You Play, They Pay

How much should it cost Internet radio operators like Jim and Wanda Atkinson to satisfy your cravings for streaming rock & roll?

Between playing the songs and raising two teenagers, the Atkinsons spent hours on the phone with software developers from Microsoft and RealNetworks, serving as "guinea pigs for a lot of these companies to get them to get their streaming perfect, get their advertising platforms perfect," says Jim.

At one point they leased bandwidth from Broadcast.com, billionaire Dallas Mavericks owner Mark Cuban's thoroughbred entry in the Internet stakes race.

"Which, by the way, had very bad service," Wanda puts in. "But we wrote letters to Mark Cuban, and within two days everything was fixed. He sent a note to the entire Broadcast.com staff saying, 'This salesperson did everything wrong, so don't do what this guy did.' He made an example of him."

Jim Atkinson says he bailed on FM in 1993 because of "the potty-mouth humor and the stupid way that being an announcer was headed."
Jennifer Silverberg
Jim Atkinson says he bailed on FM in 1993 because of "the potty-mouth humor and the stupid way that being an announcer was headed."

Likewise, Wanda says, when they ran into problems at RealNetworks, they went right to the top. "We went to Rob Glaser, and he helped us out. Those were the good old days, when you could talk to the CEOs who were personally involved because the companies were so small."

Though no one was turning a profit, speculation on the future of the new medium drove up values. The Atkinsons watched wide-eyed as budding Internet stations got fat with venture cash.

Recalls Wanda: "NetRadio in Minneapolis, which had 150 channels, and SpikeRadio in LA, blew through millions of dollars in venture capital, [moved] into huge buildings with huge staff — and there's no advertising. Some of those places in LA were putting up billboards around town, and there was no way at that point to listen to Internet radio in your car."

SpikeRadio.com shuttered in spring 2001. NetRadio.com followed later that year.

The Atkinsons say they were approached by potential investors but always left the negotiating table dissatisfied. "It always came down to their wanting to buy us for stock in their company," Wanda says. "Most of them were new Internet companies: We don't know if you're going to succeed. Why would we want stock in your company?"

Jim: "And every investor wanted our 'end strategy' — isn't that the word for it?"

Wanda: "They all wanted to know, 'How soon can you get it so that we can do a public offering?'"

Jim: "Or, 'We'll invest, but how soon can you build it up so we can sell it?' And we went into this because we like doing it. We like the music."


Wanda Atkinson describes the division of labor at 3WK in snarkily simple terms: "He programs the music and I do everything else."

The Atkinsons have been married 28 years, and it shows. Wanda does a lot of the talking, Jim does a lot of the sighing, grunting and — when he sees fit, correcting. Each completes the other's sentences, butts in when the other deviates.

While Jim was jumping from station to station during the 1980s, Wanda was bridal director for 30 Famous Barr stores, but she left the department store in 1993 to work with Jim on their radio-industry newsletter. When they resolved to move to Internet radio, the couple continued their partnership.

They readily acknowledge that their station is a labor of love. "We're terrible business people," he elaborates. "We always watch the bottom line, and we break even — and sometimes make a little bit."

In 2001 3WK had yet to turn a profit and was relying on cash infusions from Jim's mother. But their pioneer status and networking savvy had helped the Atkinsons develop relationships with like-minded indie retailer Insound.com and secure placement on large Web radio portals like Microsoft's MSN and Apple's iTunes player, which endure to this day.

Yet even as networking and word of mouth were increasing page views, a financial threat arose.

In 2002, as a consequence of the landmark Digital Millennium Copyright Act of 1998 (DMCA), Web broadcasters suddenly faced a new drain on their finances. At issue: royalties.

Among its many provisions designed to address the expanding digital media marketplace, the DMCA required that broadcasters who digitally transmit music — be it Sirius Satellite Radio beaming a signal from outer space, KSHE or National Public Radio streaming their radio product or the Atkinsons rocking the Hill — pay royalties to record companies and performers.

Prior to the DMCA, Webcasters followed the same protocol as AM and FM stations, which pay royalties — amounting to roughly 5 percent of gross revenues — to songwriters. When KSHE plays the Guns N' Roses version of "Live and Let Die," for example, Paul McCartney gets paid; Axl and company don't.

The DMCA decreed that Web broadcasters had to give unto Axl and pay Paul.

Elsewhere in the industrialized world, it had always been so. "The United States stands alone in not compensating the artists," explains Walter McDonough, general counsel for the Future of Music Coalition, an artists'-rights lobbying organization. McDonough is also a member of the board of SoundExchange, a Washington, D.C.-based nonprofit that was formed to collect and distribute performance royalties. "If someone's using the music, then frankly I think people should be compensated for it."

David Oxenford, a D.C.-based attorney who represents 3WK and other small Webcasters, says the U.S. government used to see things differently. "It was felt that radio promoted the sales of records [and concerts, etc.], so that airplay of music was to be encouraged, not 'taxed,'" Oxenford writes via e-mail. "The composers, who did get royalties from broadcasters, do not benefit in anywhere near the same degree in the sale of recordings, and don't benefit from concert revenues. So that's been the way it is in U.S. broadcasting for well over 50 years."

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