Make Some Noise

Monday, 25 June 2007
by felix
filed under Announcements and About Us
Comments: 156

It seems we owe everyone an explanation on a subject that has come into the public eye over the last few days. Tomorrow is the so-called “Day of Silence,” during which thousands of US webradio broadcasters will get together to turn their radio streams off for a day to protest the newly-introduced higher rates that SoundExchange intends to charge them.

Last.fm decided long ago that we wouldn’t be participating in this; I’d like to explain here why this is the case. To warm up, I suggest you read this Techcrunch post (and today’s one), which sums up the argument for why we should turn off, and, in the comments, the argument for why we should stay online.

Where We’re At

Firstly, Last.fm is a social music platform and not only a radio station. Unlike many of our fellow webcasters, we have a vibrant social network, a massive music fanbase, and people spend a lot of time using the site without ever switching on the radio.

Secondly, as we’re based in London, this kind of legislation is not new to us. In fact, we’ve had to live with its existence since our inception in 2002.

A Quick Licensing Primer

In the US, copyright holders (i.e. people who make a recording, usually the labels) do not get royalties when a song is played on terrestrial (traditional) radio. When webradio became more popular in the early 2000s, new legislation was introduced that charged operators online radio royalties that went to the copyright holders; new media, new rules. A panel called CARP set the royalty rates at ~£0.00035 ($0.0007) per track played, and that was that. After heavy protests in the US, they introduced a “small webcasters” rate which charged a percentage of revenue instead. Last.fm was paying this rate until recently, having been a small webcaster for quite a while.

Recently, a new panel called CRB (which replaced CARP) got together and re-evaluated these rates. In a nutshell, they’ve more than doubled, going up to ~£0.0009 ($0.0018) per track by 2010. This is what everybody is protesting about.

Now Last.fm, being a UK company governed by UK law (which we still are after the acquisition), has been subject to a whole host of additional rules since the beginning. Every webcaster has to pay royalties in all the countries they stream to. They also have to make agreements with all the relevant local royalty collection societies. Since 2002, we’ve been in the process of doing this. In fact, we applied for a UK radio license before the site went even public (with about 3 listeners we all knew personally!). This was smack dab in the worst time to be doing online music, right after the big Napster meltdown.

Pretty soon we also learnt about the copyright charges, which in the UK go to a society called PPL (they’re the UK equivalent of SoundExchange). Since the days of CARP, the PPL has proposed charges which are even higher than the rates being proposed in the US by CRB now.

This continues to be a massive challenge for us, but it’s one we’ve been struggling with for years. We’ve racked our heads to come up with a business model that can survive and even grow under these difficult circumstances, and I believe we’re making progress.

The mood in the US, however, has turned rather pessimistic with a number of stations publicly foreshadowing their own demise. Frankly, we’ve been slightly baffled by the opinions being aired. Rates have been a commercial reality for years.

Play It Louder

So why do we think the “day of silence” is not a good idea?

We do not want to punish our listeners for our problems, period.

If a commercial challenge comes up, we have to deal with it. We have always done that, as many people who have been using Last.fm for a while can attest to. And we’ve had our fair share of challenges. (Like the server growth problems we’ve been battling recently. Mischa was overheard grumbling that “we’ve probably put in two days of silence!” over the last couple weeks; a heartfelt thanks our users for their patience.)

Since Last.fm started we’ve engaged in negotiations with the music industry, leading to our recently reaching an agreement with several major record labels for the use of music on our service. As a legal and responsible provider of music, we’re continuing discussions with record labels and music publishers. At the same time, we’re negotiating with royalty collection societies to make sure we can get rates that make sense to us.

The only solution to this dilemma is commercial; make a commercial argument and see it through. What benefit does music have if no one is playing it anymore? There are various opinions about the promotional benefits of playing music on the radio, but having your music heard by more people instead of less can’t be wrong, no?

What I am saying is: it’s in no one’s interest to let online radio die. But people want to make money from their music. And we want to pay artists for the music we play. It’s only fair.

We think – and this is the opinion of the whole Last.fm office, who you can meet on our lovely team page – that turning off the radio is just plain wrong. This has been a no-brainer from day one for us: the users rule, and we serve them. If only one person wants to listen tomorrow, we should serve them. I for one want to listen every day.

Online radio won’t die in a hurry, but it will be hard work. And we don’t deal in silence.