On March 2nd, the Copyright Royalty Board filed a judgement setting new royalty rates for Internet radio stations. This agreement replaces the prior agreement that was reached in 2002. It is estimated by many sources (see www.kurthanson.com as one example, with feedback from many individuals at the bottom of many pages) that the best outcome of the new rates would be a dramatic decrease in the number of stations that are capable of providing content for the public. While SoundExchange and the RIAA try to portray broadcasters as Chicken Littles who have been making unfounded claims of the death of internet radio for the last five years, the reality is that rates such as these would have an incredible impact on the viability of internet radio. Many stations could be on the line for retroactive payments of thousands of dollars, which would silence many stations rapidly if changes aren't made soon. Many industry leaders, including National Public Radio and the Corporation for Public Broadcasting are rallying to the defense of the webcasters, arguing that these new rates could be the end of webcasting. Even the Wall Street Journal has come out in support of the webcasters with their own dire predictions of what these rates could result in (see the second article on this page at kurthanson.com).
Currently, most small webcasting stations are paying royalties based on a percentage of revenue while larger stations are paying based on either a per performance basis or an "aggregate tuning hour" basis. The details are rather murky, so I won't delve into them here, but a detailed explanation can be found at this website.
The new scheme would levy fees pretty strictly on a per performance basis. The initial fee for 2006 would be $0.0008 per song per stream. Estimating an average song length of four minutes, a station could theoretically play fifteen songs per hour. For someone listening to internet radio while working an eight-hour shift, this would come to 120 songs per day (keep in mind that it doesn't matter if the song has been played once already in the day - the fee is per song per listener every time it's played). While this works out to just under one dollar per day, you also have to factor in the per listener portion of the equation. Let's say the station has ten listeners - that would factor out to roughly $10 per day. Assuming all the listener ship maintained at this exact level, Mondays through Fridays only, with each listener having a total of ten work days off per year - that comes to $2,500 in royalties for the station. And remember that these are conservative estimates - the most successful stations are estimating royalty fees that range into six digits.
Another thing to keep in mind is that the above scenario would actually not be likely, as it appears that for the per song rate to kick in, a station has to have listenership of more than 159,140 hours per month. Our example above would only come to roughly 2,240 hours per month. Those stations falling under this listenership level would still face a minimum fee of $500 per channel.
The above new fees are listed as being "per channel" - a major problem with determining the impact of this ruling is that "channel" is currently not clearly defined. Assuming Live365's promos are accurate in stating that they have 10,000 stations, this would easily come to approximately $5,000,000 in MINIMUM fees for 2006 alone, and doesn't even factor in the additional fees for stations that exceed the 159,140 hour limit.
Stations which have not signed a "small webcaster" contract with SoundExchange don't currently know what the exact impact will be to them. Stations which broadcast through services like Live365 have their royalty fees handled under Live365's blanket license. These royalty fees will be assessed against Live365, who is expected to have to pass the cost down to the broadcasters through increases in other fees. Until they know for sure what they're expected to pay, they can't tell their broadcasters what to expect.
For the most current information on the issue, visit www.kurthanson.com.
On April 26th, Representative Jay Inslee (D-WA) introduced the Internet Radio Equality Act (HR 2060). This bill will provide immediate relief from the proposed new rates and can save thousands on internet radio stations from going off the air. The bill would vacate the CRB's decision and set a 2006-2010 royalty rate at the same level currently being paid by satellite radio services (7.5% of revenue). The bill would also change the royalty rate - setting standard used in royalty arbitrations, so that the standards applying to webcaters would align with the standard that applies to satellite radio royalty arbitrations.
If you would like to help, CALL your Representative and ask them to co-sponsor HR 2060 -- the Internet Radio Equality Act. Click here to find your Representative's number.
U.S. Senators Ron Wyden (D-OR) and Sam Brownback (R-KS) proposed legislation to keep internet radio alive by vacating a Copyright Rotalty Board (CRB) decision that could increase royalties by 300 percent to 1,200 percent. SaveNetRadio has announced that the Senate's bill (S. 1353) is also called "The Internet Radio Equality Act." Fans of internet radio are being asked to contact their Senators to ask them to co-sponsor S. 1353. This link will take you to a website to help you find the phone numbers for your Senators and your Congressional representative.
Over the past few months, there have been several hearings on the matter, and negotiations have been underway between SoundExchange and webcasters. As of this writing, very little seems to have come out of these hearings and negotiations. We firmly encourage internet radio listeners and fans to contact their Senators and Representatives and encourage them to support HR 2060 and S. 1353.