Last Friday, March 2nd, The Copyright Royalty Board
announced its ruling on Internet Radio royalty rates, and as they say in the
back-alleys of the music biz, they really “screwed the pooch” on this one. The
board rejected the position of the webcasters, those who would be most impacted
by their decision, and instead went with the obscene royalty recommendations of
SoundExchange, the online fee collection organization spawned by the evil
Recording Industry Association of America (RIAA).
The board set royalty rates at $.0008 per “performance” for
2006, retroactive for online broadcasters from the first day of the year. For
2007, the royalty rate will run $.0011 per “performance” and it will climb to
$.0019 by 2010. The board defines a “performance” as the streaming of a single
song to one listener; i.e. an Internet station playing a single song to 500
listeners would equal 500 “performances.”
As outlined by the Radio
And Internet Newsletter’s Kurt Hanson in this informative analysis, a
typical Internet station plays 16 songs an hour. At the 2006 rate, this would
create a royalty obligation of $0.128 per listener, per hour. If your station
averaged 1,000 listeners hourly, say ten hours a day, that’s a nifty $1,280 per
day, $8,960 per week or $465,920 per year…crazy money for most stations. The
faster a station grows, the more it would owe the RIAA member labels hiding behind
this insanity. It wouldn’t take long under this scheme for a smaller station to
end up in the hole on royalties, and the income to be derived from advertising
and other revenue streams is unlikely to overcome the royalty hurdle.
RAIN’s Hanson points out that “according to the comScore
Arbitron ratings report
for November 2006, the AOL Radio Network had an average audience
("AQH") between 6AM and Midnight of 210,694 listeners. Multiplied
by about 16 songs per hour, 18 hours per day, and 31 days per month, plus
adding an additional 10% to account for overnight (Mid-6AM) listening, suggests
that AOL played about 2.1 billion songs that month. At the CRB's royalty rate
($0.0008 per play), I'm guessing that would create a
royalty obligation to SoundExchange for the month of November of about $1.65
million. Annualized, that's about $20 million for 2006.”
That’s $20 million for AOL, a big dent in even that
company’s deep financial pockets. Hanson extrapolates this data to comment on
the fate of independent broadcasters like Pandora or Radio Paradise, quoting
that station’s Bill Goldsmith. “This royalty structure would wipe out an entire
class of business: Small independent webcasters such as myself and my wife, who
operate Radio Paradise. Our obligation under this rate structure would be equal to over 125% of our total income. There is no
practical way for us to increase our income so dramatically as to render
that affordable,” said Goldsmith.
Internet radio is in its infancy, and The Copyright Royalty
Board’s ignorant and ill-informed decision means that the medium is unlikely to
grow to enjoy its rightful teenage kicks. All but the biggest of ‘net networks
will be forced to shut their doors or face bankruptcy, which will mean an
Internet Radio landscape ruled by the same milquetoast corporate broadcasters
that have gutted traditional AM and FM radio. Money will rule the day and the
days of diversity and independence for Internet Radio will disappear.
This ruling also plays right into the hands of performance
rights organizations like ASCrAP and BeMyIdiot that would not only require ‘net
broadcasters to pay for a blanket annual license but also a performance license
(on top of the abovementioned royalty to the record labels). Of course, I’ve
seen nothing from the RIAA or SoundExchange on how this new “revenue stream”
will be paid out to the artists that deserve it, but you can be sure that their
record labels will get a taste of the pie. As David Byrne once sang, “same as
it ever was....”
