Internet Radio Gets Fucked Again

The new standards look something like this:

For each play per listener in 2006, each outlet must pay $0.0008. In 2007, the rate increases to $0.0011 per play, continuing on to $0.0014 in ’08, $0.0018 in ’09 and $0.0019 in 2010. Now looking at those numbers, you’re probably thinking, as many might, what’s the big deal about $0.0011 per song? That’s pennies.

Seemingly so, until you do a little math. Consider that each hour, the average radio station plays 16 songs. So that’s about 1.76c per hour, per listener. A station with a 500-listener average over the limit (see below) would be hit with fees of $211 per day, $6,336 a month or $78,088 a year. When you impose such rates on small stations, you’re asking them to play by financial rules that only the wealthiest of corporations can afford.

Now there’s one loophole: “For noncommercial webcasters, the fee will be $500 per channel, for up to 159,140 Aggregate Tuning Hours (one user listening for an hour) per month. Noncommercial webcasters who exceed that level pay at the commercial rate for all listening in excess of that limit.”

What that means (as I understand it) is, since there’s 24 hours in a day, and up to 31 days in a month, you can average just under 214 listeners per hour and get away with paying just the $500. Anything beyond that, however, and you pay at the commercial rates detailed above.

All of this amounts to a significant repeal of the Small Webcasters Settlement Act, which up to this point based the royalty rate on percentage of revenue, thus protecting the little guy. Now, any station whose listenership exceeds the usage limitation set forth above is subject to paying overages at more than four times the rate they pay now. Add to this the fact that most of the stations in question at best posted a revenue of 1 to 1.2 cent per listener hour last year. Now the Board’s decision is forcing them to pay about 1.28 cents per listener hour in copyright fees for 2006, more than 100 percent of their total revenue.

The bottom line: asking any business to retroactively pay out over 100 percent of last year’s revenue will put all of them out of business.

In a theme all to familiar to any off us who work in this business, guess who’s collecting these fees? Surprise! SoundExchange, the digital copyright collection arm of the RIAA. I’m not going to even get into the evils of this organization, which under the guise of “protecting artists” have acted to cripple home recording, limit digital technology and sue kids downloading music. This same dinosaur must now be allowed to die, because their time has passed. Finally, guess where the RIAA gets the money to fight all of these legal battles? Straight out of the royalties they collect, further diluting the artist share.

Remember that Internet radio in its short life span represents (for the most part) the avant-garde of taste and acts as a foil to the crap on commercial radio. Radio on the web provides its listeners an avenue to explore music that commercial radio won’t touch, music that people like us tend to like.

To destroy this alternative voice in one fell swoop is a seriously bad idea, especially when you consider that the listenership of such stations is more likely to discover new music via these sources, and support it via purchase or by attending a live show. The entire process reeks of a rich-getting-richer scenario, with smaller broadcasters and therefore smaller bands and musicians getting the shaft.

Think about it another way: Say Band X, just starting out, gets played once a day on such a station. That means that based on this system, they’ll make $200 per year (minus the litigation fees that the RIAA so freely spends out of “their” money, so maybe $180…$150…?) from these plays, from little Internet stations that won’t be able to afford to continue to “broadcast” their music because of the fees. Oh, and cut that in half if they’re on any kind of label, even an indie.

If, however, during those five plays per week, maybe one person out of those theoretical 714 listeners decides to come check out struggling Band X’s show at $10 a ticket on a 65% / 35% door deal. Yep, they made $322. Maybe two people out of that 714 theoretical listeners come, well that’s $644. And what if two people come and one more buys the band’s self-released CD off their MySpace page? After manufacturing costs and store set-up, that adds up to another $425. And that’s just reaching two or three listeners per week out of 700-plus. Is it worth it to eliminate one potentially larger stream of revenue for the smaller one that puts Internet radio out of business?

Let it be known that I’m all for artists getting paid for their art. When they do, I do, so it’s a matter of my survival as well. But the paradigm is changing, and that’s why I’m against this. There’s a difference between stealing music and promoting music, and maybe it’s not quantifiable yet. But you cannot handcuff small Internet streaming radio stations in an effort to protect musicians. It doesn’t add up.

In working with musicians and supporting their art, I’ll take almost anything we can get. But not this.

So here’s what we can do:

Contact your representatives in the Congress and Senate. Write to them and ask them to help repeal the decision of March 2nd by the Copyright Royalty Board.

And stay gold.

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4 Responses

  1. Well said, MiH. It amazes me just how often the old “cut off your nose to spite your face” adage comes up with regards to music and royalties. I still can’t believe the RIIA and certain bands themselves refuse to acknowledge they can only be helped by these smaller stations.

    Not that I agree with it, but at least I understand the Oink hesitation. This, this makes no sense.

  2. more on this, depressing as usual:

    Chill descends on KCRW

    A ruling on Friday by a committee of the Library of Congress means that KCRW.com and other websites that stream music could have to pay royalties each time a song is played on the Internet. The United States Copyright Royalty Board accepted the position of the RIAA-associated SoundExchange royalty organization and rejected arguments by the International Webcasting Association, Wired News says. Two years in the making, the decision threatens to essentially end Internet radio, say critics. A senior staffer at KCRW tells LA Observed, “Everyone is stunned by the decision. The determination to charge per song/per listener would effectively shut us down, as well as most other music sites. We estimate it could cost us anywhere from $1 to $5 million to keep going.”

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