News & Reviews

BASS: New Music Royalty Rates May Shut Down Internet Radio
Edited Press Release

The U.S. government, through the Copyright Royalty Board (CRB), earlier this month made a determination of the royalty rates Internet Radio webcasters must pay the owners of sound recording copyrights to license the music they webcast for the years 2006-2010. The license is paid to SoundExchange, a nonprofit organization that collects royalty payments from digital music broadcasters and distributes them to rights holders. In an open letter, Digitally Imported Founder/Manager Ari Shohat appealed to the public to help keep Internet radio viable.

The issue is that the new rates completely ignore the business and market realities of Internet Radio. In a nutshell they expect many webcasters, such as at Digitally Imported, to pay far greater money for licensing than we ever even collect from all of our services, effectively driving webcasters out of business.

For commercial and for larger non-commercial webcasters the judges set a pay-per-play rate of:

$.0008 per play for 2006
$.0011 per play for 2007
$.0014 per play for 2008
$.0018 per play for 2009
$.0019 per play for 2010

No need to adjust your glasses, you are seeing it correctly. Not only are the rates outrageous but they also continue to increase wildly every year. For example, by 2007 the rate jumps 37% from 2006!

SaveTheStreams.org has sample calculations here on what it means to stream to 10,000 concurrent listeners on average, if you are interested in the fine details. And keep in mind that Digitally Imported has far more listeners than in that example. We are talking about rates which are hundreds of % more than the revenues webcasters generate, even before any expenses for things such as wages, resources, hardware, and so on. How judges can come up with such numbers is beyond me. What we do know is that Digitally Imported was part of a collective of small commercial broadcasters which presented its arguments in court proceedings. Yet the judges completely threw virtually all of our arguments aside in making their decision.

What's ironic is that even if the Internet radio advertising market was fully mature, which it isn't, and we played as many audio ads for you as we could - then not only we'd be in for a prize for most ads played by any entity, as one other webcaster joked. But we still would be very far from reaching the required revenue numbers and being able to pay such rates. It's just completely unrealistic to expect any sort of a model to exist both now and in next years that would come close to being able to justify these rates. Maybe the big corporations of the world such as Yahoo and AOL could in theory afford to loose on such rates and still provide music, but that doesn't mean all other businesses have to go as a result. Do you really want to have just a few big corporations playing the music for you in the future?

You may ask us about why don't we just play unlicensed tracks or make an agreement with artists directly to avoid paying so much. The reality of the business is that it is virtually impossible to micromanage things this way. You'd have to have a world class communication company to be able to track down so many artists or labels, find where who is, who to contact, what forms to sign, talk them into it, etc.

Plus you'd be surprised just how much of the non-mainstream music you love so much here is really signed to a label. That's why in theory the law that allows for a blanket license is really convenient - it's just that the rates which were set now are truly hopeless and stifle any kind of competition. What are we supposed to do, wave a flag and and turn into a payola service? Put a banner out that says "hey, whoever pays us the most in advance gets to have his or her track heard on the radio!"? Because that's the only model that is going to work with these rates.

This All Sounds Familiar, What Happened Last Time?

If this all sounds familiar it is because it is very similar to what happened the last time around 2002 and the Day of Silence campaign. Then too very bad rates were proposed for the period up until the end of 2005. Much hype was raised because then as now the industry was about to die. You wonderful listeners wrote in droves to your congressmen whether by submitting online forms, emails, letters, or phone calls, and they in turn heard your message.

With the urging of Congressmen last time, SoundExchange and the small commercial webcasters such as Digitally Imported settled on a deal (SWSA) that allowed us to pay a percentage of revenue or expenses instead of per performance, with the rates ranging around 10-12%. Even though officially the rates set by the Copyright Royalty Board (CRB) last time were also bad, this negotiated deal allowed us to use another model and continue to exist. There was no such option allowed by the CRB this time, and the jury's still out on whether anything will be negotiated like it was last time.

WHAT YOU CAN DO TO HELP, AND IT TAKES 2 MINUTES

After careful consideration we feel that the most efficient course of action would be to send a note to your own Congresspeople complaining about the issue, stating that it is important to you and that you want them to help solve it.

To do so we are providing an easy link for you, there's even prepared text for you to Copy and Paste. Please go to this link at Congress.org, check the text there and copy it, and by just inputting your zip code you can digitally send in the letter to your congresspeople.
 

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