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I try to limit my commentary on politics on this site as much as possible, but every now and then something comes up that's relevant to the usual music discussion and it needs to be mentioned. Such is the case with yesterday's decision by the Copyright Royalty Board to deny National Public Radio's request to reconsider the Board's previous ruling on the royalty rates for internet broadcasters.
Some background on the issue: Back in May of 2006, SoundExchange (a royalty-collecting organization originally founded by the RIAA) began renegotiating its royalty agreement with the International Webcasting Association, a process overseen by the Copyright Royalty Board (a branch of the Library of Congress). For the previous five years, Internet broadcasters were allowed to pay royalties as a percentage of the revenue that the station earned. So, for example, an Internet station might have negotiated an ongoing deal to pay 40% (not an actual figure) of their revenue to a royalty collection agency in exchange for unlimited plays of copywritten music.
SoundExchange asked the Copyright Royalty Board to change the current rules for Internet radio stations to be more in line with the Digital Sound Recordings Act, a law passed by Congress back in the '90s requiring digital broadcasters to pay the record labels each time a song is played. This past March, the Copyright Royalty Board ruled in favor of SoundExchange, stating that Internet radio stations must pay royalties "per performance" to both the artist and the record label. A performance, in this case, is defined as one listen per person. So if you have five listeners that each listen to five songs, that's twenty-five performances that must be paid for. Traditional, "terrestrial" radio stations are only required to pay "per play," not per performance.
As it is, that in and of itself would have been a serious problem for Internet radio. Ad revenue for an online station is typically much less than, say, Hot 97. Making matters even worse, the Board also raised the rates for Internet broadcasters to three times the rate that traditional broadcasters must pay. From savethestreams.org:
"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."
Without hitting you over the head with even more statistics, suffice it to say that whatever internet radio station you may be listening to, its not making anywhere near that much from selling air time to advertisers. My initial thought on this was that it might have actually been a blessing in disguise if internet stations were forced to play more independent music instead of the RIAA-sponsored groups that have dominated the airwaves. Unfortunately, this ruling applies to all copywritten music, whether it's covered by the RIAA and SoundExchange or not. So unless the station is playing music licensed under creative commons or is able to directly negotiate a deal with each independent artist, its going to have to pay these rates.
Now, I'm as big a supporter of the concept of a Free Market as the next libertarian (and I hate being on the same side of an argument as Clear Channel, who is supporting the NPR on this issue), but the RIAA ain't playing fair. And make no mistake - despite the fact that SoundExchange is no longer officially a part of the association, they are most certainly still in bed with the RIAA. The RIAA has used its deep pockets to buy a whole lot of influence over the legislation process, a tactic that Internet Broadcasters can't afford. If Internet radio was going to fail because there was no market for it, I'd be okay with that. But that's not the case here - its in danger now of failing because of legislation that is being sponsored by what is for all intents and purposes a monopoly.
The RIAA has taken this action to kill off Internet radio while its still in its infancy. Why? Because its a threat to the system that the RIAA has fought so hard to keep in place. This isn't about piracy. The RIAA isn't concerned about people ripping the low-quality audio streams that these internet stations are putting out. And its not really about collecting royalties either - after all, the radio stations are essentially paying the record labels for the permission to give free publicity to their artists by playing their music.
What this really comes down to is an attempt by major record labels to control what music consumers have access to. Internet radio acts as a venue for consumers to gain exposure to independent artists that are not a part of the product that the RIAA is peddling. They do not want you purchasing a Clean Guns album (or whatever your independent group of choice is) at CDBaby or some other outlet that they have no control over, they want you picking up the latest from MIMS or Pretty Ricky at Wal-Mart. If you're only able to listen to what the RIAA wants you to, you're a lot more likely to drop eighteen bucks on the latest from whatever bullshit rapper they're putting out on the store shelves. And its a lot less of a risk for the record labels that are behind the RIAA to invest in the homogenous pop music that gets regurgitated on the radio year after year instead of taking a chance on the type of music that's getting released independently.
The death of internet radio isn't necessarily inevitable, though. There is a possibility that many of these sites will move onto servers that are run outside of the U.S., where the RIAA's influence is limited at best. The next hearing is on May 15th, when the US Court of Appeals for the District of Columbia Circuit will hear NPR's appeal. After that, there's still a chance that Congress could step in and prevent this from taking place. If not, however, the future of internet radio could be very bleak. If the new rates do go into effect, they will be retroactive to January 2006. That means you'll be seeing a whole lot of internet stations filing for bankruptcy, while only a handful of sites run by large corporations will be able to stay in business - namely, AOL and Clear Channel. In other words, the only internet stations that will be able survive are the stations that play RIAA music, and only RIAA music.
If you feel particularly motivated to get involved in this, you can check out Save The Streams for more information.
4/17/2007 2:28:29 PM posted by Fresh