RSSDissecting the Proposed Internet Radio Royalty Fees
By Scott M. Fulton, III | Published March 8, 2007, 5:02 PM
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Will online music providers be treated fairly?
A research report prepared by the radio market analysis firm BridgeRatings cites estimates that about 56.7 million listeners tuned in to Internet streaming radio every week in 2006. Compare this to about 279.6 million listeners of AM and FM radio. But BridgeRatings believes the growth rate for AM/FM listeners will murmur at around 1% per annum, while the Internet radio listener base will grow at about 27% per year. By 2010, BridgeRatings projects 147.5 million listeners will tune in for streaming radio every week.
In straightening up BetaNews' projections from Tuesday, one of our first tasks was to apply that projected growth rate in streaming audiences to the big four online streaming providers, as tabulated by comScore Arbitron: AOL Radio, LaunchCast, Clear Channel stations, and Live365.com. Based on the CRB's royalty rates for 2006, AOL Radio is expected to receive a royalty bill for last year for about $23.7 million.
We based that figure on its November 2006 ratings for average listeners during peak hours (336,364), during awake hours (210,694), plus the industry standard of 10% of that broader figure for the overnight hours. With an industry average of 16 songs played every hour, AOL Radio in November served up 569.6 million performances to individuals every week, for which it owes $.0008 per performance under the 2006 rates.
 | BetaNews' projections for annual royalty fees paid to the SoundExchange group by the US' top four streaming music providers, should the CRB's proposed rates become ratified. |
When you apply the projected growth rate of Internet radio for the next three years, and also take into account the 2010 royalty rate of $.0019 per performance, BetaNews can now project that AOL Radio could owe $146.4 million in royalties in 2010 alone. LaunchCast would owe $113 million, Clear Channel would owe $61.7 million, and Live365.com would owe $42 million. Just the top four streamers would be billed $363 million during the same year that all 14,000 US radio stations combined would be billed $550 million.
Based on comScore Arbitron's numbers, BetaNews determined that these top four providers together supplied 11.64% of all streaming music traffic during November 2006. We estimated this by combining the listenership projections from BridgeRatings with the November scores from Arbitron. Using that percentage as a guide, we estimated the number of total US listeners during November's peak hours, and scaled that number up using BridgeRatings' growth rate, up until 2010.
This way, we could estimate the total number of performances for which all streaming radio providers would be responsible for 2010. At about 12.13 trillion performances per week alone, the annual figure is astoundingly large.
 | Royalties organizations typically integrate upwardly scalable fees per year into their rate schedules. Here are the differences between PRO schedules and what SoundExchange proposes. |
At the projected 2010 rate, streaming radio providers would provide SoundExchange with $2.3 billion in revenue. That's almost exactly 400% of the calculated cumulative total for PRO royalties to be collected during that same year - and keep in mind, radio stations with Internet services would owe both fees.
From this perspective, the SoundExchange royalties only look four times as much. But the size of the overall markets are disproportionate, so we asked ourselves what each station is paying per listener, if the assessed charges were applied to listeners rather than to songs.
 | How much should Internet and terrestrial broadcasters expect to pay in royalties fees for each of its customers? Our estimates reveal the disparity. |
On a per-listener scale, broadcast radio stations paid $1.56 per listener on average during 2006; and in 2010, that figure rises to $1.94 per listener. BetaNews estimates that Internet radio sites, by contrast, will pay $8.91 per listener for 2006, rising to $15.59 per listener in 2008 and staying flat beyond that time.
Thus an Internet radio music provider is likely to pay in royalties almost ten times the amount for each of its listeners throughout the year, than the terrestrial broadcaster.
Can you please post a citation for that BridgeRatings forecasted Internet growth? I went to the site and couldn't find it.
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|Your 3D charts are very pretty and shiny.
Now how about presenting the data in a flattened graph where you can actually *see* the values without it looking like a New York City fly-over?
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|Hello!!!! 14,000 stations billed $550 billion combined in one year for performance royalities? I think someone had better get a calulator that works, or start explaining where all the money is going to the artists that are owed for their work. Or the writer of this article needs to hire an editor that knows how to read!
And the music industry wonders why they are not selling any CD's! What a group of slimey leeches the recording and music publishing industry has become!
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|{retracted on account of author's temporary blindness, which has hopefully since cleared up, but with apologies to mjpowell45}
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|I think the writer needs to search the article to the end instead of stopping on page 1. The second web page of the article shows "during the same year that all 14,000 US radio stations combined would be billed $550 billion." So the original comment is correct, and the authour has egg on the face now as well as the high and mighty attitude.
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|And a rather tasty egg it is, too.
I did check that article even after the comment was posted, and yet I still missed it. My sincere apologies, including for the high and mighty attitude; and if anyone would like some custard pie, I appear to have a surplus.
-SF2.25
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|Well the good news if anything, is that Webcasters have seen what's at stake and are now gearing up to form an industry trade association to combat this injustice.
http://www.smallwebcaster.org/
Let's just hope it's not to late to affect some change in this whole ordeal.
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|Well it was fun while it lasted.
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|Internet radio providers, like my company Pandora, pay BOTH Soundexchange and the PROs (ASCAP, BMI, and SESAC) so it's even worse than the picture you paint. It's not $2.3B vs $500M it's $2.3B vs $0.
You're certainly right that Internet radio can't survive unless these rates are revisited.
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|love pandora. great service. dont know what id do without it behind my work firewall :(
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|Of course your analysis will never come true because if the rates hold there will be few legal businesses streaming to pay the royalties.
Your anaylsis shows how the willing buyer/willing seller rationale used by the CRP cannot be viewed in a vacuum. Internet can only survive if its cost of sales - in this case royalty fees - are near what broadcasters pay. With the added SoundExchange fees not paid by broadcasters, Internet doesn't stand a chance as a viable business. Only reasonable solution is for all non-interactive services to pay same royalty rates. In the case of SoundExchange fees, that means either $0 as currently paid by broadcasters, or some reasonable percent of revenue fee that is easily tracked,
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|Great way to get your music heard. What's next, suing highschool cover bands? Oh wait, that's already happening.
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|To answer your question, "What's next?" it's suing funeral homes. Not a joke.
-SF3
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|Odd. I could understand it if they charged admission, but I've yet to go to a funeral home with a cover-charge.
Stupid lawsuits abound, as always.
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|I like the ideal, where is the white paper on this.
The way of "Open Source" and letting people have a say.
http://www.rmvb-converter.com/news
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|What about FM/AM stations that also broadcast over the internet, i have set up a few of these, will this affect them?
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|Indeed it will. The Copyright Board ruled that the recording industry is entitled to a separate set of royalties to compensate them for what the board described as a handing over of their rights of first performance in digital format. So whoever provides a digital performance of a song (regardless of the quality of the digital track or stream) is responsible for royalties, even if it's a radio station that has already paid the PROs for the over-the-air rights (analog).
So I'm afraid yes, this affects you.
-SF3
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|Oh Yes. AM/FM broadcasters get the double whammy. The have to pay once for over the air broadcast and again for the webcast of the same performance. Yes, you heard right. They have to pay twice for one performance.
Who says the government, courts and PROs aren't corrupt. Even the Mafia is better behaved than this!
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|Do you know something about Shylock?
It reminds me him ,the policy of all those lawmakers, lawers and company owners.
I think they will tax you when singing in your bathroom.
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