Ad disputes tune Web radio out

Clear Channel Communications, Emmis Communications and several other large broadcasting companies turned off many or all of their Web streams Tuesday, citing ongoing negotiations with the record industry and advertisers.

Online listeners at Clear Channel stations ranging from Los Angeles' KFI Talk Radio to San Francisco's popular KMEL hip-hop station were given a terse apology instead of the expected live radio stream. The note cited "issues regarding demands for additional fees for the streaming of recorded music and radio commercials."

"We are working with...our advertisers and the Recording Industry Association of America to find a solution to those problems as quickly as possible so that we can resume our streaming," the note said.

Although this round of radio silence is likely to be temporary, it is the clearest illustration yet of the thicket of details old and new media companies must still push through as they try to establish the Net as an entertainment medium in its own right. Ranging from copyright complaints to advertising contracts, each of these issues will affect the financial viability of Net services and help determine how much content winds up being available to consumers online.

The catalyst for Tuesday's blackout was a disagreement with advertisers over who should pay for commercials that are rebroadcast on the Internet. But that was just the last in a series of issues that has posed a growing financial threat to radio stations providing their work online.

Late last year, federal regulators ruled that radio stations will have to pay the same royalty fees for music that face online-only Webcasters. Radio stations have never had to pay this type of royalty for broadcasting music on air and are suing in federal court to have the decision overturned.

Don't forget the ads
The decision by Clear Channel, Emmis and several other big radio corporations came shortly after national advertisers sent them letters requesting that they not use on-air ads online without authorization.

Advertisers have paid the actors in commercials a higher rate if their ads showed up on Web sites, an industry practice that was written into standard contracts last year. In many cases, it has been a conscious decision on the part of advertising agencies to buy media time online. But in the case of Net radio, the ads were showing up online without authorization.

According to Ira Shepard, an attorney representing the Joint Policy Committee of the Association of National Advertisers (ANA) and the American Association of Advertising Agencies (AAAA), advertisers recently sent the broadcasters a letter saying that the ads shouldn't be used online--unless the stations themselves wanted to pay the extra fees for the actors.

"The point is, unless they're buying the time, advertisers don't want to have to be on tap for paying the talent," Shepard said. "What we're saying is that we're not responsible for paying these fees."

The confusion finally led many of the biggest stations to pull their streams entirely.

"This was a corporate decision," Kevin Mayer, chief executive of Clear Channel Internet Group, said in a statement. "We are working hard to resolve outstanding issues with all concerned parties. It is our intention to put the streams back up when it makes legal and financial sense."

Clear Channel owns more than 1,100 radio stations around the country, of which at least 150 were online until Tuesday.

The advertising issue appears to be a temporary one, however. Technology exists, and is used by some radio stations, that allows them to clip out pieces of a stream--such as individual advertisements--and replace the pieces with something else. Mayer said Clear Channel is close to moving to such a system.

Others say they're close to adopting similar technology. Emmis, which owns 23 radio stations, is part of a joint venture called the Local Media Internet Venture (LMiV) that will allow ad insertion.

"Last week, several of Emmis' 23 domestic radio stations began getting requests from advertising agencies to 'block or remove' commercials from online streaming," the company said in a statement. "Emmis currently doesn't have the ability to 'block' advertisements during the streaming process, although we will have the ability to do so with LMiV's streaming provider (RealNetworks) when the system is launched."

The advertisers said this approach was fine with them.

"The answer is not to stop streaming," said ANA/AAAA's Shepard. "The answer is to stream appropriately."

How much to pay?
The issues surrounding playing copyrighted music on the Web--which affect radio stations and their newer online-only brethren--are reaching boil point in Washington, D.C.

Wednesday evening is the deadline for all involved in the Webcasting debates to submit their opinions on how much companies should pay for the rights to stream copyrighted music online. Webcasters and the record industry have fought over this for years, and the issue is now in arbitration in front of the U.S. Copyright Office.

The Recording Industry Association of America, a large coalition of Webcasters, and individual broadcast companies such as Clear Channel will be filing by the end of the day. The broadcasters still contend that they should not be subject to these fees but are participating in the arbitration nonetheless.

An initial view of the recommendations shows that the sides still have a long way to go before reaching agreement. The record companies are suggesting that Webcasters pay 0.4 cents per song streamed, a rate they say is consistent with 25 other deals they have made with individual companies in the past, such as Yahoo and MoodLogic.

The Webcasters are taking a dramatically different route, looking at how much ordinary radio stations collectively pay for a different kind of royalty every year and figuring out how much that winds up being per listener, per hour. Arguing that online stations serve as a better promotional value than ordinary radio, the group then cut that figure by 30 percent. In total, each Webcaster should pay about 0.15 cents per hour, per listener, they say.

By contrast, the RIAA's recommendation would work out to be about 5.2 cents per listener, per hour. That would be a substantial financial burden, the Webcasters say--particularly since the fee will be retroactive stretching back to October 1998.

The filings Wednesday are just one step in a long process, however. The Copyright Office is not slated to decide the matter until next January.