Record Companies, Congress Take On Satellite Radio

Industry, Government Collude to Squash Consumers

By Martin H. Bosworth
ConsumerAffairs.com

January 20, 2007

• Internet Radio Reaches Deal On Royalties • Sirius XM Near Bankruptcy • Poor Reception for XM-Sirius Shuffle • House Passes New Internet Radio Legislation • No Surprise: FCC Chair Decides to OK Sirius-XM Merger • Consumer Groups Urge FCC to Reject XM-Sirius Merger • States Raise Questions about XM-Sirius Merger • XM-Sirius Merger Gets Antitrust OK • Senate, FCC Chairman Spar Over Media Consolidation • Wisconsin Seeks To Block Satellite Radio Merger • XM/Sirius Merger Gets a Boost • Webcasters, Music Industry Reach Accord On Royalties • Karmazin "Clarifies" XM-Sirius Merger Plans • Last Minute Stay Of Execution For Web Radio • Dead Air Ahead: Court Denies Webcasters' Appeal • Notes From The Future Of Radio • Senators Throw Support Behind Internet Radio • Internet Radio Gets a Reprieve • Web Broadcasters Lose Music License Appeal • Feds Agree To Rethink Internet Radio Royalties • Reception Poor at Senate Sirius-XM Hearing • XM-Sirius Merger May Encounter Technical Difficulties • The End Of Internet Radio As We Know It • XM-Sirius Merger Encounters Serious Opposition • XM, Sirius Agree to Merge • Record Companies, Congress Take On Satellite Radio • Satellite Radio Looks Wobbly --- Consumer Comments • Sirius • XM Radio

Music fans frustrated with the cookie-cutter formats and heavy advertising of traditional radio have turned to satellite stations such as XM and Sirius in greater numbers over the last few years.

But new legislation introduced in Congress, as well as lawsuits by the recording industry lobby, may chill listeners' attempts to record the music they're enjoying.

A U.S. District Court Judge ruled on Jan. 19th that major record labels may proceed with a suit against XM Satellite radio, alleging that XM supports the marketing of music players that can record satellite radio streams, and turn them into MP3s.

Although XM's lawyers argued that recording satellite radio streams is no different from recording songs off broadcast radio stations, Judge Diane Batts disagreed.

Batts' ruling held that XM was acting as both a broadcaster and distributor of music licensed from record companies, even though it only paid to be a broadcaster.

"It is manifestly apparent that the use of a radio-cassette player to record songs played over free radio does not threaten the market for copyrighted works as does the use of a recorder which stores songs from private radio broadcasts on a subscription fee basis," she said."

Although the RIAA was pleased by the ruling, XM said it was confident that the lawsuit would fail, pointing to the fact that the 1992 Audio Home Recording Act explicitly allows listeners to record broadcast content for private use.

"At this stage of the proceeding, the court's ruling is required to be based on the false characterizations set forth in the plaintiffs' complaint," XM said in a statement. "The real facts strongly support our view that the lawsuit is barred by the Audio Home Recording Act. We look forward to making our case in court."

Senate PERFORMS For Record Lobby

However, a Senate bill would severely restrict listeners' rights to record music from satellite radio broadcasts.

The "Platform Equality and Remedies for Rights Holders in Music" (PERFORM) Act would mandate that all satellite, cable, and Internet broadcasters incorporate content protection technology to prevent copying of specific artists' songs, though they could still record by time period or station.

The PERFORM Act also would mandate that nontraditional music broadcasters pay "fair market value" fees for the music they license for broadcast.

Given that satellite and Internet radio broadcasters already pay high fees, the new legislation would make it difficult for any new independent broadcasters to enter the marketplace and might hamper the survival of current broadcasters.

The PERFORM Act was originally introduced in the previous Congress but languished, despite the support of then-Senate Majority Leader Bill Frist (R-TN).

Frist's former chief of staff, Mitch Bainwol, is now President of the Recording Industry Association of America (RIAA), the chief lobbying group for the recording industry.

Even without Frist's support, the original supporters of the PERFORM Act, including Sens. Lamar Alexander (R-TN) and Dianne Feinstein (D-CA) placated the RIAA by reintroducing the bill.

"New radio services are allowing users to do more than simply listen to music," Feinstein said. "What was once a passive listening experience has turned into a forum where users can record, manipulate, collect and create personalized music libraries."

But not everyone on Capitol Hill has lined up for the record industry and against everyday consumers.

Sen. John Sununu (R-NH) recently introduced a bill that would prevent the Federal Communication Commission (FCC) from mandating that electronics manufacturers include copy-protection technology in their products.

"The FCC seems to be under the belief that it should occasionally impose technology mandates," Sununu said in a statement. "Whether well-intentioned or not, the FCC has no business interfering in private industry to satisfy select special interests or to impose its own views."

Of course, if Congress imposes those views, it's a different story.

Bad Day For Blue Space

As is often the case when big business and big government collide, the voice of the little guy is drowned out.

In the case of independent radio broadcasters such as Chris Gerard, the drowning out may be literal if the PERFORM Act passes or the XM lawsuit succeeds.

Gerard, who lives in the Washington, D.C. area, operates an Internet radio station, BlueSpaceRadio.com. In his view, legislation or lawsuits against Internet or satellite radio will only drive more entrepreneurs out of the market. Gerard called the PERFORM Act "a waste of time."

"It's too cumbersome for folks to sit around and record from satellite or internet radio," Gerard told ConsumerAffairs.com. "I can't imagine a single sale has been lost to people ripping streams from internet or satellite radio, when there are much easier ways to rip off music."

Gerard makes very little money from his Internet radio broadcasts, and pays high fees to license and provide the content through his station. He does it for "only for the love of music and to interact with other music fans."

"The RIAA is trying to stop a flood with a toothpick, and the only thing they are accomplishing is putting people like me out of business," Gerard said.

"Making it too expensive for me and hundreds of others like me to operate will not help the music industry. It will result once again in fewer choices for music fans."

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