money.jpgWhen is a service not a service? When it collects money from subscribers, supposedly for one purpose, then uses it for another. That’s what’s reportedly happening with a popular platform for webcasters that collected money it said would go towards covering royalty and rights payments, but those payments were allegedly never made.

On Monday April 18, 2011, non profit Performance Rights Organization SoundExchange** posted a Public Notice Of Disabling Of Access To SWcast Services. SWcast‘s services included a hosted platform for independent webcasters, for a fee. The fee contractually included royalty payments from webcasters to SoundExchange, as required by law. SWcast was then expected to pay royalties on behalf of their users. A few hundred stations ran smoothly on SWcast, and SW cast took broadcasters’ money, supposedly putting it toward legal artist royalty obligations.

Great service, but that’s apparently not what SWcast actually did. From the SoundExchange Public Notice Of Disabling Of Access:

SWCast. . .does not provide the promised services. Specifically, and despite its claims, SWCast has failed to abide by its obligations under the statutory license, did not pay anything to SoundExchange for years, and, as of the date of this letter, has not even attempted to make any payment to SoundExchange for any period after 2005. SWCast has also never provided the reports of use that are clearly required by the statutory license

It seems SWcast Services received payments from their users over a six year period, but what happened to that money is unclear. Based on the Public Notice, SWcast never sent a single payment to SoundExchange.

In a stroke of morissette-esque irony, the first shutdown of a service provider in the ongoing Webcaster – SoundExchange saga is apolitical. Taking money from users for the mutually agreed purpose of paying royalties, and not following through with that obligation as expected by users (ever) is not a business. It reads like a scam.

Using an interesting defense strategy that apparently includes creating social media and quickly deleting it, Founder Randall Krause was suspected by some to be sock puppeting (that is, posting comments about oneself/one’s business under a anonymous screen name) on respected tech news site CNET.

A comment popped up on Greg Sandoval’s article “SoundExchange relies on DMCA to shutter Webcaster” – that defended SWcast. A response to the “anonymous” comment suggested the anonymous commenter was actually Krause, even as another response linked to very recent and hidden changes to the posted public agreement between SWcast and its users (broadcasters), hosted by SWcast.

The agreement originally included language obligating SWcast to make payments to SoundExchange on behalf of their users. According to the comment reply, the word “SoundExchange” was recently removed from the agreement.

All of this went down in a comment section, and I read it. But I wasn’t fast enough to screenshot it in time, and those comments have disappeared from CNET. I contacted the post’s author, Greg Sandoval, by email to see why they are no longer visible. He says he is looking into it, and as soon as there is more information, I’ll update.

Speaking of disappearing media, a YouTube video posted by SWcast’s founder claiming his company had done nothing wrong spread like wildfire and was critiqued by way of comments – shortly thereafter it was marked “private” on SWcast’s youtube channel.

SoundExchange isn’t the only PRO payment webcasters trusted SWcast to make – so what about ASCAP, BMI et al?

Meanwhile, the wheels keep flying off the SWcast bus, as they just tweeted a virus warning:

SWcast isn’t a victim, as their messaging would lead you to believe. While SWcast provided a platform for small webcasters, the company didn’t fulfill their obligation to customers, consumers or artists. It is unclear to me what services, if any, SWcast did provide to webcasters.

SomaFM’s Rusty Hodge flatly confirmed what I thought to be true. “SX [SoundExchange] didn’t take down any webcasters,” he wrote in an email to me.

“They took down a service provider that was allegedly providing a service that paid SX, but wasn’t paying SX.”

I take it back: it doesn’t just read like a scam, it reads like a big lose-lose.

**Disclaimer: I am a SoundExchange consultant regarding unrelated issues. This piece is independent of my professional work. I have taken great personal and professional interest in both the survival of webcasting and royalty payments since 2006. I co-organized a fundraiser to Save Net Radio, sponsored by Pandora, with other webcasters and local music tech startups. I’ve even been to Congress, explaining why what we call internet radio is both a groundbreaking and vital tool in music consumption. And frankly, from a marketing viewpoint, I have yet to define the difference between consumption and promotion. Working in an industry essentially based on six basic copyrights, the last decade has been a deep learning experience, and it is from those experiences from which I try to articulate ideas and opinions for the SF Appeal.

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  • swcastnetwork

    Being an editorial column on “deception”, I should not be too surprised that a journalist such as yourself must rely less on verifable evidence and more on hearsay and gossip to “prove a point”. Personal misgivings and the testimony of only one party, aside — it just makes for a far better read.

    Your firm accusation that no payments were ever made is baseless, as can be verified by SoundExchange. That statement alone may well constitute defamation. In fact, astonishingly most of these extrapolations you’ve drawn are untrue, massively distorted, or nothing short of pure speculation — and lend you great credence as a journalist who understands the role of due diligence in reporting.

    While, other news reports on the subject have drawn more logical conclusions and/or taken the time to actually interview both parties involved, you have instead delved into the online blogs and Twitter feeds for the real scoop. But sensationalism (albeit mistruths disguised as “your opinion”), once again, does make for a more entertaining article. So I won’t admonish you in that regard.

    But I digress. I have no need to defend myself to you — notwithstanding your bold assumption that I apparently parade my company as the “victim”, which has certainly never once been the case in any PR. Truth be told, I have publicly taken on full responsibility for these legal claims for the protection all of my clients, both past and present, and the communication lines with customers have been open 24/7. Even the most disparaging comments posted to my Facebook page are uncensored, because I have nothing to hide.

    Of course, you would not realize that (or perhaps you prefer not to acknowledge it, as once again that would make for a highly mundane article) since you only see me from the lens of a handful of mob protesters.

    Then again, it is what it is. All the best to you,

    –Randall

  • Corey Denis

    Hi Randall,

    Thanks for reading. To be clear, while you assert that this article includes a “firm accusation that no payments were ever made [which] is baseless,” the plain language of the piece includes no such broad assertion. As is clear from the piece, SoundExchange — in its Notice of Disabling of Access — asserts that over the six year period between 2005 and 2011, SWCast collected funds from small webcasters and ”has not even attempted to to make any payment to SoundExchange for any period after 2005.” Thus, the article states that “based on the Public Notice,” SWcast never sent a single payment to SoundExchange during that six year period. If SWCast believes the Notice of Disabling of Access of SoundExchange is inaccurate, I would of course be delighted for you to provide a link here to any documentation reflecting payments made by SWCast to SoundExchange on behalf of small webcasters between 2005 and 2011.

    I look forward to hearing from you!

  • swcastnetwork

    I appreciate your courteous reply.

    I would be delighted to provide that documentation to you, but for reasons of confidence, particularly during the settlement phase of this case, you know that I cannot disclose those types of documents without counsel approval despite my desire to do so. That is for both my benefit and the benefit of SoundExchange. There are facts that have not been publicized regarding the payments my service has submitted, but by written order of their attorney I cannot discuss (alternatively read, “discredit”) SoundExchange in any public forums. They want me to remain hush hush about their organization. So I am legally compelled to refrain from sharing facts potentially construed as defamatory.

    And further, the alleged delinquent years are not between 2005 through 2011. I cannot ascertain how you derived that date range, given the published statement. But, your facts are askew. And moreover, there is no claim by SX that no payments have ever been made (despite the phrasing in your article that implies such).

    Anyway, this will probably be my last reply on here. I have tried to be forthcoming, insofar as I am legally entitled at this point. You’ve jumped to some wild conclusions, and I respect your freedom to do so. But at this point defending myself on a public forum is not an appropriate use of my time. I have customers and SoundExchange to attend to.

    Wishing You the Best,

    –Randall

  • vmuktisub

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