The Blame Game

I love NPR, National Public Radio. It is the bright shining glimmer of hope in a world where radio has become a repetition of obnoxious commercials, offensive jocks and bad music. NPR has quality news programming and play lists that stray away from commercial radio, MTV and the United States in general. They know that the Internet is the future, so they stream web casts in the Internet along with their terrestrial radio content. NPR is good radio on every level.

But NPR, as well as all other public and commercial radio who have updated with web casting, is facing a possible crisis: The Copyright Royalty Board has proposed royalty hikes for music on the Internet. These increases are justified by Sound Exchange, an entity created by (who else?) the Recording Industry Association of America, to collect royalties from Internet, satellite and digital music. The current royalty system is two-tiered: small web casters pay 12% of the annual revenue for royalties while large companies like Yahoo pay royalties based on the number of songs played in a "tuning hour." However, Sound Exchange, who claims to protect the artist and the record companies, decided that there should be a universal royalty system. This could put many small Internet broadcasting companies out of business. Accuradio, which operated over 320 Internet radio stations, made about $400,000 last year in revenue. Under the old system, they paid out $48,000. The new system, which will be based on a per-song, per-user fee, will make Accuradio's annual royalties $600,000, much more than their annual income.

Why has this happened? Why have the proponents for the record industry gone after its one friend?

I call this the Blame Game. The record companies have seen a decrease in CD sales in the last few years. According to them, here are a few options why this has happened:

1. CDs are so 20th century. Consumers are tired of just your average, basic compact disc with twelve tracks. They want more. They want two-sided CDs, they want DVD components with live performances and music videos, they want a steak dinner with their CD. Clearly CDs have gone out of style and the record manufacturers must find a way to augment the format to attract people. It has worked wonders. Just look where Tower Records is now.

2. File sharing has turned music consumers into thieves! How can record companies compete with free stuff? I know! Sue their consumers for finding a new way to discover music! It is clear that the way to bring people back to buying CDs is to take them to court, humiliate them, and take their money in large sums.

3. Web casting has contributed to the decrease in CD sales so the record companies must make up the difference by putting them out of business. Record companies want to support and protect the artists. They do this by not allowing them on the Internet, because consumers are never on the Internet. Everyone still listens to terrestrial radio to get their new music and the Internet clearly cannot reach as many people. Internet broadcasting is not the future. So we must penalize all the web casters for being stuck in the past.

My sarcasm is harsh but this game of blame is a symptom of the record companies not recognizing the simple truth that they need to change their model. The model is dead. They are seeing the repercussions of their ignorance and instead of address the problem, they go after their long-term partners. This is worse than cheating, this is a divorce where one side tries to leave the other destitute. The record companies need to embrace web casting, because the Internet is where all their consumers have gone. Trying to drag them back kicking and screaming will not work. You must go to them, adjust to their needs, and they will give you what you need.

Web casters have until tomorrow to file a motion for a re-hearing of the Copyright Royalty Board. For my and and everybody's sake, I hope they come out on top in this ugly divorce.

Contreras, Felix. "New Royalty Rules May Reshape Internet Radio". All Things Considered. National Public Radio. 27 Mar 2007.

Online Video Content: Spring Fling or A Very Long Engagement?

Almost a week ago media conglomerates NewsCorp and NBC Universal announced that they were teaming up with Internet portals AOL, Yahoo and MSN to distribute new video content online. The content will include full length television shows and films as well as the clips that we have all become accustomed to when using prospective rival YouTube. Just like other video content companies such as Joost, NewsCorp and NBC Universal do not see their venture as competition for YouTube or vice versa. I disagree. Yes, YouTube focuses mostly on user-created content but the film and television clips they do have receive a decent amount of hits on the website. I believe that consumers on average do not want to search several different sites for different content. If a site says they contain video content, that should mean they have both professionally produced videos in addition to user-created content. Of course I am a proponent for marketplace competition but why cannot each of these sites be all-inclusive? Maybe because Viacom sued Google and YouTube for $1 billion dollars last month. The fear of copyright infringement has almost ruined it for us.

The question I would like to pose, and it might be provocative, but really is online video content the future? NewsCorp and NBC Universal obviously think so if they are venturing away from their traditional business (which I think needs more attention because quality television content is hard to find these days) and putting both feet in the video content realm. But as quickly as technology and consumers change, how do we know that next year online video content will still be as popular as it is today? I rarely watch YouTube or online television. Maybe I'm old-fashioned and I like watching shows on my 20" screen as opposed to my tiny laptop, but I really think that video content is going to hit a plateau, and all of the media conglomerates are going to find themselves in a relationship that has lost its passion. But maybe I am wrong. This could be a very long engagement. We just have to wait and see.

Kawamoto, Dawn and Greg Sandoval. "NBC, NewsCorp. push new Web rival to YouTube." ZDNet. 22 Mar 2007.

Democratization May Be Big Brother In Disguise

Campaign advertising has always been a cutthroat creative medium for political candidates to praise themselves and criticize their opponents. Even in those disguised as unbiased public service announcements, there is always a little line of text at the bottom of the screen that says "Paid for by the (fill-in-the-blank) Campaign." But now in the age of YouTube and cheap yet high-quality user-created video content, average people are getting into the political circus.

"Hillary 1984," the Obama-supporting spoof of the iconic 1984 Macintosh commercial where a hammer is hurled at a Big Brother computer screen (symbolizing IBM), has been on YouTube for about two weeks and has been viewed by over 2 million people. Now it is known that the creator, an Internet professional named Phil de Vellis, worked for a firm that supported the Obama campaign but claims to have created the commercial on his Mac computer on a Sunday afternoon. "The specific point of the ad," he wrote, "was that Obama represents a new kind of politics, and that Sen. Clinton's 'conversation' is disingenuous. And the underlying point was that the old political machine no longer holds all the power." de Vellis has since resigned from his company, Blue State Digital, while they assert that he was fired.

de Vellis himself has said that now that his "citizen ad" has taken off, "the game has changed." The average citizen has the means to create an impact on the 2008 Presidential Election using basic software. I am a firm believer in the First Amendment and value the democratization of the Internet, so I support the power of knowledge and influence that the public has been given. However, with all the misinformation given by traditional campaign ads, I think citizen ads have the potential to muddy the already murky water. Democratization gives power to the people, but most people are not informed enough to use that power effectively. Unless the United States decides to convert to a truly democratic society, there will always be those with power and those with a little more power to tip the scales.

While "Hillary 1984" may be a peak into the democratized future of campaign advertising, the fact that it was created by a professional leaves me feeling that this might just be a passing phase. I think the majority of Americans are apathetic (just look at the percentage of people who actually vote--it is very disturbing how low it is) and those who will put in the time to get their political views heard will be those who either have a professional, personal or ethical stake in the process. I hate to think so little of my fellow Americans but again, the public is misinformed, or just not informed at all. This leaves our country vulnerable for Orwell's prophecy. Maybe Big Brother is not so far away.



Noyes, Katherine. "'Hillary 1984' Creator: 'The Game Has Changed'." TechNewsWorld. 22 Mar 2007.

Free Downloads and Advertising: A Match Made in Heaven?

Would you consider purchasing a Hyundai if they gave you a free Mp3 download of a song by alternative rock band The Ataris?

That is exactly what Hyundai is hoping with a new Internet advertising campaign where they place banners on websites like Pandora.com, ComedyCentral.com and Billboard.com. When a user clicks on the banner, a 20-second Elantra commercial is screened in a pop-up while a song from the band plays and is simultaneously downloaded onto the user’s computer. Hyundai wants the people who watch the commercial to know that the car company is bringing them something that makes them feel good.

I think this model is revolutionary. Giving away digital media in conjunction with advertising might become the standard for all Internet as well as brick-and-mortar retailers. Free giveaways have always attracted new customers, similar to the way department stores offer their customers 10% off their purchase if they open up a store credit account. People will commit to “relationships” with retailers if they are given an immediate, tangible benefit. Mp3s and other music downloads are very on-demand products and could be used by almost any company as an advertising incentive. This "give, then receive" model is also being tested in the live music realm with the new Ozzfest tour, where tickets will be free with the hope that the concert-goers will spend money on records and merchandise. Why haven’t the record companies and radio groups figured this out? Even Hyundai, an arguably second-rate auto maker, is thinking more outside the box than the music industry.

Ultimately I think this marriage of free music with advertising will not bring Hyundai itself any major additional revenue. To be perfectly honest, I do not like The Ataris and I doubt that the majority of the targeted 18- through 49-year old audience do. For this to benefit auto makers or any retailer in general, the scope must be much greater. Users need options. Users need variety. Users need further incentive to form a relationship with the retailer. Offering songs by one band and failing to follow-up on the commercial will leave Hyundai in the same place they stand today, except with a limited relationship with online music retailers. However, according to this article on Adweek.com, Hyundai ran an earlier campaign with Music Interactive and had their users fill out a registration form. 35% of those who clicked on the banner filled out the form. That is not a high figure but higher than one would expect.

In the end, people do not like commercials but will watch them if they get something in return. Music was, is, and will always be a commodity for any retailer to use as an incentive. Hyundai has the right idea; now we are just waiting for the company that will perfect the model.

Payola Pact Helps Independent Music...Yeah Right

When consolidated radio groups like Clear Channel Communications Inc., CBS Radio Inc., Entercom Communications Corp. and Citadel Broadcasting agree to pay $12.5 million in fines and give a collective 8,400 half-hour radio segments to independent music during the next three years in order to stop a payola investigation, does that not indicate that they are guilty?

While I do not believe that payola will ever end because there will always be that one disc jockey or programming director that will play a song a few hundred times for a free weekend in Las Vegas, I think this pact has two possible outcomes:

The first outcome is the glass half full. Independent and local music’s presence on radio has historically been restricted to Sunday nights between 9pm and 11pm. The radio groups have agreed to play independent music in half-hour segments between 6am and midnight. This could not only give independent artists and labels the commercial exposure they have been denied for decades, it could also give radio the youthful and on-demand audience it has lacked in the last five years. It also gives the people who still subject themselves to commercial radio and those who would love to return to the medium they used to use to discover new music the opportunity to listen to something other than Justin Timberlake five times an hour.

The second outcome, and the most likely, is half empty. Yes, commercial radio will include a half-hour segment of independent music during the daylight hours and that is more than we can say about independent music on the radio in the past. However, one half-hour is not going to bring radio’s listenership back in droves or clean up the wasteland that commercial radio has become. Independent music’s place is in the “now” and the “future,” which involves new media like the Internet and social networks. One half-hour segment on radio will not bring as much exposure to independent music as a feature on MySpace. Especially if these segments are only guaranteed for the next three years.

Like radio historian Christopher H. Sterling stated in this Los Angeles Times article, payola is almost “as hard to stamp out as prostitution.” This agreement is a start but the corrupt nature of the radio and record business really leaves very little hope that payola will stop and that the two businesses will come back to the reason they are in existence: the music.

Kazaa Creators Go Legit for Joost

Kazaa creators Niklas Zennstrom and Janus Friis are no strangers to lawsuits. Since 1999, the two have been embroiled in infringement lawsuits with record companies and movie studios. Neither men set foot in America until recently, when all their legal battles came to an end in November after they agreed to pay $125 million to their opponents.

Zennstrom and Friis sold their other "free-service" company, Skype, to eBay in 2005 but still work closely with them as executive chief and executive vice president for innovation, respectively. But in the meantime, they have developed their new endeavor, a Web video venture called Joost.

Analysts and the creators themselves do not see the popular YouTube as competition. Joost, which streams full length programs in a full screen format, is predicted to be competition for cable companies. Frii's explains that Joost is "not Web video; it's TV."

Last month, Viacom ordered Google's YouTube to remove over 100,000 of its videos from the video-sharing site while inking a deal with Joost. While the agreement is undisclosed, Joost and Viacom will share advertising revenue from the programs the former will stream on the Internet.

Will the Kazaa guys find success in a legitimate Internet venture after so much success in "free service?" It looks like they will. Having full length content from former YouTube powerhouse The Daily Show with Jon Stewart along with all the other content provided by Viacom will give Joost a large fan base. This could change the way people watch television on the Internet. As long as the quality is high and the advertising does not become as burdensome as cable television, network television and radio advertising is to us now, Joost may fill the void that YouTube has left since it was bought by Google and "legitimized."

Don't worry, I believe YouTube will still be our #1 source for watching a college student dumping his cheating girlfriend in front of 3,000 spectators. Thank goodness we can always count on that.

Peters, Jeremy W. "Kazaa's Creators Do Latest Venture by the Book." New York Times. 27 Feb 2007.

I am a radio consolidator...

The following is an extremely loose and embellished transcription of the speech I delivered in my Music, Broadcasting and the Internet class at USC on Wednesday, February 28, 2007.

I am a radio consolidator and I would like to talk to you briefly about the future of radio as I see it and how we are going to get the "new generation" back to terrestrial radio. As you all know, we have lost a significant amount of listeners in the last five years and this is how I think we are going to get them back.

Let's talk about the new generation briefly. According to Christine Makris in a 2005 Boston Globe marketing report called "On Demand Killed the Radio Star," the age segment that owns the most MP3 players and iPods are from 12 to 17 years old. And that was two years ago, so I can bet those numbers have grown. The "new generation" has never lived without on-demand media, like TiVo, on-demand Pay-Per-View and broadband Internet, so radio just does not fulfill that on-demand need. To get the new generation to come to us, we need to go to them. We need to go to the Internet. With the prospect of a universal WiFi network for everyone to tap into in the next few years, everyone will be connected constantly and the radio industry needs to catch up with the times.

Simulcasting, while already in existence, is projected to take over 40% of all Internet radio listening in the United States by 2020, according to a Bridge Ratings Digital Media Growth Projections report from February 19, 2007. I think this is a pretty modest number because it does not take into consideration population growth, which is at an unprecedented rate, and the rapid improvement of technology. I think the future of terrestrial radio is a compromise with the Internet: consolidated companies like my own need to bite the bullet, pay the licensing fees and simulcast their content in order to reach the new generation and possibly capture the older ones when they are in their cars, or at work, or when the universal WiFi network goes down.

The other major element to attracting the listenership of the new generation and the listenership that we have lost in the past years is content. There are has been an enormous breakdown in the relationship between the record companies and the radio groups. Radio is no longer a "hitmaker" because of the availability of music to the consumer via the Internet and the straightening of the "long tail." Radio needs to be a service to the consumer for local and national information and for the discovery and acquisition of music. I do not believe people should have to search MySpace and other social networks for new music; that is our job.

Localization and diversification is the name of the game for the future of radio content. We need to bring back disc jockeys and local personalities who create playlists not dictated by the record companies but by their personal taste. We need new formats like the Pandora model of create-you-own-radio-station based on songs, artists and genres the listener already likes. Also using the digital technology, there can be formats where the playlists are completely determined by the listeners' votes. Created geographic and genre formats featuring unsigned and local music along with the majors will appeal to so many more of the new generation and the population in general.

Radio can also get in the retail business via simulcasting. If someone is listening on terrestrial or Internet radio and hears something they like, they should be able to get on the computer and purchase that song or album as they hear it. They should have a choice between the digital copy (MP3, AAC, etc.) or the physical copy sent to them in the mail, or both! My company could make a deal with Amazon or iTunes, or start our own retailer. This would be a great means of revenue for radio as a replacement for the overabundance of advertising that also drove our listeners away.

To summarize, simulcasting and diverse content models are the future for terrestrial radio and will bring our listenership back as well as help us acquire the listenership of the new, on-demand generation.

In the same report by Bridge Ratings, it said that there will 150 million average weekly Internet radio listeners by 2010. In just three years, half of the American population will be listening online. That's where we need to go and I believe we will gain back what we have lost and then some.

BIBLIOGRAPHY

Del Colliano, Jerry. “Satellite vs. Radio vs. WiFi.” Inside Music Media. 26 Feb 2007.

Kusek, David and Gerd Leonhard. The Future of Music. Boston: Berklee Press, 2005. pp 148-152.

Makris, Christine. “On Demand Killed the Radio Star.” The Boston Globe. Nov 2005.

Spar, Debora L. Ruling the Waves. New York: Harcourt Inc., 2001. pp 362.

Van Dyke, Dave. “Digital Media Growth Projections.” Bridge Ratings LLC. 19 Feb 2007.