Has Internet Radio Started To Disintegrate
Alright, SaveTheStreams.org has this posted with a petition. Take a minute or two. I'm going to be writing to my Congress people and crawl up their asses.
1. Okay, what's going on?
On Friday March 2nd, the U.S. government (specifically, the Copyright Royalty Board, or "CRB") announced its determination of the royalty rates Internet radio webcasters must pay the owners of sound recording copyrights to license the music they play for the years 2006-2010. The owners of these sound recording copyrights are, in the vast majority of cases, recording companies ("labels").
While successful webcasters which have built loyal audiences can usually cover most of their costs from their revenue (and sometimes even make a little profit), these new rates will almost certainly destroy the Internet radio industry, as they amount to well over 100% of even the most-successful webcasters' online radio revenues. In other words, these fees are grotesquely disproportionate to any other expense a webcaster would normally face, and certain to bankrupt him or her.
2. Are the rates really that high?
First of all, the rates webcasters pay are "per performance," meaning any time ONE listener hears ONE song (or any portion of a song), that's a "performance." If ONE listener hears ten songs, that's TEN performances. If 1000 listeners hear ten songs, that's 10,000 performances. Still with me?
The rates announced for 2006 (long story, but the licensing term is for 2006-2010, and it took this long to figure out the royalty rate, thus webcasters will pay "retroactively" for 2006) are $0.0008 per performance. Now, that's only 8/100ths of a cent, but let's do the math to see what happens.
Let's imagine a webcaster with an AVERAGE audience of 10,000 listeners (obviously, listeners come and go, and no one listens 24 hours a day, but we're talking about an average number... so sometimes there'll be lots more than 10,000 folks listening, sometimes lots less... but for math's sake, let's deal with the AVERAGE audience). Our webcaster plays 16 songs every hour, 24 hours a day, 365 days a year, to an audience that averages out to be 10,000 people.
$0.0008 X 10,000 listeners X 16 songs/hr. = $128. It'll cost our imaginary webcaster $128 to play one hour of music for 10,000 people. At the end of the day, that's $3,072 ($128 X 24 hrs./day) -- for just a single day! After a week goes by, it's $21,504 ($3,072 X 7 days/wk.). And for all of 2006, this webcaster with a steady average audience of 10,000 listeners would owe $1,121,280!! (the $3,072 X 365 days/yr.)
That takes care of 2006. For 2007, the rate increases 37.5%! So, with no audience growth, the cost of streaming music for the year would increase to $1,541,760.
And the royalty rate goes up another 28% in 2008, and another 28% in 2009, topping out at a $.0019 per performance rate in 2010 (resulting in a royalty obligation of $2,663,040 for that same audience averaging 10,000 listeners) for that year. I wish my boss gave me raises at those rates!
3. What about the commercials I hear? Aren't webcasters making money from those?
Advertising rates are expressed as a "cost per thousand" ("CPM," as M stands for thousand). Rates vary, but national radio ads (pretty comparable to Internet radio) go at about a $2 to $3 CPM. In other words, an advertiser would pay $2 or $3 for every 1000 people that heard their commercial one time. For our hypothetical webcaster, let's go with a $2.50 CPM. The webcaster would earn $25 ($2.50/1000 X 10,000 listeners) to run a commercial.
If this webcaster ran an average of 5 commercials an hour from 6 am to midnight every day, not only would he or she win the "set of steak knives" for selling more ads than any other webcaster ever, but would earn $821,250 in ad revenues ($25 X 5 commercials X 18 hrs./day X 365 days/yr.). Not a bad job, but unfortunately, it'll cover just about three-quarters of our webcaster's royalty obligation for 2006 ($1,121,280). And you can be sure ad rates won't increase 37.5% in 2007, 28% in 2008, another 28% in 2009, etc. like royalty rates do.
4. Can't you make a "percentage of revenue" deal -- you know, the more money you make, the more you pay?
Not this time... small webcasters were able to operate with just such a deal for the previous 5-year term, but the CRB made sure all webcasters would be subject to the "per performance" method of royalty calculation.
5. Well... independent music is cool. Why not just play independent music?
This is very important to understand, as lots of people see this as a solution. The statutory webcast license covers ANY copyright music, from the biggest labels, down to the smallest, and even independently-released music. Again, the license covers ANY copyright music. The copyright owner need NOT be part of SoundExchange or the RIAA. The ONLY exceptions to this are (A) direct deals with each and every sound recording copyright owner, (B) copyright owners that are willing to make a blanket "waive" of fees, or (C) non-copyright, public domain music.
6. This is crazy, and I don't wanna lose my favorite station. What can I do?
Glad you asked! Please click the 'Sign the Petition' and 'Send a message to your Representative' links available in the upper-right of the Save The Streams page (http://www.savethestreams.org/), or on the website of your favorite webcaster. And please, tell your family, friends, and anyone you know that would rather not see Internet radio disappear.
1. Okay, what's going on?
On Friday March 2nd, the U.S. government (specifically, the Copyright Royalty Board, or "CRB") announced its determination of the royalty rates Internet radio webcasters must pay the owners of sound recording copyrights to license the music they play for the years 2006-2010. The owners of these sound recording copyrights are, in the vast majority of cases, recording companies ("labels").
While successful webcasters which have built loyal audiences can usually cover most of their costs from their revenue (and sometimes even make a little profit), these new rates will almost certainly destroy the Internet radio industry, as they amount to well over 100% of even the most-successful webcasters' online radio revenues. In other words, these fees are grotesquely disproportionate to any other expense a webcaster would normally face, and certain to bankrupt him or her.
2. Are the rates really that high?
First of all, the rates webcasters pay are "per performance," meaning any time ONE listener hears ONE song (or any portion of a song), that's a "performance." If ONE listener hears ten songs, that's TEN performances. If 1000 listeners hear ten songs, that's 10,000 performances. Still with me?
The rates announced for 2006 (long story, but the licensing term is for 2006-2010, and it took this long to figure out the royalty rate, thus webcasters will pay "retroactively" for 2006) are $0.0008 per performance. Now, that's only 8/100ths of a cent, but let's do the math to see what happens.
Let's imagine a webcaster with an AVERAGE audience of 10,000 listeners (obviously, listeners come and go, and no one listens 24 hours a day, but we're talking about an average number... so sometimes there'll be lots more than 10,000 folks listening, sometimes lots less... but for math's sake, let's deal with the AVERAGE audience). Our webcaster plays 16 songs every hour, 24 hours a day, 365 days a year, to an audience that averages out to be 10,000 people.
$0.0008 X 10,000 listeners X 16 songs/hr. = $128. It'll cost our imaginary webcaster $128 to play one hour of music for 10,000 people. At the end of the day, that's $3,072 ($128 X 24 hrs./day) -- for just a single day! After a week goes by, it's $21,504 ($3,072 X 7 days/wk.). And for all of 2006, this webcaster with a steady average audience of 10,000 listeners would owe $1,121,280!! (the $3,072 X 365 days/yr.)
That takes care of 2006. For 2007, the rate increases 37.5%! So, with no audience growth, the cost of streaming music for the year would increase to $1,541,760.
And the royalty rate goes up another 28% in 2008, and another 28% in 2009, topping out at a $.0019 per performance rate in 2010 (resulting in a royalty obligation of $2,663,040 for that same audience averaging 10,000 listeners) for that year. I wish my boss gave me raises at those rates!
3. What about the commercials I hear? Aren't webcasters making money from those?
Advertising rates are expressed as a "cost per thousand" ("CPM," as M stands for thousand). Rates vary, but national radio ads (pretty comparable to Internet radio) go at about a $2 to $3 CPM. In other words, an advertiser would pay $2 or $3 for every 1000 people that heard their commercial one time. For our hypothetical webcaster, let's go with a $2.50 CPM. The webcaster would earn $25 ($2.50/1000 X 10,000 listeners) to run a commercial.
If this webcaster ran an average of 5 commercials an hour from 6 am to midnight every day, not only would he or she win the "set of steak knives" for selling more ads than any other webcaster ever, but would earn $821,250 in ad revenues ($25 X 5 commercials X 18 hrs./day X 365 days/yr.). Not a bad job, but unfortunately, it'll cover just about three-quarters of our webcaster's royalty obligation for 2006 ($1,121,280). And you can be sure ad rates won't increase 37.5% in 2007, 28% in 2008, another 28% in 2009, etc. like royalty rates do.
4. Can't you make a "percentage of revenue" deal -- you know, the more money you make, the more you pay?
Not this time... small webcasters were able to operate with just such a deal for the previous 5-year term, but the CRB made sure all webcasters would be subject to the "per performance" method of royalty calculation.
5. Well... independent music is cool. Why not just play independent music?
This is very important to understand, as lots of people see this as a solution. The statutory webcast license covers ANY copyright music, from the biggest labels, down to the smallest, and even independently-released music. Again, the license covers ANY copyright music. The copyright owner need NOT be part of SoundExchange or the RIAA. The ONLY exceptions to this are (A) direct deals with each and every sound recording copyright owner, (B) copyright owners that are willing to make a blanket "waive" of fees, or (C) non-copyright, public domain music.
6. This is crazy, and I don't wanna lose my favorite station. What can I do?
Glad you asked! Please click the 'Sign the Petition' and 'Send a message to your Representative' links available in the upper-right of the Save The Streams page (http://www.savethestreams.org/), or on the website of your favorite webcaster. And please, tell your family, friends, and anyone you know that would rather not see Internet radio disappear.
posted by Lord Genocyde at 8:11 AM
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