The Day the Music Dies

In their written decision, the judges said they based their rate hikes on the "willing buyer/willing seller" orders from Congress. The CRB used individual deals between huge companies like RIAA and Yahoo and then applied those rates to everyone. The CRB also said percentage of revenue deals proved illogical, because royalties are about playing songs, not how much a company does or does not make off them.

Hodge says the law that the CRB judges use has to be changed because it rigs the system against the little guy. "I'm not vilifying the CRB. I'm vilifying the instructions the CRB was given by Congress," he says. "They use a 'willing buyer/willing seller' system that doesn't ask, 'Which buyer? Which seller?' They need something that takes into account the real world."

Simson says SoundExchange didn't get everything it wanted. "But we got a lot," he allows, "and I think that's one of the reasons the reaction is so dramatic."

Indeed, within weeks SoundExchange faced a frontal assault worthy of a screenplay.

---

Since SaveNetRadio.org went live on April 16, it has stoked an incredibly smart, rich, and vocal segment of the population — the biggest of which is angry 20- to 40-year-old males trapped in cubicles. Web radio stations large and small have pitched in, posting banner ads linking to the site and breaking into regularly scheduled broadcasts for SaveNetRadio announcements.

SaveNetRadio's lobbying efforts have fanned a firestorm of letters, phone calls, and e-mails to Washington, sometimes eclipsing issues like Iraq and immigration. "It's kinda sad, actually," says Hodge.

The coalition got Rep. Jay Inlsee (D-Wash.) to introduce the Internet Radio Equality Act, HR 2060, into the house of representatives on April 26, 2007. The bill would nullify the copyright royalty board decision and set royalty rates at 7.5 percent of gross revenue. The house bill has 118 co-sponsors of a needed 216. Two weeks later, U.S. senators Ron Wyden (D-Ore.) and Sam Brownback (R-Kan.) cloned the same bill and introduced it in the Senate. Net radio listeners have already blasted their representatives with more than 85,000 phone calls, and 400,000 faxes, and e-mails to their offices. According to Ward, "when the fax lines jammed, we physically walked the printed-out faxes down to their offices. You should've seen the look on staffers' faces when we came in with file boxes full of paper, saying, 'These are letters from your constituents.'"

All of SaveNetRadio's efforts appeared to pay off on May 22 when SoundExchange offered an olive branch of sorts. They issued a press release saying they would spare small Webcasters the hiked rates through at least 2010. "We've certainly reached out to that category," says Simson.

Hodge of SomaFM says people in the coalition were divided initially over whether to accept the reprieve: "There were some people who said, 'Maybe we should take it.' My stance was, 'We'll be right back where we were in four years.'"

Eventually, Hodge persuaded other small Webcasters not to take the deal from SoundExchange.

That decision may have been costly. Rosenthal threatened small Webcasters in print by saying that seeking a congressional solution will only hurt chances for individual negotiations later.

The Webcasters have gone all-in with their bigger brothers, and the next few weeks will be nail-biters.

---

For the next two weeks and likely longer, Rusty and the SaveNetRadio coalition will battle on the Net, in court, on Capitol Hill, and in the press. The stakes are high — so high that the $20 billion terrestrial radio industry, as well as NPR, which is also impacted by the rate hikes, has thrown its heft into the debate to fight the royalty rate hikes.

SaveNetRadio threw a benefit concert on Capitol Hill on June 19 with a bunch of no-name artists and one guy from the Decemberists who used to work at Pandora. However, David Byrne of the Talking Heads has spoken out. So has Thomas Dolby, the guy who wrote "She Blinded Me With Science." Science!

On another front, SaveNetRadio filed an appeal in the U.S. Court of Appeals, D.C. Circuit on May 31, 2007, seeking a stay of the CRB's ruling. Ward has no idea if it'll work, since "the CRB is so new, there's no precedent for overruling it. No one's ever done something like this before."

Most people have a murky idea of the future at this point.

"We're playing it by ear," said Westergren of Pandora. "It's an evolving situation."

No matter what happens on D-Day, Rusty says he'll keep broadcasting till they send him a bill. "And then I'll keep broadcasting till they send me a collection notice. And then, I guess SomaFM will go bankrupt."

"Internet radio's still going to be around," Rusty adds. "It's going to be injured on July 15, but it'll come back in some form. Even if we're killed, we'll go on. The worst-case scenario is we up the arms race and go peer-to-peer ."

Pirate Internet radio from overseas is also an option, but it's a specious one, says Hodge.

"There's plenty of ways to go unlisted on the main aggregators and just broadcast to your five friends," Hodge says. "Plenty of kids will continue to stream to their buddies."

"You're not supposed to tell him that," Elise says.

More than likely, July 15 will Latin American-ize the economy of Net radio, eradicating the middle class like Hodge and leaving only the super-rich like Yahoo and super-unknowns in metaphorical favelas. Of the estimated 30,000 Web radio stations out there, most have five listeners or fewer, says Hodge. With a staff of 28, SoundExchange can't go after them all.