Music Update on Webcaster Royalty Rates
posted by June 8 at 10:48 AMon
A recent story in Line Out crying wolf about the impending death of web radio (don’t worry) reported how new performance royalty rates for webcasters could shut down many small webcasters. Most of the information reported came from SaveNetRadio.com, a front group for the big webcasters. SaveNetRadio is funded by DiMA, the lobbying arm for AOL, Yahoo, Real, etc.
Since then, SoundExchange has offered, but small webcasters have not accepted, a deal allowing small (under $1,250,000 in revenue) webcasters to pay just 10 percent of their first $250,000 in revenue and 12 percent above that to the cap of $1,250,000.
SoundExchange has also offered noncommercial stations lower rates. Stations at schools with under 10,000 students would pay an annual fee of just $250, and stations at schools with over 10,000 students would pay $500. They have a listener cap that, by their own evidence, 99 percent of colleges will not come close to during this license period. If they exceed the cap, instead of the rate set by the CRB of .11 cents, these services would pay .02 cents (two hundredths of a penny) for each song streamed if they exceed their cap. This rate is five times lower than the CRB rate and would significantly reduce any additional obligation.
What hasn’t been discussed much in all the hyperbole about the potential death of web radio is the value of music. First, realize that when it comes to terrestrial radio (AM/FM), the United States is the only country that doesn’t require a royalty be paid to the owner of the recording and the artist. Because the U.S., due to the powerful lobbying efforts of the NAB, doesn’t pay this royalty, it also isn’t paid to U.S. artists in other countries. So a beloved indie band like the Gossip who is getting a ton of airplay in the UK, isn’t getting paid what they should be. And in the U.S., where almost every station is owned by billion-dollar-per-year corporations, these corps get to make money off the backs of the musicians. The royalty in the web-radio debate is the same royalty. Thanks to artist-rights groups and labels, webcasters do have to pay a performance royalty. And it’s not much: Based upon various studies of internet-radio listeners, an independent source calculated that the average internet-radio listener would consume 473.2 hours of music per year and the artist and label would receive $8—473 hours of music for $8 seems like a pretty good deal. In 2010 when the new rates in question peak, a listener listening to 40 hours of music per week would require a service to pay $1.14 in royalties. So 40 hours of music for less than half a latte! Or 160 hours of music per month for $4.56.
But many small webcasters still claim they can’t afford to pay this, so SoundExchange has offered them a break. However, many of them wish to pay nothing for their music, claiming the airplay they offer sells albums and so the artist and labels are already benefiting. Of course this argument would never hold up if applied to any other art form. If I were to make a movie based on someone’s book, I have to pay for the book rights even the the film will no doubt lead to increased book sales. Like any property, recorded music is owned by someone, it has value, and the creator and owner of the copyright should be able to receive payment when it is used, especially when it is used to make a profit. SaveNetRadio of course would argue that they have the support of many musicians. However, of the 400 artists who have provided testimonials for SaveNetRadio, 90 percent have never been reported on a playlist by the stations reporting to SoundExchange. On the other side, there are 3,000 SoundExchange artists and independent label members who have written to Congress in support of the value of music, and over 20,000 musicians are members of SoundExchange.
Due to the lobbying efforts of DiMA, the usually fair minded Jay Inslee has introduced a bill in the U.S. Congress that is supposed to help little guys but ends up being a land grab for the 20 largest webcasters who pay in 95 percent of the webcasting royalties. If the bill passes, artists and labels will have to return $12 million in royalties these services have already paid under rates they agreed to in 2005. The Inslee bill not only overturns the CRB rates but discounts rates that were set in 2002 by the initial arbitrators and approved by the Librarian of Congress by over 70 percent—a windfall of over $75 million for the 20 largest webcasters, many of whom have market capitalization individually that is larger than the entire recording industry. Fourteen of the 20 have market caps over 1 billion. No doubt why SaveNetRadio/DiMA support the Inslee bill. Musicians should realize that if they have received royalties for web-radio play, they will have to pay them back. Which means indie musicians returning money to AOL, YAHOO, Clear Channel, etc. Small webcasters should accept SoundExchange’s offer, and Inslee should stop supporting the megamedia corporations over musicians.