Net Radio In Danger As Royalty Rates Jump

It’s a sad day for fans of music on the internet and the creative broadcasters who program it.

Internet broadcasters already pay higher overall royalties than over-the-air broadcasters do, but onSoundexchange_1 Friday the US Copyright Royalty Board announced new higher internet radio royalty rates. The move rejected arguments made by webcasters and adopted a "per play" rate requested by digital royalty collection agency SoundExchange. Retroactively through the beginning of 2006 the rates are:

  •    2006 – $.0008 per play
  •    2007 – $.0011 per play
  •    2008 – $.0014 per play
  •    2009 – $.0018 per play
  •    2010 – $.0019 per play
  •  per play is 1 song heard by 1 listener

For noncommercial webcasters the fee will be $500 up to 159,140 aggregate tuning hours (one listener listening for an hour) per month. Noncommercial webcasters who exceed that level pay at the commercial rate for all listening in excess of that limit.

In an era of shrinking playlists and closed personal iPod song collections, internet
broadcasting offered hope for new music discovery via an almost
unlimited array of channels.  Now that is in real danger of
disappearing or at least consolidating into a few deep pocket players.

An analysis from the experts at Kurt Hansen’s Radio And Internet Newsletter concluded that, "In 2006, a well-run Internet radio station might have been able to sell two radio spots an hour at a $3 net CPM (cost-per-thousand), which would add up to .6 cents per listener-hour. Even adding in ancillary revenues from occasional video gateway ads, banner ads on the website, and so forth, total revenues per listener-hour would only be in the 1.0 to 1.2 cents per listener-hour range."

"That math suggests that the royalty rate decision for the performance alone, not even including composers’ royalties, is in the in the ballpark of 100% or more of total revenues."

One of the most successful mid-size broadcasters Bill Goldsmith of my favorite stream Radio Paradise also painted a very gloomy picture, "This royalty structure would wipe out an entire class of business: Small independent webcasters such as myself & my wife…Our obligation under this rate structure would be equal to over 125% of our total income. There is no practical way for us to increase our income so dramatically as to render that affordable."

The only hope for broadcasters appears to be a general belief that it is in no one’s best interest for internet radio to disappear.  Broadcasters can demand a a re-hearing before the Copyright Board and a re-negotiation with SoundExchange may be possible.

Hypebot will provide full coverage of this developing story.

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