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Yes, but we all know that large multi-billion music labels never make profits, according to their official accounting, so in effect, won't this force the small bands which are barely scraping by to subsidize Capitol Records and other major labels?

Just saying ...

Posted by Will in Seattle | July 19, 2007 2:38 PM

You conveniently left out the minimum fees, Josh.

Posted by supergp | July 19, 2007 2:45 PM

I read your editorial this morning, Josh. One big problem, actually, is with the structure of the article. You don't really get to the crux of your position until the tail end, whereas at the front end it seems as if you are anti-internet-radio. You're not, and as the article goes on, your true position becomes clear, but reading the first few paragraphs, it seems like you're supporting the interests of artists at the expense of internet radio.

Now, your suggestion... the peril of separating the 'indie' units from the 'mainstream' units is that the mainstream units catch on to this and do what they have done with other marketing facets in recent years: create covert subdivisions that act as 'indie' units to fool the general public, or purchase 'indie' units and use legal workarounds to reap their benefits without having to incur the penalties that come with being a mainstream unit.

You know businesspeople and you know lawyers. If you try to create a caste where the corporations have a disadvantage, the corps will simply try to create or acquire units on the other side and pass themselves off as such. And whether or not you want to think so, no one can really regulate that.

Posted by Gomez | July 19, 2007 2:49 PM

None of the web casters I listen to play commercials, so there is no profit motive on their part. On the contrary, they are there to share there love of music with like minded people. When I hear something I like on the internet, I seek it out and buy it (hoping that the artist gets their fair share).

The record companies and publishers are getting out of control. ASCAP and BMI are already going after clubs that have live music, and charging the clubs royalties for cover versions, based on the capacity of the club, not the actual attendance. They’ve also gone after a guitar teacher for teaching people how to play Rolling Stones songs. What's next? Charging people for singing karaoke? Charging people if they play their stereo loud enough that someone in the next room can hear it?

Josh, I respect that your heart is in the right place in getting indie artists their fair share of their deserved profits, but all you are going to do is kill any chance that an indie artist will be heard outside a club and the only radio left will be corporate top 40 and talk radio.

Posted by elswinger | July 19, 2007 2:54 PM

Wow, looks like you and Meinert had that beer after all, huh?

Still not sure how I feel about this - I'm affected (or theoretically could be affected, not that I've ever gotten a dime from Sound Exchange) on both sides of the issue, but your 180 degree turn is interesting to note.

Posted by Levislade | July 19, 2007 2:57 PM

Will - large labels definitely do make profits, and no, this doesn't force the small bands to subsidize the labels at all. How would it?

As or separating small from large webcasters it's an easy straightforward formula, the kind lawyers hate. A 'small' webcaster is a commercial webcaster with below $1.25 million in annual income. That's a pretty big 'small' webcaster. The biggest 'small' webcaster currently makes only $400,000 per year, so even the largest 'small' webcaster has quite a lot of room to grow before they have to start paying fair market value for their content.

Elswinger - if the stations you listen to don't have income, then they pay nothing. Pretty sweet deal. ASCAP and BMI at times seem out of control, but protecting copyrights is sometimes a difficult thing - if you start making lots of exceptions, then after a while a legal precedent gets established.

Elswinger - the rest of your point doesn't make much sense - how will requiring Google and AOL to pay fair rates for music hurt indie artists?

@5 - are you signed up for Soundexchange? IF you're an artist that gets webradio play then you should be. All our artists get paid. Not a lot right now, but none of them are getting tons of web radio play yet. But when they do, and as webcasting grows, this will become a significant stream of revenue for them. We don't want to kill that stream, we want a healthy webradio industry, it should just pay fair rates for the music they use to make their business happen.

Posted by Meinert | July 19, 2007 4:35 PM

@2 is right. the real issue here is SoundExchange's minimum fee per station. that's an administrative fee that has to get paid out for every single station, so every custom service that does happen to play indie artists, who can submit themselves without representation(like Pandora and Rhapsody) are paying more per subscriber in SoundExchange fees than they get in subscription. and then there's the fees that they pay for stuff offered for free. Rhapsody just killed all but 100 artist stations, that used to be free to listen to for almost every artist in the catalog. i assure you that Pandora and Real aren't actually the artist-raping behemoths you think they are.

do your research.

Posted by ironymaiden | July 19, 2007 4:35 PM

Meinert, I confess I didn't know that commercial free radio does not have to pay royalty fees (I'll trust that you are correct). I am not sure, what Yahoo and Google have to do with anything (they weren't mentioned in either article or by me). I meant, or feared that only those radio stations rich enough to pay the fees will only cater to the lowest common denominator, much like 99% of over the air radio stations do. I am probably wrong, but I am used to it.

Posted by elswinger | July 19, 2007 4:52 PM

Considering how much the labels fuck bands with their creative accounting, and all the tales I hear that bands only make a living from their tour and merchandise revenue, you'd think they'd want to give the music away.

Posted by Gitai | July 19, 2007 7:04 PM

@9 - that's the beauty of performance royalties, they have nothing to do with label accountings, they portion paid to musicians goes straight to them, no label involved. That's part of why this is so important for bands. Supporting this royalty equals supporting musicians.

Posted by Meinert | July 19, 2007 7:10 PM

Hey people - WAKE UP! Meinert is not telling the whole story (and neither is Josh Feit).

Read the facts here

What the whole fight over internet radio royalty fees is about is extinguishing a broadcast medium (i.e. net radio) that the RIAA and Big 4 record labels can't control. It is about extinguishing an alternate, viable business model that threatens the stranglehold on musical diversity that has been in place since the payola days of AM/FM stations.

Dead net radio stations don't pay royalties to anyone, and the RIAA and the Big 4 (and now Josh Feit) would rather have artists not get paid than have a new viable medium flourishing which they can't control.

Posted by seattle salmon | July 19, 2007 9:27 PM

Read for yourself what 400 bands (and counting) have to say about how the new royalty rate will affect them here.

Posted by seattle salmon | July 19, 2007 9:29 PM

@8 - Commercial-free internet radio stations *DO* pay royalites, have paid royalties, and their royalty payments have been increasing each year already ($20 million in 2006). The current net radio royalty rate is based on how much $ a station brings in. Commercial-free stations *DO* bring in money through donations and subscriptions. So artists get paid even though the stations are commercial-free.

Bandwidth cost money, and any station with more than a couple hundred listeners is bringing in money. Why? Because it starts to cost more than a reasonalble person is willing pay out of their own pocket to maintain a hobby. So artists get paid when money comes into the station, even if the station is not bringing in $ by playing commercials.

Posted by seattle salmon | July 19, 2007 9:32 PM

@9 - With a gun to the head of internet radio, the Big 4 labels can cut out the artist from the royalty payments:

"As it stands now, the only fiscally prudent path now for webcasters is direct licensing, which reduces sound recording performance royalty payments legally by cutting out the artist's 50% share of the royalties. Labels can offer broadcasters discounted, direct-license deals at up to a 50% discount over CRB rates and still make the same amount of money [for the label - SS]. Or by offering just a 40% discount, webcasters would pay the same as they've paid in the past, and RIAA labels would earn a 10% premium by bypassing the revenue share with artists. It's just a simple money-grab from the artists by the big labels."

Read the source post here

Posted by seattle salmon | July 19, 2007 9:35 PM

@6 - Dave, that is not true. Read the fine print. If a station exceeds the income limit of $1.2 million they *ARE* hit with retroactive fees, and new fee rate they are retroactively hit with most likely will bankrupt the station. If you go over the $1.2 mil limit, then you have to pay the higher royalty rate bracket for the whole year, not just from that month forward. And the new rate bracket means you have to all of a sudden quadruple (or whatever) your income to be able to afford the higher rate.

"An SWSA extension would limit small webcasters to $1.2 million in revenue, and once they earned a dollar more, all their performances back to the beginning of the year in which they exceed the cap would be subject to the CRB per performance royalties, effectively exceeding their revenues by many multiples."

Read the source post here

Posted by seattle salmon | July 19, 2007 9:39 PM

@7 - Yes, the $500 fee per station goes 100% to SoundCheck's "administrative costs" - NOT to artists. So stations that provide a great many streams that individual listeners can personalize could wind up paying $200 million to SoundCheck in "administrative fees". In comparison, SoundCheck has collected a grand total of $20 million in royalties from net radio stations (in 2007), which it will eventually pay to artists (if SoundCheck can be bothered to find them).

Read the source post here

Posted by seattle salmon | July 19, 2007 9:42 PM

Did you know that if SoundCheck can't find an artist after 8 years, it gets to keep all the royalty money it owes that artist? And apparently SoundCheck is not very motivated to find a lot of the artists it is collecting royalties for. Just ask Seattle attorney Fred Wilhelms (see the following post for info on this).

While SoundCheck may say they represent 20,000 artists, they apparently are having trouble finding at least 8,200 artists which they are collecting royalty money for - see here's their list.

Boy it'll just be too bad if they can't find them, 'cause then Soundcheck will get to keep all that money: if the figure of an average of $360 per astist is to be believed, that's $2,952,000 Soundcheck will NOT be paying to artists.

Posted by seattle salmon | July 19, 2007 9:44 PM

Josh - you really should have researched this issue more thoroughly. I share your passion for seeing that artists - especially small indie artists - get their fair shake o' the money tree, but honestly you need to dig a bit deeper into this whole thing than you have.

Do you ever read the SLOG? (just askin'). There is an excellent - perhaps scathing - commentary on Soundcheck by attorney Fred Wilhelm on the June 8 SLOG here (scroll to near the end of the comments to find Fred's).

Fred pretty much debunks SoundExchange's supposed goodwill towards artists in his comments.

It might have been worth the time to chat with Fred before you wrote your article (just sayin').

Posted by seattle salmon | July 19, 2007 9:50 PM

Fred also has an excellent rebuttal to the new rates: "Why the New Royalty Rates Hurt Artists".

Posted by seattle salmon | July 19, 2007 9:52 PM

(Damn The Stranger's "one embedded link per post" rule, even if it is supposed to be stopping spam or whatever.) *grin*

Posted by seattle salmon | July 19, 2007 9:54 PM

Seattle Salmon, you have your tin foil cap? get it here -

The good thing is John Simson is going to come to Seattle to discuss this with anyone who cares in person. Hopefully Inslee will step up and show up to discuss his bill.

more news to come.

Posted by meinert | July 19, 2007 10:06 PM

And damn hypertext links - I goofed up the html coding - forgot an apparently all-important " somewhere in the mix.

@11 Read the facts here

@12 on 400 bands say how the rates affect them here:

@13 and 15: the "($20 million in 2006)" and "the $1.2 million threshold: source article is here:

@17 Soundcheck's 'unpaid artist' list is here:

@18 The previous SLOG with Fred's comments on Soundcheck is here (#46):

@19 and Fred's comments on "Why the New Royalty Rates Hurt Artists"is here:
(scroll down just a bit to get to the article)

Posted by seattle salmon | July 19, 2007 10:18 PM

Well Dave, if you can't address the points I'm making, I guess you can always call me names.

At least David Byrne understands what's at stake.

Posted by seattle salmon | July 20, 2007 12:57 AM

SS - cut and paste all the press releases, and drop all the names you want. David Byrne? All you are doing is quoting people who own radio stations that don't want to pay for the music they use. They'll pay for hosting, they'll pay for computers and equipment, they'll pay rent, they'll pay employees to collect add dollars, but they won't pay musicians and labels who make and produce the music that makes all of what they want to do possible.

I actually can't get past your first post about how Soundexchange wants to 'distinguish a whole medium'. That is so ridiculous it's barely worth commenting on.

Soundexchange represents over 20,000 recording artists, over 2,500 independent labels. It collects from webcasters. It wants to see these webcasters thrive so it can collect more money. The webcasters don't want to pay for the music they use. So there's a fight. The webcasters aren't evil, nor are the artists and labels who want to get paid. It's just a negotiation.

The hysteria and misinformation on the webcaster side has risen to a level where it's brought out the crazies, and on forums like this that means the 'cut and paste' crazies. You're the case in point.

Posted by Meinert | July 20, 2007 10:23 AM

In addition to the resources in post 22, Slashdot has impressive commentary and discussion on the SoundExchange debacle.

Latest news - the reduced fees will only go to stations that implement Digital Rights Management (DRM). Thanks to the Digital Millennium Copyright Act, that means that it will be *illegal* to listen to net radio in any way not pre-approved by the man. Sure, you can hack DRM, but that leaves you a mark for extortion.

Broadcast is a *marketing* medium, and the big players are desperately trying to extinguish voices that might undermine their exclusivity. High minimum fees and DRM requirements do a great job.

Posted by opticsdoug | July 20, 2007 10:40 AM

Meinert, please tell us about why you think the administrative fees that are applied per station help artists.

oh, wait, they don't see any of that money.

Posted by ironymaiden | July 20, 2007 11:40 AM

meinart says:

``if the stations you listen to don't have income, then they pay nothing. Pretty sweet deal.``

Not true. These is a $2000 minimum per year, and you have to pay 7% of your expenses *or* 10% or your revenues (under $250k; 12% over that).

``A 'small' webcaster is a commercial webcaster with below $1.25 million in annual income. That's a pretty big 'small' webcaster. The biggest 'small' webcaster currently makes only $400,000 per year, so even the largest 'small' webcaster has quite a lot of room to grow before they have to start paying fair market value for their content.``

Those numbers were true under the SWSA but the "offer" from SoundExchange to extend this offer has not been presented to the CRB. There are limitations on the number of listeners a station can have under this RIAA/SX proposal which would be determined on a case by case basis according to a SoundExchange rep I spoke with. THIS OFFER IS NOT SOLID AND HAS NOT BEEN PRESENTED PUBLICLY IN ALL COMPLETENESS.

Also, not sure where yo get that $400k figure. There are a lot of small indie webcaters getting close to the $1 mil revenues mark. THAT IS NOT A HIGH NUMBER when you consider all the costs entailed with internet broadcasting. EVEN THE SMALL BUSINESS ADMINISTRATION has a $5 mil cap for broadcasters to be considered a "small business".

What ends up happening is that a small webcaster is FORCED to stay small. As soon as you hit that 1.25 mil cap (or the listener cap which has not been disclosed) you have to pay the huge royalties for the WHOLE YEAR.

One thing you don't point out is that over-the--air broadcasters are specifically exempted from this royalty by US copyright law.

Everyone loves to mention Clear Channel. But the bottom line is that Clear Channel doesn't do that much MUSIC webcasting. Most of their popular webcasts are their talk programming. They're not going to be paying that big of royalties anyhow.

Why do you think that internet radio should have to pay such higher rates than satellite radio? XM and Sirius pay less than 3% of their total revenues in SounxExchange royalties. A little more than half of their programming is music programming, and that's where the 7.5% number comes from. When the satellite radio fees are raised, the internet fees will be raised as well. But they should all be calculated the same way.

If you don't like the 7.5% rate, why not demand congress raise it? The issue is there needs to be a percentage of revenue (or costs) calculation. That's how ASCAP, BMI, SESAC do it. That's how other PPLs in other countries do it.

Posted by Rusty Hodge | July 20, 2007 1:57 PM

@24 Talk about quoting press releases!

First off: drop the BS that webcasters don't want to pay artists. Webcasters DO pay artists (unlink AM/FM broadcasters). But it's hard to say it's fair to raise prices 300% (and up to 1200% in the case of many small indie webcasters).

And Sound Exchange may represent 20,000 artists, yet for example, Live365 has over 250,000 artists played across all their stations. They've been paying royalties for years. Alas 200,000 or so of those guys fall under SoundExchange's minimum payout.

Let me give you another example of how the current royalties are screwed:

A radio station making $400k a year right now under the CRB royalty ruling would owe over $1 mil in royalties in 2007. Now the SX offer to extend the small webcasters rate for 2 years (with a few catches added) will mean that station would only pay about $42k in royalties in 2007. But if they successfully grow their business and revenues 3 times to hit that 1.2 million level, their royalties would go up to about $3 million - JUST for the SoundExchange royalties.

That's ridiculous. It's an impossible barrier to any station to grow past a certain size UNLESS they're acquired by a larger company. So much for a thriving independent internet radio industry.

Posted by Rusty Hodge | July 20, 2007 2:14 PM

Dave - you've done a lot for music in Seattle and I gotta respect that, but you don't run an internet radio station, so it's possible you don't really understand what it costs and how the CRB royalty rate hike will affect webcasters.

That's why I quoted some some webcasters, except that I also quoted C/NET, SoundExchange, Nashville Attorney Fred Wilhelms (who represents and tracks down $ for artists), and even The Stranger's own SLOG - all of who are not webcasters. Also I quoted David Byrne, who is . . . an ARTIST! who receives royalties for his work and who (probably) IS one of the "20,000 recording artists SoundExchange represents."

** But people should read up on all this for themselves and make up their own minds - it's as easy as googling "CRB rates" to start to turn up articles on all sides of this issue.

If you think the debate is about whether or not artists should get paid royalties - or how much - for songs played on net radio, then you are missing the bigger picture. I cannot say it any better than this:

"Because net radio is a threat to their business model, and because it's the future of radio."

"This is a clear attempt by the majors to kill what they can't control. They took control of broadcast radio in the early '90s when they instituted their thinly-disguised 'indie promoter' scheme as a legal form of payola, thereby pricing small labels out of broadcast because they couldn't afford the massive entry fee."

"Hence there may be a real future in an internet radio that's outside the system. Sounds unbelieveable, but that exactly what happened in the '60s with the advent of FM radio; the DJs were set free, the people flocked to it, and the music business was reborn, bigger than ever."

Merely making the debate out to be about whether or not, or how much in, royalties to pay artists is to not understand that we are close to a tipping point, perhaps even a revolution, in how more artists can have more control over getting their music heard by tons more people - without having to go through the Big 4 record labels.

If no hears you, no one pays you anything, and for a really long time the Big 4 (and their predecessors) have pretty much controlled who's music anybody got to hear.

As far as royalty payments to artists, net radio royalty payments to artists (or at least to SoundExchange) have increased each year with the $20 million in 2006 being the largest total payment to date. And all indications are that the royalty payments to artists paid by net radio will continue increasing.

But the new royalty rates the CRB put in place this past April are like this: If you've been paying $700 a month for your apartment, and each year the landlord raised the rent a bit to $725 the next year, then $750 the following year and so forth, then you'd grumble a bit, but you'd probably keep living there and paying a bit higher rent each year.

But if one year your landlord jacked up your rent from $700 to $2,100, then you'd probably move out the same day.

That's why there's all the sqwaking going on. If the CRB rate increase had been more gradual, you wouldn't have the showdown in congress that's happening now with the IREA (Internet Radio Equality Act).

Personally I don't think everything is perfect with either the new CRB rates or with parts of the IREA. But the point here is not to kill the goose before it finishes laying the golden egg.

As it stands now the new CRB rates will kill an awful lot of the internet radio stations and will severely cripple others in terms of how large they can get (which also limits how much $ they can pay artists). As of July 15 the new CRB Rates ARE in effect. SoundExchange does NOT set the rates, nor can they change them (they just collect the fees).

All of this willingness of SoundExchange to negotiate some changes to the new rates is nice, and sure, SoundExchange can make "recommendations" about their proposed changes to the new rates, but the only folks who can change the new rates now are either congress or the CRB - and the CRB already was asked to reconsider and they said "no," so it's now in the hands of congress . . .

. . . and each of us!

Save Net Radio

Thanks Dave, for an engaging discussion on this topic!

Posted by seattle salmon | July 21, 2007 9:16 PM

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