Inside Social Networking Meets Internet Radio

Inside Social Networking Meets Internet Radio

A strange thing happened on the way to the latest digital music revolution.'s popularity and ease of use raise an inevitable question faced by all music startups without licensing deals: Is it legal? Although the site differs from Pandora and other Internet radio services, its design represents a clear attempt to qualify as a noninteractive webcaster.

Under the DMCA, noninteractive webcasts and online simulcasts of terrestrial radio -- which don't enable listeners to listen to a song on-demand -- can play music without negotiating licenses with labels and music publishers. Instead, they can play music under a statutory license that requires them to pay rights-holders a per-stream royalty through SoundExchange. Some label executives say privately that they suspect doesn't fit the definition of a truly noninteractive webcaster, although they acknowledge that they're still familiarizing themselves with the service.

To be considered noninteractive, a music service must satisfy a number of requirements. The service must limit the number of times songs by the same artist can be played within a three-hour period. It can't reveal in advance the titles of specific songs or names of albums or artists that will be played. And it must display the artist's name, song title and album title while playing a track. has built-in limitations in an effort to meet these requirements. For example, if a room has only one DJ, songs played from a DJ's queue can be heard in their entirety by everyone but the DJ, who can only hear a 30-second preview of each song. When there are two or more DJs working a room, each can listen to the tracks they choose in their entirety but not on-demand -- instead DJs add tracks to the room's song rotation. Listeners in the room have no control over the songs being played and don't know what will be played next -- just like with any other Internet radio station.

The service also follows the provisions in the DMCA regarding the removal of infringing content. Although allows DJs to select from a catalog of songs licensed by white-label digital service provider MediaNet, it also lets them upload and play songs that aren't in MediaNet's catalog.

DJs tend to upload rare remixes, tracks ripped from vinyl and occasionally their own songs. The DMCA's provisions come into play when a content owner spots an infringing track, such as previously unreleased studio tracks or live bootleg recordings. In such cases, must conform with DMCA guidelines that require such services to respond to takedown notices filed by copyright owners.

While it hasn't attracted as much recent attention as, Listening Room has been developing a business around a similar mix of noninteractive webcasting and social networking elements. Founder Abe Fettig, a Portland, Maine-based Web programmer, came up with an idea for the kind of music site he would enjoy -- a "comfortable place to talk about music," as he calls it.

Fettig put up a working version in late 2010, attracting attention through word-of-mouth. After taking the site off­line in January to address bugs and traffic problems, he used the downtime to read up on copyright law and hired a lawyer to ensure that the site was DMCA-compliant before relaunching it in March. Listening Room lacks's avatars and MediaNet catalog -- users upload songs to their DJ queue and its spartan layout resembles a blog post that keeps a running tally of songs played. But it still features a social element that distinguishes it from traditional webcasters.

While time will tell whether rights-holders will challenge the noninteractive status of newcomers like and Listening Room, these services provide yet another illustration of the pivotal role that the DMCA is playing for startups building businesses around the consumption of music.

On-demand subscription streaming music services, which are saddled with licensing costs that exact a heavier financial burden than webcasting royalties, are still struggling to appeal to a mass consumer market. According to the RIAA, U.S. on-demand services like Rhapsody, MOG and Rdio had a combined 1.5 million subscribers at the end of 2010, up 25% from a year earlier.

But that was still dwarfed by Pandora's registered user base of about 80 million in January, a tally that recently topped 100 million, according to the webcasting company. Like Pandora, the new social music services are eyeing advertising, not subscription fees, to generate revenue -- a strategy that would be all but impossible without the provisions of the DMCA.

"I'm grateful the statutory license is there," Fettig says. "I don't mind having to do what I have to do to comply with the law."


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