally, ``compulsory licenses'' are much easier to deal with.


To operate an internet radio station, you need licenses from the copyright holders of the songs, and of the recordings.

Paying for the Performance Rights:

To get a compulsory license for the songs, you pay ASCAP, BMI, and SESAC. They each have sliding scales to determine how much they are going to charge you. They want to know how many people will be listening to the music, and how much money you will be making off of that music, in subscription fees, advertising, etc.

If you're not making any money off of it, this turns out to be a few hundred dollars per year, to each agency, depending on how many visitors you get.

You really want to qualify for a ``compulsory'' license. If you don't, then you'll need to negotiate with each record label for each song you play, and that would be a huge hassle. And when I say ``huge hassle,'' I really mean ``practical impossibility.''

To qualify for a compulsory license, you have to follow certain rules that make them consider your webcast to be an ``Eligible Non-subscription Transmission'' (an ``ENT''). Don't ask me where they get these stupid names. The rules to qualify as an ENT are as follows.

(And note that these rules are for webcasts only: RF radio stations have a different, less strict, set of rules.)

  • The webcast is not limited to particular users who pay for it (that's the ``non-subscription'' part.)
  • The user must not be able to choose and receive a particular recording: that is, no playing songs on demand.
  • In a three hour period, you can't play more than three tracks from a given album, and no more than two consecutively.
  • In a three hour period, you can't play more than four tracks by a given artist, and no more than three consecutively.
  • If the webcast is archived, the archive must be at least five hours long, and must not be made available for more than two weeks. The idea here is to make it hard for users to scan through the webcast to pick out and save individual songs.
  • If the webcast repeats itself (plays in a loop) then the loop must be at least three hours long.
  • The webcast must not publish prior announcements of the songs: you can't let the users know what songs are coming up next, and you can't publish your playlists ahead of time.
  • You must identify the song title, album title, and the featured artist in text during the performance of the song.
  • You must not ``encourage'' users to copy or record the music that you are playing, and you must ``disable copying by users if in possession of technology capable of doing so.''

So, if you qualify for a compulsory ENT license, you can just pay ASCAP, BMI, and SESAC some fixed rate. Which leads us to...

Paying for the Publishing Rights:

To get a license for the recordings is a little trickier, because they only just finished making up the rules in 2002. The way it is supposed to work is, you pay RIAA in the same sort of way that you pay ASCAP (with a compulsory license), and RIAA will distribute the money to the copyright holders of the recordings (the record labels.) Remember, you have to pay these guys as well because they have decided that broadcasting over the web is more like printing CDs than it is like broadcasting over the radio waves.

You have to pay them even if you only play music by non-RIAA artists. This because SoundExchange (the non-incorporated subsidiary of the RIAA who collect the fees) is authorized to collect on behalf of all copyright holders, even non-RIAA members. If you want to avoid these fees, you'll need a waiver from every artist/publisher you play (in other words, it's impossible.)

In February 2002, the U.S. Copyright Office (Copyright Arbitration Royalty Panel, or ``CARP'') released its proposal for how webcasters should be charged by the music industry. Neither side liked the proposal very much: the webcasters (that's us) said the rates were insanely high, and would put pretty much all small webcasters out of business over night; the RIAA says the rates were still way too low.

The proposal was rejected by the Copyright Office in May 2002, and in June 2002, the Librarian of Congress issued a ``compromise'' ruling, which you can read on the Copyright Office web site.

The 2002 ruling mandated that webcasters must pay 1/14th of a cent ($0.0007) per song, per listener.

But it gets worse: in 2007, they changed the rules again and upped that rate to 1/9th of a cent ($0.0011), with it scheduled to regularly increase until it reaches one fifth of a cent ($0.0019) in 2010.

(However, in counting the number of songs heard by listeners, any connection, no matter how short, is counted: you pay for a whole song even if someone only listens for five seconds before changing the channel. If you look at the numbers of connections that last longer than five minutes, and the number that last less than five minutes, it turns out that the ratio is 3:1 or 4:1. This has the potential to make the CARP rates far more expensive than most webcasters are estimating.)

Then on top of all that, you owe another 8.8% for what they refer to as the ``Ephemeral License Fee.'' This charge is purportedly the license you pay for having the music files on disk or in memory buffers: you have to pay this unless you're using a computer that doesn't have disks, memory, or an IP stack. Yes, it's as crack-addled as it sounds: basically it's the ``paying the taxman tax.''

That all adds up to a rate of roughly $12 per listener per month! No radio station in the world makes that much money. If a station has an average of 1000 listeners, that's $157,000 per year in 2007, rising to $272,000 three years later.

And that's above and beyond the ASCAP/BMI fees, and bandwidth charges.

Under these rules, if a webcast had only a single listener -- the webcaster -- they would be expected to pay RIAA $160/year for streaming music to themselves! (Except that there's also a minimum fee of $500 per "channel" per year.)

If these new rules are not overturned, expect all college-radio-station-based webcasts to disappear: no college broadcasting program has the kind of budget needed to pay for this.

Neither does National Public Radio, who are fighting this.

The new rules also included some egregious reporting requirements that will be impossible for anyone to actually comply with: for example, not only do they want a ``unique user identifier'' for each listener, they also want the UPC code from the CD the song came from! The complete list of information that they demand be reported:

  1. The name of the service;
  2. The channel of the program (AM/FM stations use station ID);
  3. The type of program (archived/looped/live);
  4. Date of transmission;
  5. Time of transmission;
  6. Time zone of origination of transmission;
  7. Numeric designation of the place of the sound recording within the program;
  8. Duration of transmission (to nearest second);
  9. Sound recording title;
  10. The ISRC code of the recording;
  11. The release year of the album per copyright notice and in the case of compilation albums, the release year of the album and copyright date of the track;
  12. Featured recording artist;
  13. Retail album title;
  14. The recording label;
  15. The UPC code of the retail album;
  16. The catalog number;
  17. The copyright owner information;
  18. The musical genre of the channel or program (station format);

In addition, webcasters must report information on the audience as well:

  1. The name of the service or entity;
  2. The channel or program;
  3. The date and time that the user logged in (the user's timezone);
  4. The date and time that the user logged out (the user's timezone);
  5. The time zone where the signal was received (user);
  6. Unique user identifier;
  7. The country in which the user received the transmissions.

While everyone agrees that reporting the songs that are played is a good idea, so that the money can be alotted to the proper artists, those requirements go far beyond that: they would make it impossible to have a free, anonymous webcast. To comply with these rules, all webcasters, even those who do not charge money, would have to force their users to register before tuning in.

Someone said to me, ``how do they expect the little guys to survive?'' I replied, ``No Mister Bond, I expect you to die.'' They're trying to legislate webcasting out of existence, because it stands in the way of their progress toward a completely pay-per-view economy. Remember: these are the kind of people who once tried to outlaw the VCR. (That was MPAA, not RIAA, but they're the same snake with different scales.)


The Bottom Line:

If you want to operate an internet radio station legally, you need to do these things:

  1. Follow the play limits and other restrictions on content mentioned in the DMCA, and summarized above;

  2. Fill out the licensing forms from ASCAP, BMI, and SESAC, and send each of them several hundred dollars a year, at least;

  3. Fill out the webcasting licensing form for RIAA, and expect them to start hitting you with a multi-thousand dollar bill at some point. Oh, and the bill will be retroactive to when you first started webcasting.

If you want to do something different than what I described above; for example, if you want to let users choose the songs to download, or you want to archive dj sets, or you want to allow the world at large to collaboratively dj by voting on what song to play next, or anything at all interactive that actually takes advantage of the power of the internet: well... you're fucked. When you go into that world, you are out of the ``compulsory license'' territory, and must negotiate with all of the copyright holders individually, which is prohibitively complicated, since there are so many of them.

What's going on here is that the music industry establishment are absolutely terrified of the internet, and are trying to prevent any kind of progress that might require them to evolve and change their business models to keep up with the times. They are pretty much trying to legislate the internet out of the way, and force things to continue to be done as if early-20th-century technology was still all we have to work with.

And after all is said and done, what happens to your fees? The media conglomerates take your money, keep most of it for themselves, and then divide the rest statistically based on the Billboard charts. That means that no matter what kind of obscure, underground music you played, 3/4ths of the extortion money you paid goes to whichever management company owns N'Sync; and the rest goes to Michael Jackson (since he owns The Beatles' catalog.) All other artists (including the ones whose music you actually played) get nothing.


Links: