As we reported over the weekend, big broadcasters are now asking the FCC for a “payola” waiver on terrestrial and digital broadcast.  “Payola Lanes” if you will.

But now we realize that this push likely started in a 2012 with a very under the radar meeting between four clear channel executives and FCC chief.

Matthew Lasar at Radio Survivor reported the meeting  March 12 2012.  He also uncovered a summary of the meeting with a paragraph that made him as he says scratch his head:

“In addition, Mr. Pittman discussed several ways in which the FCC can help radio to improve its competitive position by increasing the flexibility that it has to enter into strategic partnerships that will enhance the listening experience, while ensuring that audiences receive sponsorship information appropriate to today’s digital environment.”

Matthew Lasar went  on to state:

“My rough guess is that it could have something to do with iHeart Radio and the FCC’s sponsorship identification (or payola) rules, which require broadcasters to let the public know when some kind of “valuable consideration” has been given to a station in exchange for air time.”

Now we know Lasar guessed right. We now know that the Broadcaster are looking for an exemption to the rules that require immediate disclosure of “payola.”  Looks like the push started in 2012.  What other documents are out there?

It just keeps getting uglier and uglier.  See FCC document below:

08-90 03-08-2012 Clear Channel Communications, Inc. 7021899350

The following is an excerpt from a post on MusicTechPolicy (Music Discovery and Purchasing Survey Results).  David thought it worked as a stand alone post, so here it is.

The “Zero Effect”:  Do Consumption Charts Penalize Artists Windowing Streaming Services and Most Compilation Records?

by Chris Castle

Although we can’t tell how consumption charts are weighted (as far as I know that information hasn’t been released publicly), it’s pretty clear that if you are not on streaming services–meaning you have zero streams–you will be penalized in the chart.

I picked the consumption chart for the first week of Taylor Swift’s October 27 release of the 1989 juggernaut to try to measure how the consumption chart reacted.  The choice was admittedly cherry picking, but with a purpose:  Taylor’s sales were historically significant and her reported streaming should have been somewhat muted given Spotify’s well-publicized decision to reject the record on the artist’s terms.  This would potentially yield good benchmarks for testing the consumption chart at the margins as well as the more bread and butter titles below the top 10.

Based on data for the week ending November 2, 2014, Taylor Swift’s first week sales were so strong it probably doesn’t matter that her streams were somewhat lower for the consumption chart.  At #1, she outsold the #2 NOW 52 title by 10:1, and NOW 52 outsold the #3 Sam Hunt album by 10:8–but Sam Hunt had 4 million streams that punched up the chart position.  NOW 52 had zero streams because it is a compilation record.

Compilation records and soundtracks do not get credit for streams because they have no streaming rights.  This is true even if the music services allow playlists–or possibly create playlists themselves–using the compilation or soundtrack brand in the metadata with the track listing of the underlying tracks.  These playlists work because the individual tracks are already available on the service under direct license from the label or artist licensing the tracks to the compilation or soundtrack. (This is the kind of free riding that was the heart of Ministry of Sound’s recent lawsuit against Spotify and probably why Spotify settled.)

The “zero effect” is much greater further down the chart, however.  In the same week of November 2, Frozen: The Songs, a compilation record, got credit for zero streams and 10,723 albums sales for a chart position of 49.  Blake Shelton sold 8,735 albums but got credit for 930,928 audio streams and a chart position of 44.  The same week Iggy Azalea sold 4,947 albums but got credit for 5,060,617 streams for a chart position of 25.  In other words, Frozen will never have any streams because compilation records typically do not get streaming rights, and got a much lower chart position in spite of selling over twice as many albums.

If you compared based on album sales alone, the Guardians of the Galaxy zero effect soundtrack would have entered the chart at #25, not #40, Sam Smith would have been #15 instead of #6, Bob Segar would have been #23 instead of #34.  Another zero effect soundtrack is Now Disney 3 that would have been #40 instead of #59, and U2’s Songs of Innocence would have been #64 instead of #94.

Seasonal records such as Christmas albums are also penalized.  The Nov 2 chart showed that based on album sales alone, Home Free’s Full of Cheer would have entered the chart that week at #66 instead of #104.  While the title had 26 streams, that was a sufficient penalty to cost the record 38 chart positions.

Conclusions?  Charts are relative beasts to begin with, and the consumption chart won’t keep a phenom like Taylor Swift from dominating the top position.  Measuring streams probably isn’t enough to affect the top 10 or the top 5.  But for records that are compilations, soundtracks, seasonal or other specialty titles that either aren’t allowed a streaming audience based on contract, are windowed, or haven’t found that audience yet for another reason, the consumption chart penalizes high sellers that are not present or are not credited with streams on streaming services.

If chart position matters to your record, then this should be of concern to you as the zero effect creates an incentive to stimulate streams for chart position–assuming you can get credit for streams.  Some would say that the more streaming, the lower the sales.  Without getting into cause and effect on that issue, it certainly can be said that the lower the streams, the lower the chart position even if sales of a given title are higher than another given title.

From a profitability perspective, artists whose records sell but don’t stream may well be thankful.  If that trend continues, then it would also stand to reason to question the benefit of chart position as a selling tool.  But then we hear about services like YouTube routinely deleting billions of fake plays in its video playlists during December.  If this same phenomenon is repeated in streaming services used to measure chart position….not to imply that anyone in the music business would ever try to rig the charts.  Perish the thought.

So what is it all about?  Is there a “zero effect” or is there zero affect?  Sales or streams?

Project Music looks to be a joint venture between The Country Music Association, Nashville Entrepreneur Center, Google and others. 

I’m not a lawyer but isn’t Project Music’s use of these classic album covers  “implied endorsement?”  Since this is some sort of music endeavor you might think these artists are lending their name to this commercial music oriented endeavor.  I mean I’m sure most of the artists here don’t need the money, but still it’s nice to be asked right?

I’m probably overthinking this. I’m sure this was cleared first with KISS, Led Zeppelin, The Beatles, Tom Petty, Booker T and the MGs, Pink Floyd, Sex Pistols, Daft Punk etc etc.

As David said in his post FCC Payola Lanes: Big Broadcasters ask FCC for Payola Waiver, Clear Channel and other NAB radio gigantamo chains have asked the FCC for a “waiver” on the FCC’s payola rules.  What’s interesting about this is the filing date, November 26, 2014.

What else happened on November 26?  One thing is that NPR reporter Laura Sydell posted “Pandora’s New Deal: Different Pay, Different Play“.  Laura Sydell quoted David alongside Georgetown professor Jim Burger and Pandora CEO Brian McAndrews all on the subject of whether Pandora’s “steering” deal with Merlin labels is payola and whether the FCC’s payola rules apply to Pandora.  This would be based on Pandora being the only pureplay webcaster to at least try to become an FCC licensed broadcaster.  (We’re not really sure where that application is at, but if you do, please comment with a reference.)

Was Sydell’s post the first time the payola issue has come up in the context of steering or promotion in direct deals between broadcasters and labels?  Of course not, it’s come up repeatedly.  But it was the first time that we know of that it came up in the context of Pandora and especially in the context of Pandora’s “Chris Harrison special” that they are trying to run in the current rate court as Sydell reports (and as was later confirmed in Billboard’s (admittedly skeptical) reporting about the similarities between the Pandora and DMX licensing strategies.  Harrison worked at DMX before Pandora–see DMX’s chest-beating press release trumpeting its defeat of songwriters).

Not to get too tin foil hat about it all, but it is very coincidental that an NPR reporter starts asking about payola and then the NAB quietly asks the FCC to give them a waiver.

If the FCC rules in the broadcaster’s favor, that could also apply to Pandora’s purchase of South Dakota radio station KXMZ-FM.

And maybe to Pandora itself.

You think internet “fast lanes” were problematic? How about “payola lanes”  on terrestrial radio and webcasting? Payola is back! And it wants to go Legit this time.  That’s right, broadcasters are proposing a payola waiver from the FCC.  Here is the document they filed with the FCC.  Read it for yourself. It freaking unbelievable.  PDF below or you can read it on the FCC website here.

DA-15-325A2

Paying for airplay is not actually illegal.  As long as a radio station announces to its audience that the track you are about to play (or just played) is”sponsored” and who has “sponsored” it, no penalty.

Although this requirement is weak,  it has largely ended (blatant) payola**.  Having to announce this puts label, artist and radio station in awkward and unflattering position.

So big broadcasters are asking for a waiver that would change the way this rule works.  They propose phasing out this requirement in two steps.  First they want to lump all the “we accepted payola” announcements into a single announcement broadcast 3 times a day.  The idea here is you wouldn’t really know you were listening to a payola song. Even if you heard the announcement you wouldn’t necessarily be able to put the sponsorship with the song.

The broadcasters helpfully provide an example announcement:

After a transition period  they would only do a single block announcement once a day.

If for some reason you might think I’m exaggerating and  you think that there must be some logical explanation for this waiver request? Check out the totally hilarious and lame reason the broadcasters give for moving the disclosure to their website.  No one with good or honest intentions would ever provide an excuse this lame:

Car horns?  Well if you are trying to look  at the Sponsor ID page on the radio station website while driving I imagine there will be a lot of car horns.

You see what’s happening here, right?  They are making it so it’s palatable for radio stations to accept payola and for labels to pay to have their artists promoted.  If you’ve read your popular music history you know that we’ve had several periods of widespread payola and it’s negative consequences. The net effect was that large established record labels were able to block independents and startups from getting radio play.  We already know how this story ends.

This is a very dangerous.  Don’t let history repeat itself.  All indie artists and labels should be very concerned by this.   Fortunately the FCC is forced to ask for public comments on waivers like this.  We dug up the comment page. Unfortunately they’ve only given a curiously short period for comments. 30 days.   Let’s all chime in.  Let’s make a lot of racket.  Let’s not let the bastards get away with this.

http://www.fcc.gov/document/media-bureau-seeks-comment-waiver-petition-re-sponsorship-id-rules

While you are at it.  The President seems to have taken a keen interest in the affairs of the FCC.  Tell the President what you think about this payola proposal.

https://www.whitehouse.gov/contact/submit-questions-and-comments

** Payola has never gone away. Currently it works in an indirect and convoluted manner. Things like contests for radio station staff or record label artists play for free at event sponsored by radio stations, record companies pay above market rates for advertising their artists, etc etc.  And it’s virtually impossible to get on the radio unless you hire “indie promoters.” I wouldn’t be surprised if  money is still changes hands directly but under the table.

New Jargon:  Math Doers & Magic Unicorn Lovers

There is no digital divide in the music business.  There is no pro-digital music business and anti-digital music business.  This is the real divide, it’s between  those that do the math on the revenues, and those that believe in magic unicorns.

I’m in a band. Like virtually every performer, I’m pro-digital.   I’ve been running a profitable web enabled business since 1993 (built our first website).  A profitable web-based business since 1999 (Napster). And managing a transmedia brand campaign since 2005 (YouTube + WordPress).  Bands were the early adopters of social media, crowd funding and just about everything that the digital gurus think was just invented (and need to desperately explain back to the pioneers for a fee).

Ever heard of  The Well and the Grateful Dead?  Anyone remember the pre www days of AOL? The most popular “boards” were hosted by bands to interact with their fans. Yeah we had acoustic dial up modem cradles sloshing around in the back of the van. Websites?  I know we had a website before Coca-Cola.  It’s fun to laugh at this now but Friendster was revolutionary, and it really took off when bands discovered they could convert their email lists to networks of friends.   Myspace specifically killed Friendster because they offered band pages and music players to bands.  Overnight bands moved their interactions with fans to MySpace.  And yes that’s funny to think about now but remember in 2005 people in Silicon Valley AND Hollywood were proclaiming it the future of the music business.   YouTube?  to this day half their top 50 videos are music videos.  We wrote the rules on social networking and social marketing.   We took the old Grateful Dead/DIY/indie-rock/punk rock grassroots techniques and applied them online.  In 2003 the big players in Silicon Valley and Holly wood they were still thinking top down.  Thinking about how they could use the web to “broadcast” out to fans.  I think that’s why bands identified with the early social media startups and self publishing entrepreneurs.  We immediately saw that they could help us get around the gatekeepers. They were helping us stick it to the man.

I can’t tell you how many talented coders, web-designers, and generally tech savvy people I know that play semi-professionally or professionally in bands. I believe bands are quicker to adapt new technologies and more efficient at using these technologies than practically any other business.

And because of our long experience in the music business we have serious bullshit detectors.  We have spent our lives dealing with crooks, charlatans, shysters, snake oil salesman and people that promise us ever elusive riches if first we do them this one little favor….

Our skepticism towards the new digital services may be confusing to some outsiders and consumers, but it’s almost always grounded in reality.  Remember we get the royalty statements, we see the contracts and terms of service. We could tell the moment it changed.  Meet the New Boss, Worse Than The Old Boss.  Bloggers and journalists?  Not so much. They just see the press releases from the digital platforms or glowing statements from some manager who coincidentally is an investor in DigitalSnakeOil.com.   (Although this sounds like I’m talking about ScooterBraun and Troy Carter,  I’m not.)

So let’s all say this together.  Everyone in the music business is pro-digital.  There’s just those of us who do the math.  And there are those who believe in Magic Unicorns.

Or profit on the IPO.

At today’s Senate Antitrust Subcommittee hearing, the one unifying theme between the Google-backed Public Knowledge, the National Association of Broadcasters and Pandora is that the reason for the consent decrees is that songwriters are a special class of people who simply cannot be trusted to behave themselves.

Time and time again throughout the hearing Public Knowledge, the NAB and Pandora regaled the subcommittee with stories for just how untrustworthy songwriters and publishers are as a class.  And of course the Google-backed Public Knowledge was just frothing at a chance to bash record companies who weren’t even present.

Then we had the database scam.  Guess who wants to control that database?  They what want a compulsory license on the world’s information.

The sum and substance of the NAB, Pandora and Google side of the table is that the music industry is just filled with bad people who you have to keep an eye on because the $2 trillion collusion of the broadcast, Internet and webcasting business is just so hard done by.

A favorite moment was when Senator Al Franken called out Pandora’s Chris Harrison (aka Songwriter Enemy #1) about the usual sensationalized statements about “$150,000 fines” that Pandora would pay for failing to license a song.  The truth–$150,000 is the maximum range that a court can set for statutory damages for willful copyright infringement.  We have it on pretty good authority that no court has ever set the damages that high, but shillers like Harrison always use this as an example.

Franken asked if Harrison could give one example of $150,000 damages being awarded.  After wriggling around trying to dodge the question, Harrison had to admit that he didn’t know of any music cases where it happened.  That’s because there are none.

That was worth the price of admission alone.

We always thought that singling out a class of people for prosecution by the government based on their status was unconstitutional.  Not in the new world order, apparently.