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New
Internet Radio Royalty Fees Pressure Webcasters |
Posted:
05.21.07
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Internet-based radio stations are battling the record industry
-- and the clock -- as they face hefty new copyright fees in two
months.
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 Radio
listeners rarely pay for music. That burden is usually placed
on stations or, in the case of online music, Webcasters such as
Live365, National Public Radio, Pandora Internet Radio and AOL
Music.
Webcasters pay royalties, as a percentage of their earnings,
to collection companies, which then split the royalties between
the music industry and musicians.
But with CD music sales decreasing and with audience shifting
online to cheaper music alternatives, the Copyright Royalty Board,
a Library of Congress panel, decided in March to increase royalty
fees for streamed online music.
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New royalty
rules |
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Under the new rules, Webcasters would no longer pay royalties
as a percentage of earnings. Instead, they would pay a fee each
time a user listens to a song.
Webcasters are multiplying the number of songs streamed each
year by the estimated 70 million Americans who listen to Internet
radio by the $0.0008 per song royalty rate set for 2006 by the
federal panel -- and do not like what they see.
"We don't have the money to pay up," Live365 Chief
Executive Mark Lam told the Washington Post, calculating that
the fees his radio network would have to pay based on its 4 million
listeners per month could rise from $1.4 million in 2006 to between
$7 million and $8 million in 2007.
With the royalty rate set to rise to $0.0019 per song per listener
in 2010, large Webcasters would see an increase in royalty expenses
of about 40 percent to 70 percent of revenues, according to a
congressional estimate. For small Webcasters, the royalty increase
could be up to 1,200 percent of revenues.
 It's
an increase Webcasters say would devastate their industry. They
predict that, in the short term, few small online stations will
survive the fee change, which includes 18 months of retroactive
payment.
Greg Scholl, president of the online music distribution company
The Orchard, told National Public Radio the change could also
have a long-term effect.
"Higher rates means less diversity of programming; it means
slower development of the digital music space; and it means more
difficult time for independent artists and labels to take advantage
of this incredible new medium ... to build audiences and make
and sell music," Scholl said.
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Lobbying
efforts |
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With the fee change slated to take effect July 15 -- dubbed "the
day the music dies" by Webcaster supporters -- the clock
is ticking for Webcasters, who are scrambling to lobby Congress
to change the royalty fees as they re-evaluate how they do business
online.
 Webcasters
-- large and small, public and private -- have joined the SaveNetRadio
coalition, seeking support from listeners, musicians and politicians
to fight the copyright board's new fees.
SaveNetRadio supports the Internet Radio Equality Act, a bipartisan
bill introduced in the House and Senate that would set royalty
rates comparable to those paid by satellite radio -- about 7.5
percent of revenue.
The bill also would set special rules to limit fees paid by non-commercial
online radio stations, such as college stations, and public online
stations, such as National Public Radio.
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Impact on
artists |
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But SoundExchange, the nonprofit company established by the Recording
Industry Association of America to collect digital music royalties,
called the Webcaster coalition's lobbying move a "money grab."
SoundExchange said the bill would save larger companies that
operate online stations -- AOL, Yahoo!, Microsoft, Clear Channel
-- from paying up to $100 million in royalties, money that would
be kept out of the artists' pockets.
 "The
fact that [SaveNetRadio] would advance the profit-grinding agenda
of big Webcasters without regard to the artists they are hurting
speaks to SaveNetRadio's true mission and evident hypocrisy,"
Rebecca Greenberg, national director of the Recording Artists'
Coalition, said in a SoundExchange press statement.
Many independent musicians, however, depend on online radio for
exposure, and Laurie Joulie, the director of the artists collective
Roots Music Association, said they would side with the Webcasters.
"Artists understand that when we proactively support the
overall viability of the industry, we support them," Joulie
wrote in a BusinessWeek editorial.
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Surviving
the fee change |
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SoundExchange Executive Director John Simson wrote in his BusinessWeek
editorial that the new fee is reasonable when broken down by listener
-- $0.68 per month for a 40-hour-per-month online radio listener.
"I think in any new area like the Internet there will be
some businesses that survive and some that don't," Simson
told the New York Times.
 "Whether
you're a corner market versus a big supermarket, you both have
to pay the same amount for the milk that you sell. It's not like
the little guy gets a cheaper price for milk," Simson said,
NPR reported.
Tim Westergren of Pandora Internet Radio said in a 10 Zen Monkeys
Webzine interview, that he viewed his popular 6.5-million-listener,
personalized radio company as a "wildly promotional service"
that shouldn't be subject to the increased fees.
To keep costs down as the July 15 deadline looms, Pandora has
closed its service to international audiences because of "legal
realities."
--Compiled
by Adnaan Wasey for NewsHour Extra
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I think we've been witnessing violence for years, whether in reality through the media or through video games, and I don't think that's a first-hand effect.
