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Monday, May 6, 2002

Don Henley's Big Mistake

Neumu's Michael Goldberg writes: In the early days of the Web, those of us attempting to establish online businesses came up against many closed-minded folks who didn't understand what we were up to, and weren't interested in understanding. "They just don't get it," was the way we dismissed their head-in-the-sand approach to innovation and change.

I thought of that dis the other day, when I received an email titled "OPEN LETTER FROM MUSIC COMMUNITY ABOUT WEBCASTERS' 'DAY OF SILENCE.'" This letter, signed by Don Henley, Alligator Records owner Bruce Iglauer, Beggars Group's Martin Mills and others, was a total misreading of the "Day of Silence." It also failed to understand the impending silence of a million-plus approaches to "Net radio" if legislation passes requiring Internet radio "stations" to pay $.14 per song per 100 listeners.

"Let's not forget that the music Webcasters want essentially for free is the backbone of their entire business," went the key paragraph of the "Open Letter." "Somehow these companies have found a way to pay fair market rates for everything else necessary for their business — from bandwidth and computers to rent and furniture. Why should the most important element of their business — the music — be any different?"

My understanding is that, in fact, most Webcasters are quite willing to pay some percentage of their revenue to the owners of the songs they stream. What they don't want to do, and in many cases can't do, is pay a set fee that has no relationship to their revenue.

I understand why Don Henley, a multi-millionaire, would sign such a letter. Independent record promoters are hired by the major labels at huge expense to get songs by Mr. Henley and other major label artists played on commercial radio. He doesn't need Internet radio to get the attention of music fans.

However, I find it difficult to understand the reasoning of Iglauer, or the folks who run Oh Boy Records or some of the other small labels, not to mention the thinking of the marginally popular artists who signed the letter. Bruce Iglauer has run an indie blues label for over 25 years. He knows how hard it is to get the blues played on the radio, how hard it is to sell blues records and the difficulty of getting his music in front of younger generations of music fans who would likely dig it if they only had a chance to hear it. Bruce Iglauer needs Internet radio, though he apparently doesn't know that.

An Internet radio station that played blues records would not be a particularly popular station. It would not have much revenue. And yet, for Alligator Records, to have stations playing its records would be a real boon. Even better than a blues station would be a cool hipster station that mixed blues with indie rock, electronic music and other underground sounds. When people hear good music, music that really touches their soul, they go out and buy it.

The long-term impact of tens of thousands of Internet radio stations playing a diverse mix of music would be very positive for music on the fringe. That's one reason why the RIAA, which represents the five megacorporations that own the major labels, wants to push through this legislation. The companies the RIAA represents spend millions to get their records played on commercial radio. When all the commercial alternative-rock stations play Linkin Park or P.O.D., a certain percentage of kids go buy Linkin Park or P.O.D. albums.

The megacorporations want fewer alternatives. They don't want thousands of Internet radio stations all playing idiosyncratic mixes of music. They don't want radio stations that they can't "buy." They don't want you to hear a song by the French Kicks or The Hives or Cat Power or Mirah, because if you hear that music, you might go buy an album by one of those indie artists, instead of an album by Linkin Park or P.O.D. or one of the other artists on the major labels.

A friend of mine told me of one Internet radio station that plays all kinds of obscure music. This station, which has little revenue, would owe around $200,000 if the proposed legislation were passed (the current proposal would be retroactive to the passing of the Digital Millennium Copyright Act in 1998). There is no question that that station would go under. As would many, many others.

The "Open Letter" ends like this: "Artists and record companies deserve fair compensation for their creations. They have waited patiently for more than three years to be compensated while Webcasters have been building their businesses. Webcasters are not entitled to a free ride or subsidy. The time has come for Webcasters to stop protesting and work cooperatively with artists and record labels to ensure success for all and provide fans with the great music they expect and deserve."

It is unfortunate that those who signed this letter have so little understanding of the Internet. Today, there are few successful Internet businesses. I would hazard that there are no financially successful Internet radio stations. Yet millions of kids who are online are finding out about new music on the Web.

The enlightened approach for artists, labels and music publishers would be to work out a fair percentage of revenues, one that would enable the Internet Webcasting business to develop, and ensure that as that business develops, record owners, writers and publishers would see their fees increase.

It is disheartening to see Don Henley's name on the "Open Letter." Henley has been outspoken in fighting for artists' rights. This time, though, he's supporting legislation that will help those same big entertainment corporations he's been fighting these past few years as it cuts off the Internet channels that could bring the music of newer, less known artists to music fans the world over.

The InsiderOne Daily Report appears on Monday, Wednesday and Friday at 9 AM PST, except when it doesn't.




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