June 2012

Radio Royalty Deal Offers Hope for Industrywide Pact

For decades, the recording industry has lobbied Congress to change how radio stations pay royalties. The broadcasters have lobbied just as hard to preserve the status quo, making an agreement look all but impossible. But last week, a groundbreaking deal by Clear Channel Communications, the country’s largest radio broadcaster, raised the possibility of a solution to the standoff through marketplace negotiations instead of political head-butting. It also put the spotlight on how federal copyright law keeps up with digital media. The agreement, between Clear Channel and Big Machine, the record label behind Taylor Swift and other country acts, will for the first time allow a label to collect a royalty when its songs are played on the radio. In the United States — and almost nowhere else — radio companies pay only songwriters and music publishers, not record companies. The system, dating back almost a century, is based on the idea that radio play has enough promotional value for performers that they do not also need to be paid royalties. The arrangement has long irritated labels and performers. But with record sales plummeting over the last decade, the labels have pursued royalties more urgently as an additional revenue stream.

So why did Clear Channel change its position, breaking ranks with its powerful lobbying group, the National Association of Broadcasters? The answer apparently has nothing to do with politics; with Republicans expected to retain control of the House in this year’s elections, few in the industry predict a new Washington battle is likely. Rather, it has to do with digital music, and Clear Channel’s desire to reshape its business in anticipation of rapid changes in the marketplace.

For HBO, Still Beholden to a Cable Company

Only HBO cable TV subscribers can watch HBO content on HBO Go.

I asked friends who have also cut the cord how they watched the second season. All of them said, in the flawed logic of a generation used to getting what it wants, when it wants it, thanks to technology, that they had no choice but to steal it. Not because they don’t want to pay for it, but because HBO Go isn’t an option. It turns out they are not alone. There’s a Web site called “Take My Money, HBO!” where people who wish they could pay to watch just HBO shows name their price. Jake Caputo, a designer who started the site on Tuesday, said 160,000 people visited in the first three days. The average price was $12. The only way to stop piracy, said Ernesto Van Der Sar, editor of Torrent Freak, a site that reports on copyright and piracy news, “is by making legal content easier to access and offering it at a reasonable price.” Like $12 a month? If HBO made its streaming service available to consumers who don’t have cable, and just one million people were willing to pay, that’s an extra $12 million a month in revenue. Cable subscribers pay about $18 a month for HBO, on top of basic cable and other cable television packages. HBO receives about $8 of that, and cable companies take in the rest. So, in my way of thinking, HBO is forgoing $12 of revenue from every person who would never get cable and $4 from those who would give up cable and get just HBO. Yet Eric Kessler, co-president of HBO, must have a different calculator in his office. “At this time, the economics simply don’t support a stand-alone HBO Go,” he said. “We make our programming, including ‘Game of Thrones,’ available on numerous platforms for our subscribers and then on DVD and electronic sell-through for those choosing not to subscribe to a TV provider.”

TV Content Ratings System Set to Expand to Web

The black labels that tell families what to expect from network television shows will start to appear on the Internet streams of those shows, too.

The expansion of the TV content ratings system is expected to be announced by the major broadcast networks on June 11. The ratings will be included in all episodic streams on Web sites like ABC.com and Fox.com by December, according to people with knowledge of the plan, who insisted on anonymity because it had not yet been made public. The announcement is an illustration of the ways that television networks are having to adapt to the Internet, where there has been a surge in the streaming of TV shows. Some sites, notably Hulu, already incorporate the content ratings into their online streams.

Congress' war on leaks

[Commentary] An angry Sen. John McCain (R-AZ) is calling for a special prosecutor to investigate leaks he says are designed to portray President Barack Obama as a strong leader on national security issues. Without going that far, Sen. Dianne Feinstein (D-CA), the chairman of the Senate Intelligence Committee, says that recent leaks "endanger American lives and undermine America's national security." She is proposing, among other things, that Congress provide "additional authorities and resources … to identify and prosecute those who violate various federal laws and non-disclosure agreements by revealing highly classified information." Although she did not advocate prosecuting journalists, the senator probably spoke for many of her colleagues when she told CNN that part of the problem was that "we have an enormously smart constituency of journalists … who piece things together."

So far most of the outcry has been directed at the administration, not the media, but in similar controversies in the past, critics have not been so discerning. So we would urge Congress — and the administration — not to criminalize the reporting of information that may have come into the possession of the media because a government official was indiscreet.

Computer attack on Iran nuclear program adds urgency to cybersecurity efforts

The revelation that the United States used a computer virus to damage Iranian nuclear facilities has added urgency to a push in Congress for cybersecurity legislation.

Top administration officials, such as National Security Agency Director Keith Alexander and Homeland Security Secretary Janet Napolitano, have long argued that the nation is at risk of suffering a devastating cyber attack. "We now know why they were making those predictions," said Noah Shachtman, a nonresident fellow at the Brookings Institution and a contributing editor to Wired magazine. "They were talking about themselves—not what some outside opponent could do to us, but what we were doing to others." "The U.S. has basically endorsed the use of these things publicly, and that does change the game," Shachtman said. Paul Wolfowitz, a former Deputy Secretary of Defense under President Bush, said he hopes the news of the attack would "put some added urgency" on Congress to pass cybersecurity legislation. "Maybe it will raise awareness," Wolfowitz said. "I hope we don't have to wait for the cyber-equivalent of 9/11 before people realize that we're vulnerable."

GOP governors bolster online sales tax push

Gov Terry Branstad (R-Iowa) became the latest in a string of top Republican state officials to back federal legislation giving states more freedom to collect online sales taxes. Branstad’s letter of support comes not long after another prominent Republican governor, Chris Christie of New Jersey, also urged Congress to get moving on sales tax legislation. But despite the increasingly vocal push from Republican governors and retail groups for a federal solution, supporters of online sales tax legislation face a heavy lift in getting a measure through Congress this year.

Apple Combats Google-Microsoft-Facebook Troika In App Race

Apple is releasing a fresh lineup of computers and software tools to woo consumers and keep developers making applications amid accelerating rivalry from Google, Microsoft, and, now, Facebook. Apple will use the Worldwide Developers Conference starting June 10 in San Francisco to debut Mac computers with high- definition screens, as well as features for the software that powers its iPhone and iPad.

Phil Schiller, Apple’s senior vice president of product marketing, will probably emcee the keynote. Leadership in the consumer-electronics industry hinges on a company’s ability to get developers to put its products first when building the next big application. With more than 600,000 downloadable games, magazines and productivity tools, Apple is the application leader. Microsoft is playing catch-up before the release of its next operating system, Google will host a developers conference this month and Facebook just opened its own store.

Did Our Public Airwaves Win It for Walker?

[Commentary] Whatever questions remain about Wisconsin Governor Scott Walker's recall election, there is no question that his campaign was built on big money, the likes of which we've never seen in a gubernatorial campaign before. And where did all that money go? Right into thin air -- our air. And as owners of the air -- our public airwaves, to be precise -- there is plenty we can do to combat the corrosive effect of big money on our elections, by holding our partners in broadcasting, local TV and radio stations, accountable to the communities they serve.

Citizens United, the Supreme Court ruling that the First Amendment prohibits government from restricting independent political expenditures by corporations and unions, is the reason huge amounts of money poured into the Walker camp from third parties like the billionaire Koch Brothers and others. So the Walker recall gave us the first glimpse at how the infamous Supreme Court ruling will affect campaigns for years to come unless something changes. There is a large and growing movement now from groups like Move to Amend, to amend the Constitution to alter the unlimited spending allowed by Citizens United. Such an effort, however, will take years to accomplish, if it ever happens at all. But what's not being talked about is where most of this money goes: about half of all campaign dollars go directly into our local radio and TV stations' wallets -- local broadcast stations which get licensed in the public/private partnership of broadcasting only if they "serve the public convenience, interest, and necessity."

Immigration, cloud form as tech issues for economy

The tech industry’s policy goals aren’t getting aired at the kitchen tables of Americans who worry about gas prices, unemployment and the housing market. But Silicon Valley is hoping President Barack Obama and Mitt Romney will embrace policies this campaign season that tech companies say will help innovation and ultimately improve the economy.

Executives and policy experts gathered here this week for the Tech Policy Summit said they want both candidates to back the industry’s top policy priorities — including visa reform for highly skilled workers, corporate tax reform and accelerating spectrum reallocation — with more than just lip service. “You’ll see the candidates get up there and pledge allegiance to innovation,” said David Tennenhouse, a partner at New Venture Partners. “This election is about jobs, jobs, jobs. We should think about, when we go ask for things, what plays into that agenda.” Tech industry leaders say job growth will come if firms are given more flexibility on a range of issues, such as transitioning to the cloud and hiring talented workers from other countries. High-skilled immigration reform is a priority for tech executives.

Obama’s data advantage

On the sixth floor of a sleek office building in Chicago, more than 150 techies are quietly peeling back the layers of your life. They know what you read and where you shop, what kind of work you do and who you count as friends. They also know who your mother voted for in the last election. The depth and breadth of the Obama campaign’s 2012 digital operation — from data mining to online organizing — reaches so far beyond anything politics has ever seen, experts maintain, that it could impact the outcome of a close presidential election.

It makes the president’s much-heralded 2008 social media juggernaut — which raised half billion dollars and revolutionized politics — look like cavemen with stone tablets. “It’s all about the data this year and Obama has that. When a race is as close as this one promises to be, any small advantage could absolutely make the difference,” says Andrew Rasiej, a technology strategist and publisher of TechPresident. “More and more accurate data means more insight, more money, more message distribution, and more votes.” Adds Nicco Mele, a Harvard professor and social media guru: “The fabric of our public and political space is shifting. If the Obama campaign can combine its data efforts with the way people now live their lives online, a new kind of political engagement — and political persuasion — is possible.”

Benton

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