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36–131 PDF 2007

FULL COMMITTEE HEARING ON ASSESSING

THE IMPACT OF THE COPYRIGHT ROYALTY

RATES ON RECORDING ARTISTS AND

WEBCASTERS

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JUNE 28, 2007

Serial Number 110-33

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

DEAN HELLER, Nevada, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

LOUIE GOHMERT, Texas, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

Van Hollen, Hon. Chris ........................................................................................... 11

WITNESSES

PANEL I 

Miller, Bryan, WOXY.COM .................................................................................... 4

Silverman, Tom, Tommy Boy Records ................................................................... 6

Allcorn, Joey, Artist ................................................................................................. 9

Fink, Cathy, Artist .................................................................................................. 11

Kelly, Kieran, Stunning Models on Display Records ............................................ 14

Lee, Thomas F., American Federation of Musicians ............................................ 15

Eiwswerth, Richard, National Public Radio .......................................................... 18

PANEL II 

Inslee, Hon. Jay ....................................................................................................... 38

APPENDIX

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 44

Chabot, Hon. Steve .................................................................................................. 46

Miller, Bryan, WOXY.COM .................................................................................... 48

Silverman, Tom, Tommy Boy Records ................................................................... 51

Allcorn, Joey, Artist ................................................................................................. 54

Fink, Cathy, Artist .................................................................................................. 58

Kelly, Kieran, Stunning Models on Display Records ............................................ 61

Lee, Thomas F., American Federation of Musicians ............................................ 65

Eiwswerth, Richard, National Public Radio .......................................................... 94

Inslee, Hon. Jay ....................................................................................................... 98

Statements for the Record: 

American Media Services LLC ............................................................................... 100

Save Net Radio - Artist Testimonials .................................................................... 102

Save Net Radio - Independent Labels .................................................................... 105

Educational Media Foundation .............................................................................. 107

KSBJ-FM .................................................................................................................. 109

National Association of Broadcasters ..................................................................... 110

Northwestern College Radio Network .................................................................... 112

National Religious Broadcasters ............................................................................ 114

Family Junction ....................................................................................................... 115

Mother Jones Band .................................................................................................. 117

Nate Query ............................................................................................................... 119

Radial Angel LLC .................................................................................................... 120

Small Webcaster Community Initiative ................................................................. 121

Tangleweed ............................................................................................................... 125

(V) 

(1)

FULL COMITTEE HEARING ASSESSING 

THE IMPACT OF THE COPYRIGHT 

ROYALTY BOARD DECISION TO 

INCREASE RATES ON RECORDING 

ARTISTS AND WEBCASTERS 

THURSDAY, JUNE 28, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:00 a.m., inRoom 

2360, Rayburn House Office Building, Hon. Nydia M. Vela ́zquez 

[chair of the Committee] Presiding. 

Present: Representatives Vela ́zquez , Clarke, Johnson, Chabot, 

Akin and Heller. 

Also present: Representative Van Hollen. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

ChairwomanVELA ́ ZQUEZ . I call this hearing to order. 

This morning the committee will examine a recent decision by 

the Copyright Royalty Board that will increase the fees that Internet radio broadcasters pay to play music. In advance of these new 

fees taking effect on July 15, it is important to consider a challenge 

of providing fair compensation for artists and record labels while 

maintaining a business-friendly environment for Webcasters. 

In May of this year, the Copyright Royalty Board set new rates 

at which commercial and noncommercial Webcasters will compensate copyright owners. The CRB hopes to establish an annual 

minimal fee that these entities must pay for each channel provided 

by the service. In response to the CRB decision, Internet radio providers have raised concerns about whether the new rates and minimum fees will put small Internet radio broadcasters out of business. Artists and record companies, however, have praised the CRB 

decision as one that fairly compensates them for their music. This 

has prompted an important debate about copyright royalties that 

will continue beyond July 15 when these new rates go into effect. 

As a result, today’s hearing will review the impact of this ruling 

on small Internet radio broadcasters, independent artists and 

record labels. 

At the heart of the copyright royalties issue it is the fact that the 

Internet is changing the way consumers access and enjoy music. 

Music used to be distributed primarily via records, tapes, CDs and 

traditional AM-FM radio. Now an increasing amount of music is 

2

now distributed via audio files, network downloads, ringtones, satellite radio, HD radio and Internet radio. 

Data from 2006 confirms that a market shift is occurring in the 

music industry. Sales of CDs continued to fall last year, while subscriptions to digital music services, digital downloads of phones, albums and ringtones, all increased. At the same time, the number 

of subscribers to satellite radio and the number of people listening 

to Internet radio has risen dramatically. 

Through the Internet, radio broadcasters of all sizes offer 

Webcasts. Many of the leading providers are small companies employing fewer than 50 employees. Given the consolidation of media 

ownership that we have seen in recent years, the growing popularity of a broad array of small and independent Webcasters is a 

promising sign. Listeners want greater choice with respect to music 

content, and Internet radio services of all sizes are providing just 

that. 

As popular as these services are today, new technologies are expected to make them even more popular in the future. When universal broadband access is realized, consumers will be able to access an even wider variety of entertainment than they are today. 

In order for this future to become a reality, there must be a business environment that allows new technologies to prosper and grow 

while preserving incentives for artistic creativity. It is through this 

balance that we will best be able to promote innovation and ensure 

that America remains a leader in these emerging high-technology 

sectors. 

The hearing today continues the committee’s active role in addressing small-business-related technology issues. These issues are 

indicative of the crucial and critical role that technology plays in 

the economy and in advancing U.S. competitiveness. I look forward 

to the testimony today. And I want to thank all the witnesses for 

traveling to Washington, D.C., today. 

And I also want to thank Ranking Member Mr. Chabot for suggesting this hearing. 

ChairwomanVELA ́ ZQUEZ . And now I recognize Mr. Chabot for his 

opening statement.

OPENING STATEMENT OF MR. CHABOT 

Mr.CHABOT. Thank you very much, Madam Chairwoman, and 

thank you very much for holding this hearing. 

As you know, time is of the essence for all the parties involved 

in this discussion, and I appreciate your willingness to consider 

this issue before July 15, which, of, course is the deadline. 

Let me also thank our witnesses, as you did, for being here 

today. I want to particularly thank a couple that are from my area, 

Mr. Bryan Miller, who is the general manager of WOXY.com in 

Cincinnati; and Mr. Eiswerth, president and general manager and 

CEO of Cincinnati Public Radio, located also in the Cincinnati 

area, for making this trip. I appreciate, I know we both do, all of 

the witnesses’ willingness to appear here today on such short notice to share with us your experiences. 

The issue—and the Chairwoman, I have to say, has set it out 

very, very well here this morning in her statement— the issue beVerDate 0ct 09 2002 09:24 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36131.TXT LEANN
3

fore us today implicates some of our Nation’s most important rights 

and protections. As I indicated in my opening statement, during 

this committee’s examination of patent reform a few months back, 

we don’t have to look any further than the Constitution to understand the importance of innovation and creativity to our Nation’s 

economic development. In particular, the question we are struggling with today is how do we best protect and encourage creativity, while at the same time adequately promote and protect the 

use of the most advanced technology innovations, particularly as it 

benefits consumers? 

For the music industry, artists and consumers of music, the 

Internet has been for the most part an asset. With its more than 

1.3 billion users, the Internet has fostered and nurtured the visibility of artists, as well as enabled a new type of small business 

to take hold, the small Webcaster. Indeed over the last 5 years, the 

number of Internet radio listeners has increased from 20 million to 

29 million, with audience levels expected to double by 2010. By 

2020, industry experts predict that more than 200 million people 

will listen to Internet radio. 

Similarly, the growth of Internet radio continues to benefit songwriters and recording artists. The exposure and audience reach 

that artists have experienced because of the Internet is beyond 

compare, providing opportunities for a diverse range of artists and 

labels who never thought it possible. 

Royalty fees have played a significant role in this growth on both 

ends, contributing to the increased number of diverse recording artists as well as the increased number of specialized Webcasters. 

However, the recent decision by the Copyright Royalty Board to increase royalty fees may jeopardize the mutually beneficial relationship. The decision and the outcry that has resulted on both sides 

raises questions and concerns about what is needed to fairly and 

adequately compensate recording artists and labels, many of which 

are small businesses, yet ensure that Webcasters, particularly 

small ones, can absorb these increased costs in order to remain viable. 

Ironically, this dilemma is not new. Indeed, in 2002, the same 

parties were here in Congress raising similar concerns. Fortunately, the dispute resulted in the Small Webcaster Settlement Act, 

which codified the voluntary agreement reached by the parties. 

As with any private dispute, I believe the parties to the conflict 

are best suited to devise a remedy that is workable and equitable 

for all involved. However, I must admit that I find it somewhat 

troubling that we are here revisiting these issues yet again just 5 

years later. This leads me to question the effectiveness and flexibility of section 112 and 114 of the Copyright Act and the ability 

of these provisions to promote and encourage creativity, encourage 

the use of the most advanced delivery mechanisms to benefit consumers and copyright holders, and ensure fair compensation for 

those who have created works protected by the Copyright Act. 

I look forward to hearing from all of our witnesses here this 

morning, and it is my hope that this hearing serves the purpose 

for which it was intended. That intent is to get those who are parties to this conflict to take a step back and look for common ground 

4

so that July 15 is just another day that listeners of Internet radio 

can hear their favorite artists. 

I yield back the balance of my time, Madam Chair. 

ChairwomanVELA ́ ZQUEZ . Thank you.

ChairwomanVELA ́ ZQUEZ . Given the number of witnesses that we 

have, I would ask that please make your remarks for 5 minutes. 

We are going to have the clock there. It will be ticking. Without 

objection, your entire statement will be included into the Congressional Record. 

And now I would recognize Mr. Chabot for the purpose of introducing the first witness. 

Mr.CHABOT. Thank you, Madam Chair. And I would first would 

like to introduce Mr. Bryan Miller. Mr. Miller is currently the general manager, as I mentioned before, of WOXY.com, a small fouremployee Webcasting station that currently operates out of Cincinnati, Ohio. WOXY.com, like many Internet radio services, started out as WOXY-FM, a terrestrial FM station that broadcasted a 

unique rock and roll format. Under the leadership of Mr. Miller, 

WOXY-FM made the transition from an analog radio station to 

WOXY.com, an Internet-only broadcast station in 2004, and is now 

one of the leading indie-rock Internet radio outlets. 

Mr. Miller hold both a B.S. and B.A. From Miami University, a 

fine university located right outside Cincinnati up in Oxford, Ohio, 

and currently resides in San Francisco. 

Thank you again for coming all the way to share your experience, 

Mr. Miller. You have 5 minutes. 

STATEMENT OF BRYAN MILLER, WOXY.COM, GENERAL 

MANAGER, CINCINNATI, OH 

Mr.MILLER. Good morning. My name is Bryan J. Miller, and I 

am the general manager for WOXY.com, an Internet broadcaster 

based in Cincinnati, Ohio. Thank you, Chairwoman Vela ́zquez and 

Congressman Chabot, for holding this important hearing.

I have had the unique experience of making the transition from 

a terrestrial FM radio station to an Internet-only Webcaster, and 

I hope I am able to convey to this committee today the lessons I 

have learned over the course of my career and my reasons for opposing the recent increase in recording royalty rates for Webcasters 

like myself. 

First let me state unequivocally that whatever you hear and believe about big Webcasters being able to pay higher royalties, the 

truth is that smaller independent Webcasters are struggling to get 

by in this very exciting, but still very young industry. There is a 

tremendous challenge to deliver the value and innovation listeners 

demand while maintaining a viable business. 

From my personal experience the economics of running a standalone Internet radio operation are daunting at best. Between bandwidth costs, hosting, music royalties and rent, a small Webcaster 

would be doing quite well to simply cover his or her costs let alone 

have anything left over for payroll. And, in fact, the revenues we 

have been able to generate in operating WOXY.com over the past 

several years have at best only covered half of our monthly expenses. 

5

In all the conversations I have had with my peers, their situation 

isn’t much better. Most draw on a salary and are lucky to cover 

just their operating costs. 

The Copyright Royalty Board’s decision is grossly out of sync 

with the economic reality of small Webcasters. Even before the recent rate hike, financial hardship forced WOXY.com off the air and 

out of business last September. We were lucky enough to have been 

acquired by a larger company, who has thus far been willing to 

subsidize our operation. Unfortunately, most Webcasters facing 

these increased royalty rates don’t have that luxury. I can guarantee that if WOXY.com had not been acquired and was still a 

stand-alone entity, the new royalties would have been the end of 

the road for us at that point. 

So why should you care about Webcasters who are a hair’s 

breath from going under even before they face the higher royalty 

rates? I would argue that we deliver something so unique to artists 

and music fans that our existence should be supported and encouraged and not hindered during the early years of our industry. 

Musicians stand to lose valuable exposure provided by Internet 

radio outlets. I believe that one of the reasons millions of people 

tune into Internet radio every month is that they are looking for 

something new. In the past 15 years, rampant consolidation 

amongst AM and FM broadcasters has led to a general homogenization of radio programming. Narrowing playlists and fewer artists 

are being exposed. Consumers are now turning to Internet radio to 

discover new artists and find something that they are not going to 

get via their local AM or FM radio station. Countless artists have 

told us that listeners have approached them at concerts around the 

country, and they told them how they first discovered the band’s 

music when they first heard it on WOXY.com. Today we are playing more than 400 songs from new artists, and in a given year we 

probably play about 10 times the number of songs as your average 

terrestrial radio station, and including five times as many independent artists who would otherwise never be heard on traditional 

radio. 

The musicians hurt most by this radio increase, I think, are the 

ones who today benefit the most from Internet radio, and that 

would be new and emerging independent artists. Webcasters going 

out of business is a lose-lose for artists. 

Consumers will also lose if there is a mass extinction of independent Internet radio stations. The growing audience of Internet 

radio proves that there is a hunger for alternatives to mainstream 

media. With consumers’ tastes becoming increasingly niched, Internet radio has the ability to serve an unlimited number of channels 

of programming uniquely suited to fulfill this need. For example, 

stations dedicated to genres like honky-tonk or even children’s 

music could never exist on FM broadcast radio. But confined by geography and limited by space on the dial, traditional radio could 

never offer this type of programming. But on line these formats 

have found a worldwide audience, and they are thriving today. 

Unfortunately, the shortsighted $500-per-channel minimum fee 

in the CRB’s decision would make serving thousands of channels 

of custom programming financially impossible. I fear that the future of Internet radio under the new performance royalty rates will 

6

look wildly different from the thousand of small vibrant, eclectic 

stations that you see today. A select few, mostly larger corporate 

Webcasters, may be able to pay the increased royalties by subsidizing their Internet broadcasting operations with non-Webcast 

revenues, in effect using Internet radio as a loss leader for their 

other products. But I truly believe that NetRadio, as we know it, 

and the opportunities it offers will be a thing of the past if Copyright Royalty Board’s decision is not overturned. Thousands of established and budding small businesses will vanish, and although 

I believe Internet broadcasting has the potential to grow into a 

thriving, profitable industry, currently the revenue structure is 

simply not there to support the additional royalties. 

Thank you for taking the time this morning to consider this matter and speak with representatives from all facets of the industry. 

I ask you to consider the importance of NetRadio, co sponsor the 

Internet Radio Equality Act and help keep Internet radio alive. 

Thank you. 

ChairwomanVELA ́ ZQUEZ . Thank you, Mr. Miller. 

[The statement of Mr. Miller may be found on page 48 of the Appendix.]

ChairwomanVELA ́ ZQUEZ . Our next witness is Mr. Tom Silverman. Mr. Silverman is the founder of Tommy Boy Records. Based 

in New York City, Tommy Boy Records is one of the world’s premier independent labels. Tommy Boy has earned gold, platinum 

and multi-platinum albums by such artists as Everlast, Queen 

Latifah, De La Soul and Naughty by Nature. In 2006, Tommy Boy 

records marked its 25th anniversary. 

Sir, welcome. 

STATEMENT OF THOMAS SILVERMAN, CHAIRMAN, TOMMY 

BOY RECORDS, NEW YORK, NEW YORK 

Mr.SILVERMAN. Good morning. Thank you, Madam Chairwoman 

and members of the committee. My name is Tom Silverman, but 

I am also known as Tommy Boy, and the owner and CEO of 

Tommy Boy Entertainment. I do appreciate this opportunity to testify before you today. 

I come from the world of hip-hop and gold and platinum records, 

from the world of Planet Rock by Afrika Bambaataa and the Soul 

Sonic Force, the world of Queen Latifah and Naughty by Nature. 

But I also come from a world very familiar to members of this committee, the world of business, of meeting payrolls, paying taxes, 

and although we only have 11 employees, we have hundreds of people depending on the viability of this business enterprise, from performers, writers, manufacturers, managers, promotion people and 

so on down the line. 

And it is as a businessman that I appear before you today. It is 

the business of music, a vast industry that, in step with the extraordinary changes in technology, is itself changing dramatically. 

Long gone are the days of vinyl records that were prevalent when 

I started out with a $5,000 loan from my father in my cramped 

New York City apartment in 1981, with two other guys. Today 

there are many ways in which people get their music, including 

Internet radio, satellite radio and other digital formats. Almost 

7

every day new technology and business arrangements are appearing and continue to dramatically alter people’s music listening habits and preferences. 

On balance I think it is all good. It is broadening people’s access 

and exposure to all kinds of music, and it is opening up new opportunities for artists in small businesses like Tommy Boy. But even 

in this new world of jaw-dropping new technology, I have the oldfashioned challenges and responsibilities of any business owner: 

making a profit; identifying, hiring and nurturing employees; investing in new artists and new products. 

I sometimes sign a new musical artist, and they do well and 

flourish, and my record label makes a profit, but no one bats a 

thousand. More often I sign new musical artists, and they don’t so 

well, sales languish, and I lose money. In the old days, one winner 

paid for five losers. Today one winner doesn’t even pay for one 

loser. These days we are becoming increasingly dependent on the 

royalties due us from the flourishing business of Internet 

Webcasting and satellite radio. These are businesses totally dependent on our work product, the creativity and high-risk investment of the record label, and the creativity, passion and hard work 

of the recording artists. Without us, these businesses would not 

and could not exist. 

Yet what we continue to hear from the Webcasting business, one 

where more than 90 percent of the Webcasting royalties are paid 

by only 20 large Webcasters, is that they want to pay less, not 

more, and I think it is only fair that these large businesses, whose 

very existence is totally dependent on the work product of record 

companies, independent labels like Tommy Boy and musical artists, should fairly compensate those whose work they Webcast. 

As to the fairness of the rates, they were determined by three 

impartial judges specifically selected for their knowledge and understanding of this industry in a hearing process that ran for more 

than 18 months. It was a fair decision. And what irks me as a 

small business owner is the attitude expressed by a few small 

Webcasters who became engaged in a grassroots campaign primarily financed by large Webcasters. They got people’s attention, 

including some Members of Congress, by claiming small businesses 

would be hurt. Okay. But what bothers me is in all their rhetoric, 

I never hear anything positive about artists, who themselves are 

small businesses, or about the challenges facing independent labels. 

There are 2,000 independent labels in America. It is all about 

cutting the rates. Congress asked Sound Exchange to give small 

Webcasters below-market royalties, to provide them with a significant discount from fair market rates set by the copyright royalty 

judges, to allow them a chance for their businesses to gain more 

steam. And as I understand it, Sound Exchange is doing just that. 

And if Sound Exchange tells me it is okay to give this discount and 

it might help some of these small operators, then it is okay with 

me because I know that Sound Exchange is looking out for our performance rates. 

So while I continue to pay for electricity and employees and all 

of my other costs that rise with the market, even as my traditional 

sales and margins continue to decline, continuing this discount for 

8

a limited time, it seems fair. But that discount offer does not seem 

to have stopped the push to cut our royalties. I know what that is 

about. It is about Big NetRadio. And, Madam Chairwoman, with 

all due respect, it is not right. 

I was asked to come before you today as an independent record 

label owner and entrepreneur who has had some success in the industry, but I want to be clear that I fully realize this success was 

not preordained, certainly not inevitable. Yes, I worked hard, but 

so do a lot of people in the industry. I have tried to assist small 

businessmen and women over the years. In the 1980s, I created the 

New Music Seminar, which was the music business’ largest conference that tried to educate new entrepreneurs and lawyers, 

agents, managers and artists on how to best navigate the difficult 

music business. 

I even distribute other small labels smaller than my own. Over 

the years I have been lucky to discover influential groups like De 

La Soul and Queen Latifah. I invested in new sounds. But so do 

a lot of others. I constantly reinvested my money to try to build my 

business. So do others. Many in my industry have failed. No small 

business is guaranteed success. I happened to strike on some successes, but many of us do not make it big in this competitive business. Many scrimp and save and sacrifice to make ends meet, devote their life to this business that they love, making music that 

others enjoy. 

And I do hope that you consider the situation; as you consider 

it, you will keep in mind the many hundreds of thousands of musical artists and the thousands of record label owners who are small 

business people, sometimes extremely small. 

I serve on the board and was a founding member of the American Association for Independent Music, a new association who represents many of America’s leading independent labels. Of our 130 

members, 90 have a market share of less than 2/10ths of 1 percent, 

which means they gross $1.4 million or less, gross $1.4 million or 

less, from the sales of their products. From this gross one must deduct artist royalties; publishing royalties, which we have to pay; 

the cost of physical goods, if in physical form and not a digital 

download; and many other costs, like marketing, advertising, artist 

advances and more. Our businesses are very different from 

Webcasters, some of whom simply pay a service fee, monthly service fee, and plug in their computers and stream. 

The income for artists and copyright owners from music royalties 

being paid for the use of their products, is a critically important 

factor in whether they can afford to keep going and bring us the 

music that so very many of us enjoy and love. It is all about fairness and being paid for the work that we do. 

ChairwomanVELA ́ ZQUEZ . Mr. Silverman. 

Mr.SILVERMAN. Thank you very much. 

ChairwomanVELA ́ ZQUEZ . Your time is up, but if you need an 

extra 30 seconds to summarize. 

Mr.SILVERMAN. Thank you. 

[The statement of Mr. Silverman may be found on page 51 of the 

Appendix.]

9

ChairwomanVELA ́ ZQUEZ . Our next witness is Joey Allcorn. Mr. 

Allcorn is a country music recording artist from Columbus, Georgia. Mr. Allcorn’s debut album, entitled 50 Years Too Late, was released in 2006, and currently working on his second full-length 

album for release in 2008. Mr. Allcorn was recently a True Country 

delegate through the Roots Music Association. Welcome. 

STATEMENT OF JOEY ALLCORN, ARTIST, COLUMBUS, 

GEORGIA 

Mr.ALLCORN. Thank you, Chairwoman. 

Good morning Chairwoman Vela ́zquez , and Congressman 

Chabot and members of the committee. My name is Joey Allcorn. 

I am from Columbus, Georgia, and I want to thank you for inviting 

me here to speak about this issue today. I speak to you as a professional songwriter, recording artist and a performer. 

As I will explain, Internet radio is one of the greatest opportunities for the 21st century recording artist. It helps fans find new 

music, it helps artists find new fans, and leads to new and unexpected performance and touring opportunities, and yet still pays 

royalties. What a great combination. But if the Copyright Royalty 

Board royalties are implemented and Webcasters go silent permanently, as they did Tuesday for their day of silence demonstration, 

then all these benefits will be lost. 

The higher royalty rates from fewer Webcasters will benefit only 

a few big artists, just as broadcast radio benefits a few, but leaves 

most independent artists like me high and dry. 

But let me go back and tell you a little bit about me and my 

music. As the title track of my album says, I was probably born 50 

years too late. I have been playing music for what seems like every 

day since I was about 14 years old. It was then I discovered Hank 

Williams, Senior, and that changed what I was doing forever. All 

those old stories of heartbreak, heaven and hell, and American history got into my blood, and I started writing songs myself. These 

aren’t mainstream country songs like you hear on FM radio today. 

My songs pay tribute to what they now call plastic country, which 

is artists like Hank Williams, Johnny Cash, Farin Young and even 

old guys like Muddy Waters and Lead Belly. I tell my stories with 

steel guitars and fiddles, hillbilly wine and a yodel. 

I do okay for a young guy playing traditional country music. I 

make a living, enjoy some success and have a good and growing following. I have shared the stage with some of the legends, members 

of Hank Williams’ Drifting Cowboys band, Ernest Tubbs’ Texas 

Troubadours, and Waylon Jennings’ Waymore Blues band. Hank 

Williams, III, who is Hank, Senior’s, grandson, even performed on 

a song with me for my debut record. 

But none of my success comes from mainstream FM radio or 

happens in Nashville where the major studios are based. My business begins with my guitar, a pen and paper, and a local recording 

studio, and it grows and thrives on the Internet. Traditional terrestrial radio promotion was never in my business plan because they 

just don’t play this kind of music anymore until Internet radio 

changed my business and expanded my opportunities a thousandfold. 

10

Joey Allcorn and many artists just like me have found a home 

on Internet radio where we can reach people who appreciate the 

kind of music we do. Last year we made the Ram Radio top 10 list 

of 2006, and people would come up to me at shows and say, I 

bought your album on the Internet, heard your music on Last FM 

or Pandora or any of these services, and that changed my world. 

It is incredibly easy to buy music with Internet radio. All the stations have buy buttons that connect listeners to Amazon.com, 

iTunes, CD Baby, or the station’s own virtual store, so I have been 

able to sell a lot of albums that way. 

Compare this to the frustration of broadcast radio. We played a 

concert in my hometown in 2005, and they set up for a local interview for me to promote the show, and the station couldn’t even 

play my music because it didn’t fit their format. It is ironic that 

Internet radio is helping me make my career, and it is one of the 

best places for me and those like me and my fans to discover one 

another, but these royalties might completely shut this opportunity 

down. 

Even beyond radio, the Internet is a huge opportunity for independent artists. It has decentralized the music industry so all artists have a shot. I don’t need a major record label or major studio 

support to make music, find an audience, distribute my music and 

make a decent living. Instead, I can go direct to music fans, or they 

can find me using Internet radio or a simple Yahoo search on classic country music, and that is okay for the major labels because 

they would never sign us anyway. My band doesn’t sell enough albums to pay their electric bills. But with low barriers to entry into 

Internet radio, I can build my audience one listener at a time, one 

city at a time with the music that I love. In a way I guess you 

could call Internet radio the greatest grassroots music movement 

ever. 

All this opportunity makes these drastic new royalties even more 

bizarre to me. Here is a new radio outlet that has broken the industry wide open for independent artists and small labels. It pays 

royalties to artists who don’t get paid on broadcast radio and is the 

only medium with a buy button next to the song titles. Yet three 

judges from somewhere I have never heard of decide to raise 

Webcasters’ royalty rates so they will go out of business, and if that 

happens, my career, my small business and my fans will suffer. 

I have heard that Sound Exchange on behalf of its artist members is claiming this royalty fight is about big Webcasters ripping 

off artists. That is really unfair, and I don’t understand it. Artists 

benefit equally from small and large Webcasters. These new royalties will kill the small Webcasters first, but then one by one as 

time goes on, they will kill the larger ones as well. If that happens, 

the opportunities lost for independent artists will be painfully real. 

In fact, I just met a guy last week whose band was heard on Pandora by one music director, and the following week he was playing 

before 15,000 in Kansas. 

I will stop here. I think you get the point. But finally, please understand this isn’t about greed or pointing fingers at some big radio 

or big label conspiracy. The beauty of Internet radio is that it supports so many artists and genres, many of them whom corporate 

radio and major labels would never be interested in anyway. I hope 

11

you agree and that you cosponsor the Internet Radio Equality Act 

and help keep Internet radio alive. 

ChairwomanVELA ́ ZQUEZ . Thank you, Mr. Allcorn. 

[The statement of Mr. Allcorn may be found on page 54 of the 

Appendix.]

ChairwomanVELA ́ ZQUEZ . And now I recognize our distinguished 

colleague, Congressman Chris Van Hollen, for the purpose of introducing Ms. Cathy Fink. 

STATEMENT OF MR. VAN HOLLEN 

Mr.VAN HOLLEN. Thank you very much, Madam Chairwoman 

and members of the committee. I just have the honor of introducing 

to you one of my constituents, one of my neighbors and a friend, 

Cathy Fink, and am really pleased that you invited her to testify 

here today. She has had a very distinguish career in the area of 

music, particularly children’s music, and together with her partner 

Marcy Marxer, they won the best musical album category for children’s music. They have been nominated 11 times for Grammies 

and won twice. They have been honored by the Washington Area 

Music Association, the Parents Choice Foundation, the 

Oppenheimer Toy Portfolio and the American Library Association. 

And I just want to thank them for all they have done, not just 

for adding to the sort of musical richness of the country, but for 

their focus on children’s music. And they have brought together 

many families and have been a joy to many families, not just in 

the Washington area, but around the country. If you haven’t heard 

their tapes, and you have young children or grandchildren, I urge 

you to get ahold of them because they are really a joy to listen to. 

It is great to have you here. 

Thank you, Madam Chairwoman and members of the committee. 

STATEMENT OF CATHY FINK, ARTIST, WASHINGTON, D.C. 

Ms.FINK. Thank you very much. It is a pleasure to see all of you. 

As you know, my name is Cathy Fink, and I am a musician, recording artist, songwriter, music producer, teacher, author, artist, 

member of Sound Exchange, a trustee of the Recording Academy, 

and a long-time member of the American Federation of Musicians. 

My partner and I have performed, recorded, produced a wide range 

of music, including folk, old-time country, swing, bluegrass. And as 

Congressman Van Hollen mentioned, we have a great focus on children’s and family music. And I actually brought you a copy of one 

of our Grammy-winning CDs called Bon Appetit, about health and 

nutrition for kids. If you want to talk about a small business, this 

is the very first Grammy winner in the children’s music category 

won by an artist who is not a licensed character or a television personality. It is the real people doing the real thing. 

I would like to share with the committee the economics of our 

small business related to our art and our profession. The creation 

of a sound recording takes a huge investment of time, talent and 

energy, and, like other entrepreneurs, we are making financial investments. In my case there is our home studio. Ours is not elaborate, but it is not cheap to maintain. I estimate that we invested 

about $40,000 in our home studio. That is cash from our earnings. 

12

All of our recording projects require us to also rent time in commercial studios at about $100 an hour and to pay engineers to do 

the studio work. And when we hire musicians to work on an 

album, we pay them well, the fundamental principle being that 

when people do the work, they should be paid for it. 

Like any other small business, we endure organizational and administrative tasks as well, the paperwork associated with hiring 

musicians, paying taxes, booking tour engagements, handling mail 

orders, public relations for concerts and more. In the last 10 years, 

we have freed up creative time by hiring a full-time office manager. 

We pay her a salary, we provide health benefits, we pay rent on 

office space and an office phone, fax, computer, high-speed Internet, furniture, et cetera. 

And then, of course, there are the expenses of our instruments, 

which are an investment. In our case we play so many different instruments, almost 50, on our recordings that we have a large collection, and many of them are expensive. But you may not know 

that a good acoustic guitar can cost from $2,000 to $10,000. 

We have made our way by pursuing a wide range of professional 

activities, live performances, anywhere from 75 to 250 shows a 

year. Many of them involve travel and other costs, but they all involve an opportunity to connect with live audiences, which Mr. Van 

Hollen referred to—we love that part—and to sell our CDs in person. But selling CDs alone is not enough to support us. And, frankly, it can take several years to recoup the costs of each project. 

The royalties we receive from Sound Exchange have been very 

welcome and valuable to us. To date these payments have been 

fairly modest, but they make a real difference to a small business. 

For example, the amount we receive from Sound Exchange this 

year can cover a major expense such as the annual cost of ensuring 

our equipment and instruments. 

We are indeed a small business and encourage you to see us that 

way. And it is a very creative business, one about which we are extremely passionate. Our music is a valuable creation. It is the core 

of that business, and, like any other product, deserves fair compensation. 

Last year I was personally proud to testify before the Copyright 

Royalty Board about Internet royalty rates. I thought it was incredibly important that the judges understand the investments of time 

and money that we performers make in our work. These were thorough and comprehensive hearings, and I believe that the royalty 

fees that were ultimately set by the board reflected the value of the 

recordings that are at the heart of the Webcasting and 

simulcasting business models the judges examine so carefully. 

Under the CRB decision, at 2007 rates, recording artists and labels will be paid 65 cents in royalties for supplying Webcasters 

with a month’s worth of music for an average listener who streams 

40 hours of music a month. These were rates that the copyright 

royalty judges determined were fair after reviewing testimony from 

all participants, including proprietary financial information to 

which no one else had access. 

And I want to say it loudly and clearly. The Copyright Royalty 

Board was an impartial panel set up by Congress that conducted 

a fair and painstaking proceeding. There truly is no valid comVerDate 0ct 09 2002 09:24 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36131.TXT LEANN
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plaint about process. It really comes down to money. Big 

Webcasters want to pay us less than what the judges determined 

was fair. 

Now, imagine if in my small business I played by the rules that 

the Webcasters are using today. Next time I need to purchase a 

new guitar, I might decide that the fair market rate is simply more 

than I want to pay. Would I start a campaign to ask the manufacturer to reduce his price? Would I ask you and Congress to pass 

a bill to make guitars less expensive? Would I silence my music to 

get my fans to write their Congressman? No. Because I understand 

that we all need to be compensated at market value. 

But the big Webcasters are taking such a tactic, and they want 

me to take less so they can profit more. As for the small 

Webcasters, you know, recording artists and labels have already at 

the request of Congress offered a rate discount to help them grow 

their businesses. This discount which comes out of the pockets of 

people like me will essentially freeze the rates small Webcasters 

pay through 2010 at the same subsidy levels they have enjoyed 

since 1998. 

There is a bottom line here. Without the talent, hard work and 

sacrifice of recording artists, there would be no music to play, no 

music to build the assets of the Webcasters’ businesses. It embraces a simple principle I have always stood for: We deserve to be 

paid for our work. 

If I may, I would like to make one more point. A couple of weeks 

ago I happened to read in the newspaper that Last.fm was purchased by CBS Corporation for $280 million. I asked Sound Exchange about that, and I found out that Last.fm got a discounted 

rate as a small Webcaster and paid less than $5,000 in royalty 

rates last year. I then asked Sound Exchange how much of that 

$280 million will be shared with those of us who create the music 

that helped build Last.fm into such a desirable company? And as 

you might have guessed, the answer is zero. 

Madam Chairwoman, members of the committee, we have had a 

long, successful career in this business. I am very lucky. I work 

very hard. Just as you want to be paid for your work, I want to 

be paid for my work. I am in a very small business. With your 

help, I hope, and the help of Congress, that is going to continue for 

a long time. And I appreciate your support and your time. Thank 

you very much. 

ChairwomanVELA ́ ZQUEZ . Thank you, Ms. Fink, for your passionate presentation. 

[The statement of Ms. Fink may be found on page 58 of the Appendix.]

ChairwomanVELA ́ ZQUEZ . Our next witness is Mr. Kieran Kelly. 

Mr. Kelly is co-owner and head of a promotion for Stunning Models 

on Display Records based in Astoria, New York. Founded in 2005, 

Stunning Models on Display have released four albums by artists 

including Summer Long, Will Stratton, the Receiver and Paul Michael. Mr. Kelly lives in New York City, where he also owns and 

operates the Body Project Recording Studio. Mr. Kelly is a member 

of the Recording Academy. 

Welcome, sir. 

14

STATEMENT OF KIERAN KELLY, CO-OWNER, STUNNING 

MODELS ON DISPLAY RECORDS, ASTORIA, NEW YORK 

Mr.KELLY. Thank you. 

I want to say, Ms. Fink, I really appreciate your testimony, and 

I think it will help us all to make much, much better choices with 

this particular act. 

I guess I will go back on point here. Good morning. As Chairman 

Vela ́zquez said, I am Kieran Kelly. I am the co-owner and head of 

A&R for Stunning Models on Display. We do currently represent 

six artists and bands. And I would like to thank both of you, Chairman Vela ́zquez and also Congressman Chabot,for making this 

hearing possible. 

If I leave with one message today, it should be that Internet 

radio is critically important for the development, growth and success of independent labels, as well as emerging artists, who derive 

no promotional benefit from terrestrial radio and only marginally 

more from satellite radio. If we fail to preserve the future of Internet radio, we are failing future independent artists as well as future labels. 

I have worked in the music industry for more than 15 years 

wearing many different hats. My livelihood is rooted in the success 

of the artists I represent and the general success of our industry 

as a whole. That is why I am here today, to explain why I believe 

that dramatic royalty increases will do tremendous damage to 

Internet radio broadcasters, record labels like mine, and ultimately 

the artists that this royalty rate is intended to benefit. 

The music industry has dramatically changed over the past 10 

years, and more and more the driving force for discovery is Internet radio. Internet radio stations are portals for listeners and fans 

to visit and hear new music, download the latest track, and, more 

importantly, purchase music. 

For decades fewer than 200 songs monopolized radio airplay, 

making it nearly impossible for a new song, a new artist or a new 

sound to be heard. As an independent label owner, it is nearly impossible to place a song on terrestrial radio. Today that opportunity 

exists on NetRadio. The doors opened by Internet radio to diversity 

has revolutionized and enriched the ways in which music enters 

people’s lives and the way artists and labels are able to make a living. These new royalty rates, if allowed to take effect, would restore the walls that once separated artists from new fans and listeners from new sounds, and close the doors that the Internet has 

opened. 

For my part, there is no more obvious anecdotal evidence of the 

power of Internet radio than of the four records my label has released in the past 2 years. Despite charting higher among traditional radio stations, albums released by The Receiver and Paul 

Michaels were outsold by albums released by Summer Long and 

Will Stratton, which receive significantly more NetRadio play. The 

undeniable truth is that NetRadio promoters, music sales, Internet 

radio and the click-to-buy button accomplishes its benefits, and it 

benefits everyone, artists, labels and listeners. 

What seems to be lost during this debate is the unique options 

inherent to NetRadio. The flexibility and diversity it gives listeners 

is both the reason it is so popular and the underlying cause of this 

15

looming crisis. Proponents of this rate increase believe there is 

more money to be made through NetRadio. How could there not be 

with more than 50 million Americans listening monthly? This reality, however, is that those 50 million listeners are drawn to 

NetRadio because it offers a better listening experience than traditional radio, fewer advertisements and minimal interruptions, coupled with dramatically more diverse playlists. 

Webcasters must choose between giving listeners what they demand and monetizing the product they are offering. The competition between Webcasters is unprecedented in broadcasting. Thousands of Webcasters vying for a listening audience unconfined by 

geography or cost and subject only to the quality of the product 

makes for a very thin bottom line. 

This evolution of the industry and the collaborative relationship 

between broadcasters, labels and artists is producing more and better music. This is especially true with small Webcasters that have 

been able to attract and maintain loyal fan bases of smaller independent artists. As the owner of a label whose bottom line depends 

on my ability to promote artists I represent, these Webcasters are 

priceless and provide an invaluable tool. 

All of us in the music business have had to adapt to the digital 

age and the impact it has had on this industry. We all, producers, 

labels and artists, are faced with a choice: Embrace this evolution 

as an opportunity, or resist it at our own peril. Those that choose 

to embrace it will ultimately enjoy the fruits of this new age that 

values quality over size. 

This committee is set up to protect the interest of small business, 

the backbone of the American economy. The excessive royalty rate 

increase is not in the best interest of our industry as a whole, but 

it is especially not in the best interest of small Webcasters, small 

bands, independent artists or independent labels. We are all at the 

risk of losing an invaluable tool and a golden opportunity. 

Thank you again for taking this morning, and deeply consider cosponsoring the Internet Radio Equality Act, which will help to 

prosper independent music. Thank you. 

ChairwomanVELA ́ ZQUEZ . Thank you, Mr. Kelly. 

[The statement of Mr. Kelly may be found on page 61 of the Appendix.]

ChairwomanVELA ́ ZQUEZ . Our next witness is Mr. Thomas Lee. 

Mr. Lee is international president of the American Federation of 

Musicians of United States and Canada. Mr. Lee has served as an 

officer of AFM since 1991 and was recently reelected to his third 

term as AFM’s president. Prior to his retirement, Mr. Lee was a 

member of the United States Marine Band for 24 years. As the pianist for the President’s Own Marine Band, he worked closely with 

six Presidents, provided musical support several times weekly for 

state dinners, receptions and other official occasions. Welcome. 

STATEMENT OF THOMAS F. LEE, PRESIDENT, AMERICAN 

FEDERATION OF MUSICIANS, NEW YORK, NEW YORK 

Mr.LEE. Thank you, Madam Chair, Ranking Member Chabot and 

other members of the committee. I thank you very much for calling 

16

this hearing for us to have an opportunity to state our feelings 

about the issue. 

As you said, I am a professional musician, international president of the American Federation of Musicians of the United States 

and Canada, representing more than 90,000 professional musicians. And I am pleased to have this opportunity to speak with you 

today about musicians and singers. 

The AFM is very supportive of the Webcasting industry, especially small, noncommercial Webcasters. And the AFM was very 

supportive when the Webcasters requested that a CRB be created 

which, in fact, would give everyone a fair and equal opportunity to 

place their issues before the CRB. And I believe the Webcasters did 

suggest that this would be an equitable way for everyone to come 

to a conclusion upon what a proper royalty would be. 

But it is important to realize that Webcasters are not the only 

small businesses affected by royalty rates set by the Copyright Royalty Board last March. Recording musicians and vocalists are 

themselves entrepreneurs and small business people who rely on 

small income streams, including performance royalties, in order to 

make ends meet. 

I have submitted my written testimony, and that describes my 

background as well, but I do want to say for Mr. Chabot, you also 

have another person from Cincinnati sitting here. I went to the 

College-Conservatory of Music in the University of Cincinnati. I am 

a small-town St. Paris, Ohio, boy, so we got another Buckeye in the 

room. 

The digital performance rights has worked in the way that my 

folks and my musicians envisioned in the early 1990s. It has created a small but important new income stream for thousands of 

musicians and vocalists who count on the accumulation of many 

such modest revenue streams in order to survive and continue to 

make music. 

Some think of recording performers as a small and select group 

of rich celebrities living a glamorous life, and whose concerns have 

nothing in common with those ordinary citizens. And I wish music 

was all wealth and glamour, but it is not. Sure, some musicians become megastars and platinum sellers. That is great, and I wish 

that kind of success were possible for every talented musician, but 

world fame and vast fortune are very much the exception rather 

than the rule. 

The fact is that all but a minuscule percentage of musicians earn 

only very modest sums for their creative work. The Bureau of 

Labor Statistics reports that in 2004, the median hourly earnings 

of musicians and vocalists was $17.85. No annual earning figures 

are available, according to the Bureau, because, as it reports, it is 

extremely rare for musicians and vocalists to have guaranteed employment that exceeds 3 to 6 months. In fact, within the profession 

we consider a performer to be a great success if he or she can earn 

a living from music without keeping a day job. And I am going to 

come back to that day job. 

Most successful recording artists never become household names. 

They record terrific performances, they make a living at music, and 

they have loyal fans, but they never become rich. And they must 

work incredibly hard to combine incomes from live performances, 

17

recording sales, licensed recordings to TV and movies, merchandising, songwriting, session recording, producing other artists, and 

any business opportunity they can muster in order to earn a living. 

I am honored to be on this panel before you today with exactly 

such an ordinary, and I use that term advisedly, artist who was 

Cathy Fink, a very hard-working artist. 

There are other recording artists whose names mostly remain 

unknown, but who are vital to the creative success of countless 

sound recordings. Session performers contributes critical interpretive elements, intros, fills, cords changes, solos, tempo and rhythm, 

that bring the notes and the lyric on a page to life in a unique recorded performance. A songwriter can write the song and put the 

notes on the page, but until you put the drummer, the guitar player, the keyboard player and the bass player together, you will not 

have a piece of music that somebody will want to listen to. 

The AFM is fortunate to have as its vice president Harold Bradley, the most recorded guitarist in history, a Country Music Hall 

of Fame inductee, and one of the legendary Nashville A team session musicians. You may never have heard of Harold’s name, but 

you definitely heard him play bass on Patsy Cline’s recording of 

Crazy, Roy Orbison’s recording of Oh Pretty Women and Crying, 

and Johnny Horton’s the Battle of New Orleans, and 30,000 other 

songs that he has been performing on. 

It is no exaggeration to say Internet radio and other music services broadcast great performances by tens of thousands of session 

musicians and vocalists. In testimony before the CRB, Harold explained how session players contribute to recordings, using examples of that session that recorded Patsy Cline’s Crazy. I have submitted Harold’s testimony for your review because I think it is critical to understanding the exact process of recording. 

It would be great if a little talent or a lot were enough to enable 

musicians to make this kind of contribution, but it isn’t. As the Bureau of Labor Statistics have said, musicians need extensive and 

prolonged training and practice to acquire the necessary skills, 

knowledge and ability to interpret music at a professional level. 

As AFM president, I am extremely proud of all the work that has 

been done in support of my 90,000 members to improve the economic life of recording musicians. Recordings made under the AFM 

sound recording labor agreement pay decent scale and pension. In 

addition, they result in further payments based on industry sales. 

Finally, musicians receive additional payments when their recordings get used in movies or other media. This is a good system, but 

it does not result in riches, only in modest middle-class income for 

musicians who work under it regularly. 

It is important to note that practically no session musician actually has a regular job from which he or she can count on receiving 

an annual income. Session work, like most musicians’ employment, 

is intermittent even at the best of times. When hard times hit, the 

record industry total wage scale and pension earnings decrease 

simply because there are few sessions. The Bureau of Labor Statistics notes that due to the limited employment in the music industry, few musicians and vocalists have the kind of benefits other 

Americans take for granted, like unemployment compensation, and 

paid vacations and sick leave. 

18

And I see that I am just about out of time, so I would like to 

conclude just with one closing remark. One of the most disturbing 

things I have read in the Bureau of Labor Statistics report is the 

following statement: Talent alone is no guarantee of success. Many 

people start out to become musicians or singers, but leave the profession because they find work difficult, the discipline demanding, 

and the long periods of intermittent employment unendurable. And 

I would have to say that we probably have, if I may be so bold to 

say, Congressman Paul Hodes and Congressman Collin Peterson, 

who are very well-known musicians in our own industry, who have 

bands here and play on Capitol Hill, and would it not be that they 

couldn’t make a decent living, they probably wouldn’t have to be 

moonlighting as Members of Congress. 

I will say this. We understand the plight of the small 

Webcasters, and I think Sound Exchange is working very hard to 

deal with the matters that small Webcasters have brought to us. 

And I think that can be worked out if we are given the proper 

amount of time. Thank you. 

ChairwomanVELA ́ ZQUEZ . Thank you. 

[The statement of Mr. Lee may be found on page 65 of the Appendix.]

ChairwomanVELA ́ ZQUEZ . And before I recognize Mr. Chabot for 

the purpose of introducing Mr. Eiswerth, I would like to ask Ms. 

Fink and Mr. Allcorn, are you sure you don’t have any relationship, 

any root in New York, since three out of seven witnesses are from 

Ohio? 

Yes, Mr. Chabot. 

Mr.CHABOT. Thank you very much, Madam Chair. I would like 

to introduce our final witness here this morning, Mr. Eiswerth, and 

he is the president and CEO and general manager of Cincinnati 

Public Radio, Inc., the entity holding licenses for both 90.9 WGUC 

and 91.7 WVXU, which serve the greater Cincinnati area. As president, CEO and general manager, Mr. Eiswerth is responsible for 

leading the station’s 41 employees in all aspects of programming, 

engineering, development, corporate sales and marketing. Some of 

his successes while at Cincinnati Public Radio include increasing 

WGUC’s membership by almost 50 percent and its corporate sponsorship by 20 percent, and successfully negotiating the purchase in 

2005 and subsequent increase in membership of WVXU. 

Prior to joining Cincinnati Public Radio, Mr. Eiswerth held positions with WMNF-FM in Tampa, Florida; Corporation for Public 

Broadcasting; National Public Radio; and WCNY-TV and FM in 

New York. 

We welcome you here, Mr. Eiswerth, and we certainly do appreciate your input on this very important issue. Thank you. 

STATEMENT OF RICHARD EISWERTH, PRESIDENT, GENERAL 

MANAGER AND CEO, CINCINNATI PUBLIC RADIO, CINCINNATI, OHIO, ON BEHALF OF NATIONAL PUBLIC RADIO 

Mr.EIWSWERTH. Thank you, sir. 

Madam Chair, Ranking Republican Member Chabot and members of the Small Business Committee, WGUC Cincinnati’s classical public radio was founded in 1960 by a group of citizens who 

19

saw the need for a radio station devoted to cultural and public affairs programming to the region. WGUC’s live signal can be heard 

over the Internet at WGUC.org. Cincinnati Public Radio broadcasts 

and Webcasts every concert of the Cincinnati Symphony Orchestra, 

the Cincinnati Opera and the May Festival, which is the oldest 

choral festival in the U.S. We also operate classicsforkids.com, 

which is a Webcentric classical music education resource used by 

more than 2,600 teachers and 329 parents in Cincinnati alone, as 

well as listeners in all 50 States and more than 47 foreign countries. More than 650 schools in greater Cincinnati serving 50,000 

students have also been served through the Classics for Kids 

Website and educational materials. 

I recite these initiatives and statistics to illustrate to the committee that Cincinnati Public Radio is more than a radio broadcaster. We, like many of our fellow public radio stations, are utilizing Web-Based distribution systems to ensure that the reception 

of our programming content adapts to the changing habits of our 

listeners. 

I want to thank you for the opportunity to comment on the misguided decision by the Copyright Royalty Board and its implications for America’s public radio stations. The fundamental flaw of 

the CRB decision is its treatment of public radio stations as commercial entities. If unchanged by the Congress or the courts, the 

board’s decision will degrade the public radio system through complex reporting requirements and dramatic and inappropriate increases in royalty fees. Application of commercial rates and complex calculations to compute those rates will drain scarce financial 

resources and distract stations from their public service missions. 

The more Americans who listen to our stations’ music 

Webstreams, the more we owe in royalties. In other words, as we 

seek to fulfill our congressional mission of reaching the broadest 

possible audience, we are financially punished. The rate structure 

in the CRB decision imposes additional fees for listeners or songs 

in excess of an arbitrary number. This concept is nearly identical 

to the CRB’s treatment of commercial Webcasters. When faced with 

the double demands of increased costs and complex rate calculations and recordkeeping, many stations will no doubt be forced to 

place artificial limits on their Webcast visitors. Some stations will 

cease their Webstreaming public service activities altogether. 

Forcing a cap on usage by public radio Webcasters is antithetical 

to the very purpose of public radio. There is no cap on public radio 

listening. Why should there be one on Internet listening? And the 

comparison by the CRB of public radio music Webcasts with commercial entities is similar to comparing the public library with 

Barnes & Noble. Placing limits on public Webcasters, music offerings or on-line users makes about as many sense as placing limits 

on the number of books a public library may have or the number 

of visitors to have access to those books or the number of books 

that may be read by that library patron. 

The variable nature of the CRB’s proposed fee arrangement, 

which requires complicated listening calculations of public radio 

stations to track how many people are listening to specific music 

tracks at specific times, prevents significant problems. Royalty fees 

for public radio stations have been paid traditionally by the CorVerDate 0ct 09 2002 09:24 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36131.TXT LEANN
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poration for Public Broadcasting through funds appropriated annually by Congress. And Congress has directed CPB to set aside 6 

percent of certain appropriated funds to pay for key elements of the 

public broadcasting system including, quoting here, the payment of 

programming royalties and other fees. 

But out of this same pool of money, Congress has directed CPB 

also to pay for capital costs of telecommunication satellites, interconnection facilities, grants for programs in languages other than 

English, training for public broadcast employees and other projects 

that enhance public broadcasting. Each dollar taken from this pool 

of funds to pay for the unreasonable licensing fee is a dollar not 

available for another project to enhance public broadcasting for the 

ultimate benefit of American listeners and viewers. 

Madam Chair, unless corrected by Congress, this decision will 

have profoundly negative effects for the future of public radio 

music Webcasting. We need you and your colleagues to support and 

pass Congressman Inslee and Manzullo’s legislation, H.R. 2060, the 

Internet Radio Equality Act. This legislation deals appropriately 

with royalties for sound recordings by recognizing the public service mission of public radio. It offers all parties the necessary longterm solutions that are now essential because of the CRB decision. 

It brings the royalty proceedings for determining sound recording 

fees in line with the proceedings used to determine royalty for 

music awards. And with the July 15 deadline for payment of new 

royalties looming, there is growing urgency that Congress take action to address this situation immediately. 

Madam Chair and Congressman Chabot, we in public radio take 

seriously and fully embrace the obligations of the Public Broadcasting Act’s charge that we reach the broadest possible audience. 

We are committed to a course of action that upholds the high 

standards for public broadcasting envisioned by the Congress and 

practiced by public radio stations for the past four decades. We ask 

that you recognize our unique status and dedication to public service and assist us in our pursuit of these important civic responsibilities by acting promptly on H.R. 2060. 

Thank you. 

ChairwomanVELA ́ ZQUEZ . Thank you, Mr. Eiswerth. 

[The statement of Mr. Eiswerth may be found on page 94 of the 

Appendix.]

ChairmanVELA ́ ZQUEZ . I would like to ask my first question to 

Mr. Miller. 

Mr. Miller, I know that Tuesday, June 26, was a day of silence 

when many Webcasters went quiet as a protest against the new 

royalty rates. With July 15 approaching, are Webcasters and copyright owners meeting to try to develop a marketplace solution to 

this issue? 

Mr.MILLER. We specifically have not been meeting, but I do know 

that—and Sound Exchange has not specifically contacted us directly. It seems like thus far most of the negotiation has been 

through press releases and kind of in a public light. But, no, we 

specifically are not meeting with Sound Exchange. 

ChairwomanVELA ́ ZQUEZ . July 15 is around the corner, and I 

hope that—the same way that you did back in 2002—that the two 

21

parties on this issue come together and find a compromise, a solution to this issue. I really don’t think that Congress should be the 

best vehicle to resolve this type of issue. 

In any case I would like to ask Mr. Silverman, do you believe it 

will be fair to set differing royalty rates for small independent 

Webcasters than for large diversified media companies? 

Mr.SILVERMAN. It would be fair. 

ChairwomanVELA ́ ZQUEZ . Do you have any recommendations 

about how the size of the Internet radio provider should be measured? Should it be based on the number of employees, listeners or 

on an annual revenue? 

Mr.SILVERMAN. Maybe a combination of the reach, which means 

the amount of listeners, and the amount of time spent listening 

and the revenue. But there already is, I believe, a compromise on 

the table in the Senate and some suggestions, I am not sure exactly 

what those are, as to what your last question was. So I think they 

are actively trying to pursue a solution. 

ChairwomanVELA ́ ZQUEZ . Mr. Lee, AFM has represented musicians for more than 100 years. According to your members, is it 

more challenging now than it was 10 years ago to earn a living as 

a full-time musician? 

Mr.LEE. Yes, ma’am, it absolutely is. It is very difficult to earn 

a living. If I were starting out today, I don’t know how I could encourage my children or anybody else’s children to look to make a 

living in music. 

But I would like to speak a bit to your previous question if that 

is in order. 

ChairwomanVELA ́ ZQUEZ . Sure. 

Mr.LEE. We recognize the difficulty that small Webcasters and 

National Public Radio may have with this decision. We did support 

the Webcasters when they chose to encourage a CRB, and we absolutely support the fact that they had access to that as the CRB had 

access to a myriad of financial information. We also recognize that 

95 percent of the income is going to come from the big broadcasters, not the small Webcasters. And to the extent that the small 

Webcasters play our members’ music and play some of our independent, we encourage that. 

And we are actively working to resolve those differences between 

our members. And I can’t tell you that any independent musician 

has the right to allow their music to be played for free on any 

Webcasting station. We are just saying don’t give away everybody 

else’s right to be compensated when that happens. 

ChairwomanVELA ́ ZQUEZ . Thank you. 

Mr. Allcorn, how will the CRB ruling affect the Webcaster’s ability to provide content that is appealing to listeners who have taste 

in music that is out of the mainstream? 

Mr.ALLCORN. Well, for artists like myself who are independent, 

we don’t have the support of major labels or major radio stations, 

Clear Channel, be it whatever. To us it is very important that our 

music be on these stations, like Last.fm, Pandora, Yahoo, AOL, et 

cetera, et cetera, because it reaches such a broad audience. And if 

these royalties are implemented, these companies are gone. That 

avenue for people like me to have my music out there is nonexistent. And it goes back to the days of calling radio stations and 

22

peddling it, which in my case is pointless because they won’t play 

it anyway. It doesn’t fit their format. 

ChairwomanVELA ́ ZQUEZ . Mr. Miller, Sound Exchange has ex- tended an offer to Webcasters with annual revenue under $1.2 million. The offer would allow a small Webcaster to pay reduced royalty rates until 2010. Assuming your company is eligible, does 

WOXY.com plan to accept the offer from Sound Exchange, and if 

not, why? 

Mr.MILLER. We currently would not qualify. As we were acquired 

by a larger company, we would not qualify for that small 

Webcaster rate. 

With that said, the issue is that we would be in this exact same 

situation 4 years from now when a new royalty panel would come 

around with set rates, and then we would have to make another 

small broadcaster provision. So that is a really uncertain place to—

it is a really uncertain realm to operate a business, knowing that 

is going to come around every 4 years. But I think the problem 

really is with the way that the CRB actually—the dictum that they 

were given to set the rates. 

ChairwomanVELA ́ ZQUEZ . Let me ask you, do you believe that a 

proposal containing a higher revenue cap is likely to be a more 

compelling offer for small independent Webcasters? 

Mr.MILLER. It could be. The really—what you have to look at 

isn’t necessarily the cap, but what the chasm would be to jump 

from the small Webcaster provision into paying the full statutory 

rates. And obviously $1.2 million, I think, is quite low; $6 million 

may be workable. But really that is the most difficult piece of that. 

ChairwomanVELA ́ ZQUEZ . Thank you. 

And now I recognize Mr. Chabot. 

Mr.CHABOT. Thank you very much, Madam Chair. 

First of all, I have to say that this has been a very good panel. 

I think all the members of this panel have represented their point 

of view very well. And obviously there is a variety of opinions here, 

but I think they have all done a very good job at it and helped us 

in trying to decide what the appropriate action is for us to take or 

not take. 

My first question, if I could ask the two artists that are here, Mr. 

Allcorn and Ms. Fink, if you could, we are also attempting to determine if there is any common ground here relative to the Royalty 

Board’s decision short of Congress stepping in and doing something. And again, as I mentioned in my opening statement, our 

preference would be that the parties come together and do what 

they think is best without the government necessarily stepping in 

and oftentimes messing things up even more than they already are. 

So is there any—being the two artists, is there any common ground 

that you are aware of? Do you see any logical resolution or solution 

to the dilemma that we find ourselves in right now? 

Mr.ALLCORN. I think the common ground between the artist, if 

you will agree with me, is that Internet radio is a viable promotional tool for people like us. And as far as an actual agreement, 

that will come between Sound Exchange and the broadcasters. I 

am speaking to the committee as an artist, and as an artist I am 

here to tell you that it is an important tool for me, for my business, 

my small publishing company and my touring and everything else 

23

I do, for my music to be heard. And if these royalties are implemented, that is gone, that is taken away. 

I want to get royalty payments, I enjoy getting royalty payments, 

I depend on them just as every other artist here does. But is it 

worth shutting down the whole industry to get that money when 

there is many other avenues? We make money performing, selling 

records, et cetera, et cetera. But is it really worth attacking these 

Webcasters and putting them out of business with these extreme 

royalty rates for that cut? Is the promotion value worth more than 

the royalties? In my case I say yes because I am not a mainstream 

artist, and it is more important for me to have my music heard because I perform for the love of the music. I love Hank Williams, 

I love Johnny Cash. I am trying to keep that music alive, where 

broadcast radio has no interest in keeping that music going. 

Mr.CHABOT. Thank you. 

Ms. Fink. 

Ms.FINK. Well, from my point of view, the common ground was 

established when the Webcaster suggested the Copyright Royalty 

Board take this on. And a year and a half of effort, energy, time, 

money, testimony, people like myself who put probably a week and 

a half of work into providing the testimony they asked for showing 

up, I thought that was the common ground, and I thought that was 

the procedure. 

And so I find us in a very awkward place that once a decision 

was made through a process that everyone agreed on, we are still 

discussing. And I think it is generous of Sound Exchange at that 

point to yet be open to hearing more information and offer a compromise that is insanely fair. 

I think that—I agree with you. Congress really shouldn’t be 

doing this right now because I think it has been done, and I think 

they have come to the table, and I think they have made a fair 

offer. 

Mr.CHABOT. Thank you. 

Mr. Miller, if I could turn to you at this point. You had mentioned in your testimony about the, you termed it, homogenization 

of radio out there, a more limited type of listening that the 

listenership can hear other than perhaps, as you mentioned, in the 

new Webcast. Could you discuss that in a little bit more detail? 

Mr.MILLER. As far as—

Mr.CHABOT. The role that you all play in that, in fighting that 

reality. 

Mr.MILLER. Broadcast radio is confined by limited space on the 

dial, so there can only be so many FM radio stations in any one 

market. So you are therefore going to be limited by the programming you can put on those channels. The Internet opens it up to 

an unlimited number of channels. You can have as many channels 

as you want. And, in fact, some Internet radio services actually 

serve a customized channel for each and every listener. 

I mentioned earlier the $500-per-channel minimum, which is a 

really difficult provision of the CRB ruling. That would definitely 

be difficult. But I think the great thing about the Internet is it 

opens up so much for everyone. There are so many different kinds 

of musicians that can thrive by finding a home on the Internet that 

24

they never otherwise could, and obviously those artists should be 

compensated. We paid over $32,000 in royalties to Sound Exchange in 2005, so 

I think we all agree that artists should be compensated. Under 

this, WOXY.com would have been out of business under the new 

rates. 

Mr.CHABOT. Mr. Eiswerth, let me turn to you if I can. Would you 

elaborate on what role WVXU and WGUC play in a community like 

ours, Cincinnati, which is probably not unlike the role that some 

of the other stations of that type play in their communities around 

the country, and what this decision—how this Royalty board’s decision impacts the role that WGUC and WVXU play in our community? 

Mr.EIWSWERTH. Thank you, sir. WVXU and WGUC in Cincinnati 

play the typical role that public radio stations do in other markets 

in that we provide services that the mainstream commercial media 

tend to overlook. WVXU is primarily a news and public information 

resource. A member of National Public Radio, we broadcast national news programming and local news programming. We have 

one of the largest local news staffs in operation in the media in 

Cincinnati. 

WGUC is one of a disturbingly shrinking cadre of stations that 

devotes full time to classical music. As you may know, commercial 

and noncommercial classical music stations in this country have 

been taking the role or the path of the dinosaur of late. It is because owners or operators have found more lucrative ways to make 

money with other formats. What we are using the Internet for is 

to fill in those gaps where classical radio, specifically regarding 

WGUC, is no longer available or in markets where there may be 

some classical music, but not enough to provide any variety. 

We have a great relationship with our local AFFM, AFFM number 1. And we provide and pay fees for broadcasts of, as I mentioned, local classical performances throughout the year. 

The important significant difference that we are trying to stress 

here that is true not only for WGUC, but also through public radio 

stations in big cities and small rural communities across the country and Indian reservations, is that we have first and foremost a 

public service mission. We are not in this business to make money. 

We are not beholden to stockholders. We don’t have to work on creating a positive bottom line that we can dole out in benefits or increased revenues to our shareholders. 

That is not to say that the commercial broadcasters don’t do 

their job. They do. But our reason for being is dramatically different. They are in the business to make money; we are in the business to provide a public service. 

The fact is that the CRB did not include everybody at the table. 

They completely overlooked the basic mission difference between 

commercial broadcasters and public broadcasters. They have tried 

to include us in league with the commercial broadcast mission and 

finance mechanism, and it is trying to unfortunately fit a round 

peg in a square hole. 

Public radio exists to serve unserved audiences. We support musicians, and, indeed, as with Internet radio, a lot of musicians who 

would find no other home in commercial radio find their homes on 

25

public radio. The CRB decision offers a tremendous threat to the 

future of our Internet activities and long term, we think, to the 

ability public radio has to serve the interests and needs, congressionally mandated, of the citizens of this country. 

Mr.CHABOT. Thank you very much. 

Mr. Chairman, I yield back the balance of my time. 

Mr.JOHNSON. [Presiding.] Thank you, Mr. Chabot. 

The Chair has asked me to chair in her absence. I believe I was 

next with my questions. I want to ask Mr. Allcorn, your music gets 

played by a lot of Webcasters, correct? 

Mr.ALLCORN. Right. 

Mr.JOHNSON. And I guess many of the biggest Webcasters play 

your music. 

Mr.ALLCORN. Right. 

Mr.JOHNSON. AOL, Clear Channel, On-Line, i365, RL Select, and 

Yahoo Music and LAUNCHcast among others, correct? 

Mr.ALLCORN. Correct, right. 

Mr.JOHNSON. And of course you get played by some of the smaller Webcasters as well. 

Mr.ALLCORN. We get a lot more play on the small Webcasters because they cater to a niche market. 

Mr.JOHNSON. When you say you get a lot more play, you get a 

lot more spins of the music? 

Mr.ALLCORN. Yes, correct. 

Mr.JOHNSON. But yet the audience that a smaller Webcaster 

would reach would probably not be as large as one of the larger 

Webcasters, correct? 

Mr.ALLCORN. It would depend. Probably not. It just depends how 

many people are looking for that specific type of music. 

Mr.JOHNSON. Perhaps even some of the smaller Webcasters may 

have picked up your work by demand from some of the larger 

Webcasters. 

Mr.ALLCORN. It could be. 

Mr.JOHNSON. And so really you would have to say that your popularity would be due to large and small Webcasters. 

Mr.ALLCORN. Yes, I would give credit to both. There is like Ram 

Radio, which is specifically targeted to traditional and alternative 

underground country of today. And their slogan is they play yesterday’s legends with today’s up-and-coming artists. And you have stations on Yahoo and AOL that do the same thing, but they are not 

specifically targeted as the smaller ones. 

Mr.JOHNSON. Certainly. 

Well, I guess probably the point that I would want to make on 

that is that artists such as yourself benefit from exposure by the 

large—or, say, those who pay 95 percent of the royalties would be 

in part responsible for your success. And you are here to say that 

there should not be—you are here to look after the interest of that 

other 5 percent, the small Webcasters? 

Mr.ALLCORN. I am here for the interest of an artist. It doesn’t 

matter in they are on a large Webcast or a small Webcast. 

Mr.JOHNSON. All right. Point well made. 

Mr. Miller, your Web station was just purchased. 

Mr.MILLER. Last October, yes. 

Mr.JOHNSON. Who was the purchaser, by the way? 

26

Mr.MILLER. La La Media. 

Mr.JOHNSON. La La Media. 

And now I guess I am looking at it like this. Today is a hot day, 

and we all like lemonade. And lemonade and a hot day goes well 

together. And I could put the lemonade in this cup here, or I could 

put it in this fancy-looking bottle here, and I could sip it from each 

one, or I could have a straw. The straw could be long or short, different colors. But the bottom line is I am getting the substance of 

that lemonade through some different medium, but it is the lemonade that is most important on a hot day. It is the music that people are being able to obtain through listening to either Webcast or 

AM/FM radio or satellite radio. 

Why shouldn’t the lemonade, the person who produced the lemonade, get paid as opposed to just simply the persons who put together the packaging that the lemonade happens to be served up 

in? Anybody want to respond to that? Even though it may be a 

small business that is producing the packaging, shouldn’t that lemonade developer get paid for the lemonade? Why should they be exempt for paying for that lemonade? I will let Ms. Fink go first. 

Ms.FINK. Well, I agree with you. I am an advocate for the rights 

of artists and the fact that we deserve to be paid. And I do want 

to repeat a point that Mr. Lee made, which is that any artist, including Mr. Allcorn, is free to make his own independent deals 

with independent Webcasters to say, you don’t have to pay me, but 

I don’t want that to affect whether or not I get paid for the lemonade that I made. If he wants to give his lemonade away for free, 

that is his right. We live in a great country to be able to make that 

kind of deal. I want to get paid for my lemonade, it cost me something, and I put my work in it. 

Mr.ALLCORN. If you want your lemonade in this cup, if you put 

the people that make this cup out of business, what are you going 

to put it in? 

Ms.FINK. They don’t have a business if we haven’t made lemonade. 

Mr.JOHNSON. That is an excellent point. They are both good 

points, they are both good points. It is the lemonade, though, that 

gives rise to the packaging. I mean, just lemonade laying out on 

a table is just going to run off the table. 

Mr.ALLCORN. It is no good to you. 

Ms.FINK. That is right. 

Mr.ALLCORN. In the aspect of Internet radio, you have to have 

those people to deliver the music, and if you want your lemonade, 

you have to have the people making the cup. Whether it is the big 

cup or the little cup, however you choose to get it, like you said, 

you have to have a delivery method. 

Mr.JOHNSON. But every small business or every business has 

business costs. 

Mr.ALLCORN. Right. 

Mr.JOHNSON. It costs to go into business. You got to pay for the 

supplies, you got to pay for the lemons, you got to pay for the 

sugar, you got to pay for the ice. 

Mr.ALLCORN. But what if the cup costs more than the lemonade? 

Ms.FINK. Then you have to find a different manufacturer. 

27

ChairwomanVELA ́ ZQUEZ . Well, then come out with a bottle like 

this that looks so good that you spend about $4 or $5 for the lemonade. 

Ms.FINK. Well, I would like to say, you know, there is a cost of 

doing business. And in all businesses, not just the music industry, 

in all businesses, not all businesses succeed. Not all small artists 

can make a living doing this; therefore, they go out and get the day 

jobs that Tom Lee was talking about. Not all Internet radio companies are going to survive, but that is true with every business. Not 

every bicycle company survives. Not every inventor creates an invention that survives the marketplace. And I think that there is a 

long-term opportunity for everyone to create the best business plan 

they can so they can work within a system that exists. 

Mr.JOHNSON. Maybe Mr. Silverman’s dad has another $5,000 or 

$10,000 to invest in the operations of a Webcam. 

Mr. Silverman, I am going to yield the floor to the next questioner. 

Mr.SILVERMAN. May I quickly? I may have to go back to my dad 

because I am running out myself. My revenues have been cut in 

half by illegal file sharing and CD copying at Tommy Boy. Combined with commercial terrestrial radio’s consolidation forcing title 

play lists, it is harder for me to get my music exposed on the radio 

than it was in the 1980s and early 1990s. But I still have to pay 

artists and writers, and I still have to pay all my other expenses 

which are going up. I have to find new ways to modify new business and keep it alive. 

Internet radio can and will find ways to prosper, and they will 

have to pay fair rates for the music that they depend on, just as 

we do. I don’t think it is fair they should get a break when we don’t 

get a break. I have to pay my artists; they should have to pay them 

as well. 

Mr.JOHNSON. Thank you. 

Mr. Heller is next. 

Mr.HELLER. Thank you, Mr. Chairman. I am going to stay away 

from lemonade here a little bit. 

Ms.FINK. I am thinking of starting a lemonade business. 

Mr.HELLER. My 11-year-old daughter would help you out with 

that one. 

Is everybody here from Chabot’s district? Is anybody here from 

Nevada? Because that is where I come from. Anyway, any artists 

that want to come down to Las Vegas, I think Celine Dion’s contract is running out, so I wish you the best. 

Ms.FINK. If they offer it to me, I will take it. 

Mr.HELLER. The day of silence, actually it was mentioned to me 

a couple of days in my office. I didn’t think much of it until I got 

a couple of phone calls yesterday from individuals that wanted to 

know what was going on, one, of course, being my brother. And I 

asked him why he listened to Webcast music, and he says because 

the regular stations don’t play the music that he wants to listen 

to. So your point is well made on why Webcast has played an important part in this business. 

I guess my question is this. I come from a State or a district that 

is 110,000 square miles, and you get outside of Las Vegas in perhaps the Reno, Lake Tahoe area, and you get into some very rural 

28

areas. We still have some very small mining towns. Outside I guess 

Sirius radio or XM radio, their only access in many of these small 

mining towns is the Webcast. 

I guess my question is that is my concern, is access, access to 

music and access to the kind of music that these people want to 

listen to. If anybody on this panel has any remarks or comments 

of what we are going to do if these royalty fees are such that we 

do turn off some of these Webcast stations and do cause a concern 

on these rural stations, what is going to be the alternative for 

them? 

Ms.FINK. I personally think it is unrealistic to portray this as if 

every small Webcaster is going to go down the drain because of 

this. And I think that the publicity around this has made it sound 

like that. And I don’t really think that is a fair portrayal of what 

is going to happen. 

Since we are talking about small business, those small 

Webcasters who are in business and create a business plan that 

provides viability for them, that includes this compromise royalty 

rate that Sound Exchange has offered, are going to survive. And I 

don’t really think it is fair to say they are all going to disappear 

and all the music is going to disappear. 

Mr.KELLY. You do have three people here that believe that actually will be the case. There are actually three of us here who believe that will be the case specifically for the small Webcasters. 

Mr.MILLER. And several large. 

Mr.KELLY. And several large as well, yes. But I think you and 

I definitely think—like particularly this subgenre, a very small 

market of music, like one that I was just introduced to called gothic 

country, which I had never heard of before, a combination of 

Marilyn Manson with traditional country music. But nevertheless, 

those listeners deserve to have access to that music and the ability 

to explore the deepest of subgenres of music, and particularly, like 

you mentioned, in these areas that are quite remote, whereas it 

used to be urban settings were the only places people were exposed 

to, say, the more counterculture forms of music or things that were 

very, very, very niche-oriented. And I think both Joey and I—I 

want to make sure that stuff is preserved as the ability of people 

to be exposed to that and how it will enrich culture at large. 

And you mentioned about deeper classical artists as well. I think 

in the same way this isn’t just a matter of country or rock or hiphop or something like that, but classical music and more elaborate 

musical art forms will have the same benefits as well that can, in 

fact, elevate and refine society as well. So that is my 2 cents on 

that. 

Mr.HELLER. I am interested in how the digital divide is actually 

getting smaller in these rural towns where they are actually, via 

satellite to their PC, getting Webcasts that way, and that is their 

preference. 

Mr. Lee, you had a comment. 

Mr.LEE. Thank you, Congressman, I do. I want to make sure 

that everybody understands that 95 percent of the money that 

comes in will be from the large Webcasters. We are talking about 

a very specific group of folks who have a significant problem with 

the rates that the larger Webcasters would have to pay. We have 

29

been talking with them, Sound Exchange has been talking with 

them. In fact, I believe the $500 that was referenced by Mr. Miller, 

which he quite rightly has observed would cost millions of dollars, 

I believe that we have offered—or not we, but Sound Exchange has 

offered to put a $2,500 cap on that. 

So we applaud every one of the smaller Webcasters that want to 

play the niche music, want to play the independent artist music. 

Seventy-five percent of the music, we understand, is crossover, but 

we want our independent artists to be able to be heard. And we 

want the small communities that you are talking about, sir, to 

have access to those. 

We negotiate with National Public Radio, we negotiate with the 

record industry. I believe that a process is in place that will allow 

the recognition of the specific problems of the small Webcasters to 

be resolved. And I do agree with Mr. Chabot that this is not the 

place for that resolution to take place for the very reason the good 

Congressman stated. 

Ms.FINK. I want lots of stuff to be free, but it isn’t. I have to pay 

for gas, I have to pay for a plane, I have to pay for an airline, and 

I can’t call them up and say, you know, I don’t really feel like paying for it, why don’t you just give it to me. As a small business with 

three people in my business, I am heading towards a day when my 

health insurance for two people is going to be larger than my mortgage. And I am a small business, I am working 18-hour days, and 

every income stream is meaningful to me. And I am willing to fight 

hard to try and make sure that some of the younger musicians who 

don’t really see that down the line they are going to be paying 

these expenses or living without health insurance and lots of other 

great benefits get the income streams that they deserve, because 

if we don’t give it to them now, it is not like we are going to negotiate up from somewhere. 

And I think it is really important to educate people about the 

many different, be they small, income streams. For me, paying 

$1,200 a month on health insurance for two people, it is significant 

to me when I get a check from an income stream from Internet 

radio. 

Mr.HELLER. Mr. Miller. 

Mr.MILLER. I would like to clarify. We are not talking about free. 

We are not asking for anything for free. In fact, we think that all 

artists should be compensated for the work. That only makes 

sense. 

And I would also like to clarify we are small business as well. 

We have rent, we have expenses, we are four people strong. A lot 

of small independent Webcasters are one person. And it can be 

misleading, but even apparently larger Webcasters, for example 

AOL radio, has a staff of approximately four people. So even 

though they are part of that larger entity, if you were to strip away 

the rest of AOL and say, AOL radio, you stand on your own, it 

would never happen. 

And I would actually argue that when we talk about large 

Webcasters, if you stripped away the larger business from the 

Webcasting piece of that business, it would never stand on its own. 

We are a perfect example of that. We were tied to an FM radio station for several years, and then when we went Internet only, we 

30

went out of business twice trying to make it work. And you could 

argue that for other noncommercial Webcasters as well as large 

companies. They are tied to larger companies, but I think we are 

looking about building a healthy industry and Internet radio that 

can stand on its own. 

Mr.HELLER. My time is running low, but I just want to thank everybody for being here today. This is an incredible group of people 

that have assembled here today, and I yield back the balance of my 

time, Mr. Chairman. 

Mr.JOHNSON. Thank you. 

Ms. Clarke. 

Ms.CLARKE. Thank you very much, Mr. Chairman, and thank 

you, Ranking Member Chabot. 

We are holding a hearing on a very critical issue that affects so 

many people, particularly with this evolving and emerging industry. I am just sitting here, and I am saying we are really at the 

advent of a 21st century issue that is going to continue to be an 

issue, and so the concern here is where is the categorical compromise. I sit here, and I have listened to compelling testimony 

from public radio, which has a totally different mandate. And I am 

not hearing anything except from public radio that carves that out; 

listening to artists who were saying, you know, I have a business 

here, I need help, but I am not here where the win-win is. 

And certainly, Mr. Miller, what is happening with your company 

and companies like yours—Mr. Silverman—each of you have a very 

unique component to what has become our world of music essentially, and we are trying to find a catchall for that. It does not 

exist. If we can start from that premise, then perhaps coming to 

the table with categorical solutions will be the way that we actually 

get to the solution. 

Has anyone there thought about what their particular component 

to the solution must be for the survival of your businesses and the 

interests of your particular businesses? And I would like to hear 

from folks at the table about that. 

Mr.ALLCORN. Well, I honestly think that what would be fair 

would just be a flat rate based on revenue, and that way it would 

be fair for everyone, because XM and Sirius are locked in at a 7.5 

percent rate of their revenue, so why are you going to go after 

Internet radio and try to make them pay more than satellite radio? 

That is the issue. It is not fair across the board. 

Mr.KELLY. And, of course, traditional broadcast terrestrial radio 

and television, it doesn’t exist at all, which are the highest revenue-generating components for music in general. So it does 

seem—it seems very lopsided as far as the way that the revenues 

are. I would agree, and I think Mr. Silverman presented a good 

idea, which would be maybe a combination of revenues with 

listenership and size of a company. So if a company or a small 

Webcaster, say, of a single-man operation one day all of a sudden 

finds there is 14 million listeners on his podcast or whatever that 

morning, that all of a sudden he owes an exorbitant amount of 

money with very, very little revenue coming in, that there would 

be contingency plans placed in line with that to address that as 

well, because you could essentially have a Webcaster go from five 

people listening to a million theoretically overnight. And the idea 

31

of a per stream, you could literally bankrupt someone just like 

that. 

And we all know—I think SaveNet Radio had 14 million hits 3 

days ago. The day before they had 350,000. So like use those sort 

of numbers of how quickly something can change in viewership or 

listenership. That does need to be addressed. 

And I think all of us here want to see artists be paid, and we 

would love to grow the royalty rates as far as the overall stream 

of things without constricting the Webcasters to a point where it 

becomes fewer and fewer players as opposed to more and more 

players. I mean, the long tail theory of content is becoming aggressively more the case where people want more and more and more 

variety in the Internet. The Internet is going to allow that, where 

it seems from our position that this would kind of bring us back 

10 years, which I think is not going to help us at all. We need to 

be forward-thinking. And a combination of revenue, a combination 

of considering revenue, listenership, would be a much, much better 

way with some sort of contingency plan as far as listenership to address it as opposed to a flat per-stream cost. 

Ms.CLARKE. Ms. Fink, did you have any thinking around this? 

Ms.FINK. As I think I mentioned before, I feel like the compromises to a large extent have been made. And I do believe that 

Sound Exchange would be willing to sit down and have more conversations. I completely don’t understand why we went through 

this for a year and a half to have a bill come up saying let us forget 

that it happened. And I would urge the small Webcasters to sit 

down and talk more with Sound Exchange, because I believe that 

there is a dialogue that has been offered that should be more fully 

discussed. 

Ms.CLARKE. Mr. Eiswerth. 

Mr.EIWSWERTH. Yes, thank you very much. 

To beat a metaphor to death, on a nice hot day when everybody 

else wants lemonade—I am from Cincinnati so I have to say this—

some people want beer. And the point of—this is stretching beyond 

credulity, but the whole point of public broadcasting, you got to remember, is mandated by Congress, is to provide service to underserved audiences. We are here to look at those people and to serve 

those people who mainstream media, Internet, broadcast, satellite, 

whatever, tend to overlook. Were it not for public radio, there 

would not be local stations in many communities. Were it not for 

public radio, there wouldn’t be news, local news. Were it not for 

public radio, a lot of communities wouldn’t have access to jazz or 

classic radio, whether it is over the broadcast or over the Internet. 

Congress recognized the value of having a wide variety of cultural entertainment and education available, and that is why public radio and public broadcasting was formed. We have from our institution, from the inauguration of service, always as an industry 

been on the side of artists and performers, have mandated and 

have pursued interests and contracts to make sure that they are 

paid. The people who created the program are paid and recognized, 

because without them, as been pointed out, we don’t have a business. 

We have a partnership with performers, we want to see that 

partnership continue; however, at the same time we have got to reVerDate 0ct 09 2002 09:24 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\36131.TXT LEANN
32

mind this committee and we have to remind the audience that our 

core mission is that. It is service. And we need to be looked at differently than the commercial marketplace. 

We are more than willing and have in the past paid our own way 

in terms of music rights and royalties. We certainly would entertain and be willing to discuss a proposal where stations would be 

charged a flat fee. But the idea that there would be a moving target or a cap initially with negotiations further down the line does 

nothing but to confuse, obfuscate and make more difficult our 

budgetary planning, because every dollar we use to pay for a fee 

to Sound Exchange or someone else has to come out of another 

public service initiative, whether it is our news efforts or the broadcast operation of our transmitters, or education that stations that 

are financially strapped to begin with have to sacrifice. And we are 

simply asking that while this discussion may continue, and while 

it may progress in the commercial marketplace, public broadcasting, by nature of our mission, by nature of our very being, 

needs to be considered separately because we have a unique service 

and a unique set of problems. That is all we are asking. 

Mr.SILVERMAN. And it is considered separately. 

Ms.CLARKE. In closing, Mr. Lee, would you add your comments? 

Mr.LEE. Thank you. It is important to understand that a CRP, 

which was prior to a CRB, was way too expensive. And folks sitting 

here at this table couldn’t afford the cost to become and be part of 

a CRP, so everyone felt that a CRB would be more equitable; I 

think probably everybody at this table, because that cost would not 

be incurred by the participants. There were 13,000 pages of testimony. The CRB had access to financial information that we don’t 

have. They had access to that. 

But I just want to make sure that there is a clear understanding 

that Sound Exchange is attempting to resolve the differences with 

the 5 percent, those that would be paying 5 percent of the revenue, 

because we understand that perhaps in the CRB procedure there 

may have been a flaw, and that flaw needs to be corrected. Just 

for example, 80 percent of the public radio stations will pay $500 

annually and nothing more. Sound Exchange has offered the noncommercial Webcasters, that is college, radio, community broadcasting, religious broadcasting, the same rate that was set in 2003. 

No increase whatsoever. The same rate. 

If there are other discussions that need to take place, they are 

ongoing here, this is probably not the place for us to be negotiating 

back and forth. But I just want everybody to understand, as a 

member of Sound Exchange, the AFM would do everything to encourage Sound Exchange, and I think the other artists, to ensure 

that small Webcasters are able to continue in business—it is a winwin for all of us, as far as I am concerned—and to ensure that 

whatever rate is agreed upon, that it will be recognition of the 

value that musicians bring to this event, and I think that is a winwin as well. I don’t think anybody on this panel would disagree 

with that. I believe that the 5 percent of the revenue that will be 

coming in from the small Webcasters can be resolved, and if we 

throw out the whole thing, we will be throwing out the baby with 

the bathwater. 

33

Mr.EIWSWERTH. If I might add just one thing. He is absolutely 

correct. I don’t know the percentage of the number of public radio 

stations that would be paying the $500 per stream; however, as we 

understand it, and as the Sound Exchange maintains, that is a 

floor, that is the basic. What it does is sets the floor that will discourage stations from growing their service, because anything they 

grow beyond the arbitrary limit, Sound Exchange has said we will 

have to pay a greater fee. In other words, we are penalized for successful public service, and that is what we are concerned about. 

Ms.CLARKE. Thank you very much, Madam Chair. 

ChairwomanVELA ́ ZQUEZ . Mr. Chabot. 

Mr.CHABOT. Thank you very much, Madam Chair. 

First, Ms. Fink, you had mentioned briefly about health care 

being a big problem for small businesses. Let me just say, I know 

when I go to a small business around my community, that is one 

of the top, if not the top, concern they have, the high cost. And it 

has been escalating so much. And to the Chairwoman’s credit, we 

have had hearings on that in this committee trying to find ways 

to deal with that problem, things like association health plans allowing small business folks to pool their resources together so they 

can negotiate with the insurance companies who otherwise have 

much more power, and trying to do away with some of the frivolous 

medical malpractice lawsuits, for example. And we have introduced 

a bill for the Healthcare Affordability Act, which will allow small 

businesses, for example, to fully deduct all their premiums, and individuals to do the same. 

But in any event I agree with you. That is a problem, and we 

are trying to deal with it to some degree. 

But let me ask a question that is totally unrelated to that. Is 

there a dynamic here that is more or less a competition or the challenge between established artists, more established artists like 

yourself—you are a Grammy winner, and well known in the industry—versus the newer upcoming folks who may not be as well 

known, with maybe a little bit more niche, and their audience may 

be as well, Mr. Allcorn and maybe some other folks? Is that one 

of the issues that in reality that we are dealing with here? And I 

would ask Mr. Allcorn and Ms. Fink. 

Ms.FINK. Well, I think it is portrayed as one of the issues, but 

I was that person 30 years ago. And I appreciate the recognition 

that you all have given me, but probably most of you never heard 

of Cathy Fink and Marcy Marxer before Congressman Van Hollen 

introduced us, which is just a significant fact that we are hardworking musicians making a living, winning Grammies, being nominated for Grammies, and still living under the radar when it 

comes to the world of music and big bucks. 

And so in some ways I still put myself in the same category as 

those people. I am both an advocate and a mentor to many, many, 

many new artists. As a volunteer I spend an average of 4 to 5 

hours a week on the phone as a mentor to new artists. And 

amongst the things that I advise them in their new venture is trying to make a living doing what they are doing; not make it big, 

which is obviously not something I have a lot of experience with, 

but just how to make a living, how to build a solid business or 

being involved with organizations like the American Federation of 

34

Musicians that I belonged to since 1974, Sound Exchange I belonged to since it started, all these different organizations that are 

set up to help them figure out how to best take advantage of the 

variety of income streams that are available to them. And I honestly feel that in many ways I am in the same boat as they are, 

just with more experience how to make the system work. 

Mr.CHABOT. Thank you. 

Mr. Allcorn. 

Mr.ALLCORN. I think that if you are a mainstream artist, and 

you have avenues—if you are for Curb Records or if you are on 

Capital Records or Sony, or whoever it may be, you are in a much 

better place than someone like me who is completely independent. 

And I rely on the Internet radio, satellite radio and those types of 

avenues for my exposure. I will not be on your FM dial. And I have 

songs that, say, you will not find my music on country radio. And 

if that avenue is gone, then where am I? What do I do? 

And on a separate note with what Ms. Clarke was saying, another reason that I do the music that I do is it is preservation of 

history. When I am out there, I talk about—I mentioned Hank Williams 100 times already and Cash and Farin Young. And you can 

go to Elvis Presley or Little Richard or B.B. King. None of these 

guys are on broadcast radio today. You can find them all over 

Internet radio. And that is where these niche markets are coming 

from. You have people who are going back finding artists that they 

like to listen to, and here is this station providing this where you 

don’t have it on a broadcast station. 

And I think that—and to borrow from what Mr. Eiswerth was 

saying about a library, this is going to become a library of American music in the future. This will be a place where you can go. 

And when I was 14 years old, I got a Hank Williams CD, and that 

is how I found him. Twenty years from now they are not going to 

be making CDs. So what avenue will artists in the future that are 

just little kids now have to find this music if all you have left is 

your broadcast mainstream radio? 

Mr.CHABOT. Thank you. 

Madam Chair, if I still have the time, one thing I thought might 

be helpful is to kind of clarify more or less procedurally where we 

are at this point. And correct me if I am wrong, but it is my understanding that the Copyright Royalty Board’s decision came out 

back in—was it May? Is that correct? 

Mr.LEE. March. 

Mr.CHABOT. And it goes into effect as of July 15. Suit apparently 

has been filed. At this point it is in the District Court of Appeals 

here in D.C. Asking for a stay on the board’s decision. If the Court 

doesn’t act within that time—and here is my question: As of July 

15, if they don’t act, these rates do go in effect, and is there any 

agreement or does somebody have a pretty good idea what is likely 

to happen at that time? 

Now, if the stay is granted, of course, then we stay with the current rates that we are in right now until the court would ultimately make a decision. These rates are also retroactive back to 

the beginning of 2006 as well, is my understanding. But in the 

event—what is the sentiment here on what would happen on July 

15 if the court does not issue a stay and these rates go into effect? 

35

Mr.MILLER. I think you are going to see a lot of Internet radio 

stations go off the air, and it will be a calculated risk. Some may 

stay on the air and technically be in violation of the copyright law 

if they do stay on the air, because they will not have paid their 

back royalties, again, hoping that all this works out. But I think 

you are going to see a lot of people who just shut the doors and 

go home. And maybe this gets resolved at some point in a way that 

they can come back and the industry can kind of thrive again. I 

think you are going to see large Webcasters go away, too. How 

many? I don’t know. But I guarantee you are going to see some of 

them go away. 

Mr.CHABOT. Does anybody else want to weigh in? You don’t have 

to. 

Mr.SILVERMAN. There may be a reduction. I don’t know if it will 

happen right on July 15, but there will be some. And some of it 

will be a protest like a day of silence. But I think Internet radio, 

we will see a lot of Web radio continuing. I think it is really important that it does continue. And I think that Sound Exchange is 

working on a compromise for everyone. They are working on a compromise for public radio, noncommercial, Web radio, the smaller 

Webcasters, and they are in dialogue on that. They are doing the 

right thing. 

The hard thing for me to understand is how the Webcasters have 

called for an impartial board to make a decision. They made a decision, and now they are saying they want a do-over. I don’t really 

understand how that works. And so they are trying to raise a bill 

to overturn this or go in another direction when it was them who 

asked for this decision, and then they didn’t agree with the decision. And yet Sound Exchange has come and said, all right, the decision has been made, let us find a way to make it work. 

We are all in a business that is really difficult. It is in transition. 

Music companies are in the worse position. Internet radio is in a 

crazy position, too, but it is a new business. There was no Internet 

radio 5 years ago. I am 26 years old in the business here, and my 

business is threatened. 

So we all have to work it out. No one knows what is going to 

come tomorrow, and we can’t expect we are going to come up with 

a solution that is going to work forever. In 3 years or 4 years, we 

are going to have to go back and say this didn’t work, let us tune 

it, let us fix it, but we are really working toward a solution. Musicians need Web radio, Tommy Boy needs Web radio, and we want 

to have Web radio, but we also need a fair payment to musicians 

and to labels as well. So we are trying to find that common ground. 

And as you can see, we are all here doing it. So there really doesn’t 

need to be an act of Congress right now. We are in the process of 

doing the right thing. 

Mr.CHABOT. Let me go to Mr. Lee and then Mr. Allcorn. 

Mr.LEE. Thank you, Congressman. 

I just want to be clear, Sound Exchange has offered to the college 

radio stations, community broadcasting, religious broadcasters and 

noncommercials to continue at the very same rate that we had in 

2003 up through 2010. You may say, well, why not continue that 

through 2020? I think because none of us know what the industry 

is going to look like 3 years from now or 4 years from now. 

36

Also, with my good friend from Cincinnati here, NPR has not 

paid anything at this point since 2004, I believe it is, because we 

are still trying to negotiate a way or a deal for NPR to become involved in this. And the contract ran out or the legislation ran out, 

I believe, in 2004. So we are not attempting to do a huge takeover. 

We are attempting to meet the concerns that have been raised to 

us. 

Mr.CHABOT. Mr. Allcorn. 

Mr.ALLCORN. I want to just say that everyone keeps saying I 

don’t know why Congress is involved in this. I think it is important 

for Congress to be involved in this, because as we move forward in 

the 21st century, these types of issues will keep coming up as stuff 

becomes more and accessible, free of piracy, or whatever it may be. 

But Congress needs to come in now before this stuff gets way out 

of hand and make sure that there are some guidelines. Sure, you 

will have to work around them before 2010, 2020, but there needs 

to be a base guideline for what this business will look like, and it 

needs to be fair to all parties involved. 

Mr.CHABOT. Mr. Eiswerth. 

Mr.EIWSWERTH. I thank my colleague from the AFM. We won’t 

negotiate in public, as he assured me, so we won’t do that. But 

speaking just for myself as an individual, if the dire consequences 

that have been suggested here come to play, I think what I see 

happening after the 15th of next month or shortly thereafter, we 

have to keep in mind that the Internet knows no boundaries. This 

may very well be the ultimate outsourcing. If there is a vacuum 

created because of the departure of small or intermediate or large 

Webcasters in this country, there is nothing to prevent a Webcaster 

from overseas, Canada, Mexico, Europe, to fill that gap. And I am 

not sure that is something we, as domestic broadcasters, people in 

the music and entertainment business, want to see happen. 

Mr.CHABOT. Mr. Kelly. 

Mr.KELLY. I just wanted to say in total agreement that I think 

that is a major concern for all of us of that happening with it, being 

outsourced, and essentially losing their listenership, and their 

listenership never returning, so subsequently never having the revenue streams of the royalties ever coming back because that stuff 

has been sourced out of the United States. So, therefore, they are 

not subject to paying royalties. We all know how fickle the Internet 

is. 

Mr.SILVERMAN. They still would be subject. Foreign broadcasters 

here would be collected by Sound Exchange as well, and they are 

right now. 

Mr.CHABOT. Thank you. 

I yield back the balance of my time, Madam Chair. 

ChairwomanVELA ́ ZQUEZ . Thank you. 

This has been a fascinating hearing and incredible. I am sorry, 

we have another Member here present who would like to ask questions, so I will recognize Mr. Akin. 

Mr.AKIN. Madam Chair, I probably couldn’t really ask the question I really want to ask, because I guess it was some 30 years ago 

I found an old Tom T. Hall record in some back of a drugstore out 

in the country, and it had Chattanooga Dog on it. And I thought 

37

maybe Mr. Allcorn could give me a couple of pointers, but I didn’t 

bring my guitar over, or Ms. Fink. 

But I guess the concern is that because you have a very, very dynamic situation going on, are the regulations really something that 

we can live with, or is it going to be really destroying something 

that is providing a good part of culture in America? 

So I guess my question to Mr. Allcorn, or anybody else who 

wants to answer, a lot of the songs you are playing may not have 

a major market appeal to the mainstream radio. You seem to found 

a broad audience appeal on the Internet radio. Have you created 

a larger fan base due to Internet radio? Do you have any examples 

of how far your music has actually reached around the globe? 

Mr.ALLCORN. I would say Internet radio, My Space, of course, all 

forms of Internet publicity have helped me big time. When my 

record came out, one of the first things to go out was a box of 100 

of them to the Netherlands. And overseas the traditional country 

music is a big thing. And here in the States, Internet radio, we 

play on a radio show WDBX in Knoxville on tour, the Blueplate 

Special, and we actually shut their server down, because before I 

went on, I got on My Space and put on a thing, we are fixing to 

be on this radio show. And in the course of us being on there for 

an hour, the thing shut down, and people couldn’t get us. So I 

think it definitely plays a big part. 

And I would also like to touch on another aspect that was just 

mentioned, too, about the border station-type idea with the stuff 

being played overseas. That already happened in the 1920s when 

you had stations that refused to play black artists and refused to 

play Jimmy Rogers’ hillbilly music at the time. These border stations created those artists that we call legends today. Elvis Presley 

was a little boy in Tupelo, Mississippi, listening to border stations. 

Johnny Cash was picking cotton in Dyess, Arkansas, listening to 

stuff that he could not get on American radio. 

Mr.AKIN. Thank you very much. 

Thank you also, Madam Chair. 

ChairwomanVELA ́ ZQUEZ . Let me take this opportunity to thank 

all the witnesses. If there is one thing that I have learned throughout this hearing this morning, and we are going to move to the second panel, but that is that there are small businesses on both sides 

in terms of this issue. And, yes, indeed, it is true that our role here 

is not to facilitate negotiations between the two parties, but I 

would like to strongly suggest that you need to continue talking to 

each other. What I learned today is that there are new ideas and 

new information that was shared here today that one side or the 

other side will not know unless you continue to talk to each other. 

I don’t know if the best solution is for Congress to act every 5 

years. Like in 2002, you came here, we had our hearing, you came 

together, there was a compromise. And now 5 years later we find 

ourselves in this predicament. And I don’t know if when Congress 

gets involved that we might create unintended consequences to 

both sides on this issue. 

So with that, again, I want to thank you, and the witnesses are 

excused. 

ChairwomanVELA ́ ZQUEZ . It is a great pleasure to welcome Congressman Jay Inslee, who was elected to represent Washington 

38

State for his congressional district in 1999, serving a district that 

includes some of our country’s foremost technology companies. Representative Inslee has taken a leadership role with respect to a 

number of present technology policy issues. Representative Inslee 

is a member of the Committee on Energy and Commerce and the 

Committee on National Resources. 

Mr. Inslee, thank you for joining us today. 

STATEMENT OF THE HON. JAY INSLEE, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF WASHINGTON 

Mr.INSLEE. Thank you. And thanks for the Chair’s courtesy to be 

talking about this important subject. It has already been fascinating listening to the previous panel. Frankly, I had not heard 

of the gothic western genre before, and it shows you can learn 

things when you come to these hearings. And we want to keep that 

genre availablein Internet radio, and unfortunately, that and others are at risk right now. 

And I have one revelation, if I can share with the committee, 

that may stun some, and that is the government is capable of making mistakes. And I think, unfortunately, we have had an agency 

that has made a mistake, not all their responsibility. Perhaps the 

legislation that created it was imperfect. But, in fact, we have come 

down the tracks a perfect train wreck that we really need to resolve in some fashion. 

The day before yesterday we had the day of silence of Internet 

broadcasters in protest of this potentially sword of Damocles hanging over their heads on July 15. They went silent. And it harkened 

back to the Miss American Pie song. Do you remember that line, 

the day the music died? I don’t want to be in Congress the day the 

music died on Internet radio. And I think that is what we are looking at for a lot of the particular systems and genres that are now 

enjoyed by people. Seventy million Americans are enjoying this 

with their morning coffee now, so this is very important to many, 

many people. It is not to just the businesses involved. 

I just want to tell you one local experience. I have a company in 

my district, a little group, it is called Big R Radio, and they now 

have 15,000 listeners enjoying their work over the Internet, but according to this new rule, they will have to pay rates that exceed 

their entire business’ revenue by 150 percent just for the premium 

you are paying for the music. Obviously that is a totally 

unsustainable situation, and they are facing bankruptcy, or they 

may have to consider going overseas. And unfortunately, Big R 

Radio is typical of hundreds, if not thousands, of small businesses 

across the country today. 

And I want to point out what I think are three fundamental failures of CRB’s decision that we need to resolve in some fashion. 

One, they dramatically raised the per-song fee, which starts out in 

2007 as seemingly a modest 5 percent increase, but gets to 149 percent increase by 2010, and that is fatal to many of these companies. 

Second, the group curiously adopted the per-station minimum 

fee, but dropped the per-service cap. Now, this is the sort of secret 

little nuclear weapon of this decision. Now every Webcaster will be 

assessed a $500-a-day charge on each and every streaming station 

39

they offer, and many Webcasters literally have thousands of stations representing every imaginable genre in the music mix, and 

they do it because this is a tremendous eclectic selection for these 

70 million Americans. And that is why Americans are loving this 

service. They are getting every conceivable thing from gothic western to, you know, you name it. 

Well, that is going to end because the minimum fees for 2006 for 

just three Webcasters, Real Networks, Pandora and Yahoo, will be 

over $1.15 billion under this particular structure. These new rates 

will dwarf the radio-related revenues by substantially more than a 

billion dollars. 

So it is not just the small guys who are going to end their services, it is some of the larger ones as well, because when you have 

a business structure where you have to pay just for the premium, 

not including your overhead, your salary, your electricity and everything else, just for the premium, one of your overhead costs, a 

billion dollars more than the entire revenue of these stations for 

these multiple stations, it is not just the little guys who are going 

to go black here. 

And that is why, although I appreciated Sound Exchange’s willingness to discuss this issue with some of the smaller businesses, 

that is productive, but for the 90 percent of the rest of the music, 

Americans are going to lose that, too, in substantial part. So we 

need to deal with that. The rate of 64 times the total royalties collected by Sound Exchange in 2006, it is a 10-—and I checked this 

number, apparently it is accurate—a 10 million percent over the 

minimum fee of $2,500 per license. 

Finally, CRB eliminated the percentage of revenue fee that many 

small Webcasters use to determine their performance royalty, and 

that moved from a percentage revenue to a per-song rate. As you 

have heard, it hits the Webcasters hardest. 

So it is abundantly clear that artists need fair compensation. 

These businesses live in a symbiotic relationship. Neither can live 

without the other. I come from a district where the payment of intellectual property is extremely important. Now, it is not so much 

music. We don’t get country music so much, however, in Washington, but we do sell some software, and so we understand the importance of compensating intellectual property. The fundamental 

precious asset of America is intellectual property. 

Artists have to be fairly compensated. They are geniuses, and we 

don’t have music without them, but they don’t have distribution 

without these Internet folks either. And I know that is in serious 

jeopardy. And somehow what the government wrote with this CRB 

decision the government is going to have to fix, and so I have been 

active in that regard, and we hope that there is some resolution 

amongst the players. The government has to be prepared to act in 

this regard. 

Madam Chair, there has been a bill introduced to deal with—I 

don’t know if you would like me to describe that. I am happy to 

describe a bill I have introduced to deal with this or not. Would you 

like me to describe that, or is that of interest to the committee? I 

will leave that to you. 

[The statement of Mr. Inslee may be found on page 98 of the Appendix.]

40

ChairwomanVELA ́ ZQUEZ . That is not part of the scope of this 

hearing, but I do have some questions to you in terms of July 15 

is approaching, and the essence of your legislation is to stop this 

raise from going into effect. So given the fact that July 15 is approaching, do you think that the parties involved can come to an 

agreement before July 15? How can we approach that? And do you 

feel that the fact that you introduced legislation, but July 15 is 

around the corner, how can we reconcile? 

Mr.INSLEE. Well, first off, having this hearing is helpful to the 

parties hopefully moving forward to some resolution, so very much 

appreciate this hearing being held to have the parties exchange 

their views, and to the public, frankly, to learn what is at risk 

here. Not everybody knows that their radios are going to go dark 

here, the Internet radio. So having this hearing is very helpful. 

Second, there is over, I think, 122 cosponsors of this bill now, so 

that there is—obviously Members are hearing from thousands of 

their constituents, and there is obviously a strong movement in 

Congress to encourage the parties to resolve that. I think that is 

helpful. 

I think that the stumbling block here—I am not one of the negotiators, so perhaps I can give an outside review of this—I think the 

stumbling block is the—I think that the lack of perception the larger percentage of the broadcasters, 90 or 95 percent of the music actually comes from some of the larger Webcasters who have these 

multiple channels. They might have thousands of channels. And for 

each one of these channels now they get hit for this fee per channel. That particular part of this ruling is really what is going to 

deprive the lion’s share of the music Americans now listen to on 

the radio, and I think that the parties need to address that issue, 

because if they don’t, we are going to lose the lion’s share of music 

over the Internet. 

I would encourage, obviously, Sound Exchange to take a hard 

look at the business model. The business model is not sustainable 

even for larger players here. And we appreciate that they have 

made an offer to the smaller Webcasters to have some relief from 

this, but the 90 percent of people listening to the radio, they are 

going to want a radio, too, and unless there is some change to that, 

I don’t see a business model that will allow that to continue. 

So I guess what I would say is perhaps all of us can encourage 

people to really look at what the economics allow for all broadcasters small and large, and I hope that they will be successful in 

that regard. 

ChairwomanVELA ́ ZQUEZ . Thank you. 

Mr. Chabot, do you have any questions? 

Mr.CHABOT. I will be very brief, Madam Chair. But I, first of all, 

would like to commend you, Mr. Inslee, for weighing into this and 

putting together a proposal which many Members agree with, obviously. Our role here, if it has been what I think you indicated 

there, is to try to be helpful to shed some light on this, to try to 

get the parties to get together without negotiating for them or telling them you want to do this and you want to do that, to get them 

so that they resolve this short of Congress having to do it. 

We don’t know how it is all going to play out at this point; but 

also to let the public know through the coverage of this how serious 

41

this is as far as some of the music literally ending for a period of 

time if this isn’t resolved. 

So I want to again commend you and again commend the Chairwoman for holding this hearing today. My only question would be, 

getting back again with the Chairwoman’s question, and ask it 

maybe a little different way, the July 15 date which is coming up, 

obviously it is not very likely that your bill would get floor action, 

and passed into law and then go to the Senate, and there would 

be a conference committee, get to the President’s desk, and he sign 

it. The odds of that happening by July 15 are slim to none. So what 

do you anticipate will happen if the court doesn’t issue a stay? And 

again, maybe I will even ask you, do you have any information relative to what the attorneys think, whether the court will issue a 

stay; and if they don’t, what do you think will happen? 

Mr.INSLEE. I don’t have any sort of inside scoop on that to share. 

Here is my thinking. There is a mind-set here that we have got 20 

seconds left on the game clock, and then when the buzzer goes off, 

we are done, and we are just done. And so people could run the 

clock out, so to speak, on July 15, and then we are done. 

That is not the case. July 15 is not the end. It is not the beginning of the end. It might be the end of the beginning. And if we 

don’t reach a resolution of this by July 15 by the parties, this effort 

in Congress will continue and swell dramatically, because when 

those decisions are made to shut off Internet radio, whatever Congressmen and women have heard to date, you are going to hear 5 

or 10 times as much after July 15, and our efforts to have some 

legislative resolution of this will not just continue, they will increase dramatically. 

So July 15 is not the end of the game. It is maybe the beginning 

of the real congressional action on this. So that is why I think it 

is important for all the parties to realize that there is no sort of 

four corners offense here. In North Carolina you used to run—you 

would have four corners, you pass the ball, and the game runs out. 

You know, we are going to continue this effort. We are not going 

to let the music die. Americans enjoy it too much. 

Mr.CHABOT. Thank you very much. 

I yield back, Madam Chair. 

ChairwomanVELA ́ ZQUEZ . Mr. Johnson. 

Mr.JOHNSON. Thank you, Madam Chair. 

Some Americans may feel that AOL and Clear Channel, On-Line, 

Yahoo Music and LAUNCHcast may be the principals behind this 

effort to contain royalty rates at the expense of the musicians and 

people who play the music. Did AOL and Clear Channel, On-Line 

and Yahoo Music—were they some of the participants in this day 

when all of the music went dead on the Webcast? 

Mr.INSLEE. I don’t know. To be honest with you, I should know, 

because I was at a rally with some of the smaller bands out here 

last week. I don’t know if any of the larger folks do that or not. 

I don’t know the answer to that. 

Mr.JOHNSON. What will happen July 15 when a new royalty rate 

goes into effect? Nothing happens between now and then, nothing 

happens in the courts, nothing happens in Congress, the rate goes 

into effect. What will happen to the Webcasters who continue to 

broadcast on the Web, but don’t pay the escalating royalty rates or 

42

don’t pay any royalty rates? What happens to them under the current state of the law now? 

Mr.INSLEE. Well, they would be legally obligated. There would be 

a legal obligation to pay this. And, of course, we always, as a Member of Congress, suggest that citizens follow the law. 

Mr.JOHNSON. They wouldn’t be off to jail or anything like that. 

Mr.INSLEE. No. I don’t believe there is a criminal penalty associated with this. 

Mr.JOHNSON. They would have to actually hire one of those despicable lawyers to perhaps defend them if someone decided to sue 

them to get the money. 

Mr.INSLEE. That may be true. But I would suggest that what I 

think would happen is that some will make a decision they can’t 

face the risk of continued business and close their businesses down. 

Some will continue without necessarily making the payment in a 

timely fashion in the hopes that pressure will build on Congress, 

and either Congress will act, or the parties will finally reach a resolution. The larger parties may continue in the hopes that negotiations continue. 

But I guess the one thing I would share with you, and I have 

spent some time talking to people associated with this, I think the 

demand in America for this service, it is so engrained in people’s 

lives now, it is like coffee in the morning and Internet radio during 

the day, that there will be a movement by Congress ultimately if 

there is not some resolution of this ultimately. And so I hope the 

parties are successful in moving forward in this regard. 

Mr.JOHNSON. I guess the point I was trying to get to is the lights 

are not going to go out on July 15 because new royalty rates are 

applicable thereafter, will they? 

Mr.INSLEE. Well, I think some will. I think, talking to some of 

the Webcasters that I have talked to, some of them are unwilling 

to take the financial risk that there would not be a settlement, and 

they may shut down their doors at that period of time. I think that 

the longer it goes, the more shut down their businesses. I can’t tell 

you percentages, but I think there is a real, real risk that will happen. 

There is another risk, too, I will just share with you. I was in 

a meeting here in D.C., and I ran into this guy who is a software 

developer, and he is also a musician, and he sells his music. And 

we started talking about this issue. And I kind of thought he might 

not like my legislation because he sells music, he gets a premium 

for copyright for his music. And he said, I am totally for your bill. 

And I said, how come? He said, this is the only way I get my music 

to Americans is through this Internet radio, and there is no way 

that I am going to be able to do that under this current structure. 

So it is not just the broadcasters that have something at stake 

July 15. We have to make sure songwriters are fairly compensated. 

They deserve it. We need their music. It is necessary, and it is the 

law. But we have the guys like I talked to who are not going to 

be able to distribute their music. The guys who have the gothic 

western, you are not going to hear those on top 40 songs, with all 

due respect to the genre. And so they have a stake in this as well 

for somehow we reach a resolution of this. 

43

Mr.JOHNSON. I guess there is a lot of small Webcasters who seek 

to become large broadcasters because they want to sell advertising 

over the Webcast. They want to perhaps simply charge people for 

subscribing to the Website. There is also some money involved 

somewhere. And my hope is that we won’t help one segment of our 

population at the expense of another. And I think fairness is really 

important here, and I am concerned that we have taken, what, 

18,000 pages of testimony, or something like that, and just a careful analysis of all of the market factors, and the Copyright Royalty 

Board came up with a decision based on input of so many different 

interests and stakeholders, and now 5 years later there is a push 

now to just change everything. 

Something doesn’t feel right about it, in my estimation, and I do 

want to see further justification. But I am open. 

Mr.INSLEE. If I can comment on that. I think that is a very important precept that Congress shouldn’t be changing the rules in 

the game willy-nilly after you make a decision. I think that is important. But I look at this as sort of like we spend 18,000 hours 

developing the shuttle, and it crashed, you know, one of the first 

models, and we fixed it. And I think that we are heading for a 

crash here on something that the economics will not allow Americans to enjoy their music. And so I think it is of that order of magnitude, and I am hoping the parties will move forward so we don’t 

have to; but if otherwise, I hope Congress will act. Thank you. 

ChairwomanVELA ́ ZQUEZ . Thank you, Mr. Inslee, for your testimony and your work on this issue. 

Members have 5 legislative days to submit materials and statements for the hearing record. 

The hearing is now adjourned. 

[Whereupon, at 12:30 p.m., the committee was adjourned.]

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