RSSWebcasters Offered Lower Royalties If They Promise to Remain Small
By Scott M. Fulton, III | Published August 22, 2007, 5:15 PM
The performance rights organization that collects royalties from streaming music providers on behalf of recording artists and copyright holders, has offered small streamers a reduced rate that caps royalties collected at 10% to 12% of their annual revenue. But for selected streamers to qualify, they would need to sign an agreement with the SoundExchange organization that would include a cap on growth, and a possible penalty for growing too fast.
In a statement late yesterday, SoundExchange described the restriction as "a usage cap to ensure that this subsidy is used only by webcasters of a certain size who are forming or strengthening their businesses." Webcasters would have until September 14 to sign on the dotted line, which is not long after Congress reconvenes after summer recess.
Current royalties rates that took effect last month have been recently described as 30% of revenue, though many webcasters have presented data that suggests that a zero was left off that percentage.
Yesterday's announcement by SoundExchange clearly has a "carrot" and a "stick" side to it, the latter of which reads like an ultimatum. "Small webcasters who do not sign the agreement, but continue streaming, will be responsible for paying the new rates first announced by the Copyright Royalty Judges (CRJs) in March, the first payment of which was due July 15, 2007."
But SoundExchange's reference to the discount rate as a "subsidy" might also suggest a certain bluntness to the "carrot" end of the offer as well: If indeed the discount rate is described in the agreement SoundExchange would have its prospective smaller members sign as a subsidy or rebate, it may actually be treating the amount of the discount as a kind of deferral. That suggests that if webcasters stray out of bounds, or perhaps grow too big, they could find themselves owing the deferred amount back.
Broadcasting attorney David Oxenford wrote for his firm's blog today that SoundExchange's offer appears to be little more than a restatement of a similar informal offer already made to small streamers.
"It does not address the criticisms leveled against the offer when first made in May," Oxenford wrote, "that the monetary limits on a small webcaster do not permit small webcasters to grow their businesses - artificially condemning them to be forever small, at best minimally profitable operations, in essence little more than hobbies."
But the SoundExchange offer could present a solution to a problem posed by the original royalty rates now due to it since last month. At the time the Copyright Review Board presented its final decision on rates, webcasters both large and small said the per-performance formula could result in royalties that could put them out of business, or that could force large media interests to suspend or cease streaming operations.
As the amended offer now appears to be phrased, the organization could perhaps be assured of a kind of "royalties farm," made up of streamers whose growth rate would be self-pruning. They could not grow large enough to pose a serious threat in court or in Congress, and depending upon how their agreement is worded, they may not afford to back out of the deal or go out of business during the guarantee period between now and 2010.
Web broadcaster and RAIN newsletter publisher Kurt Hanson obtained a copy of the SoundExchange offer. On his Web site today, Hanson reported that SoundExchange's growth cap limits streamers to 5,000,000 aggregate tuning hours (ATH) per month, after which the regular royalty rates agreed upon by the CRB take effect. A single ATH would be recorded by a single listener, so at that rate, a small webcaster would be limited to a total audience at any one time of about 6,944.
Hanson also located a reference to the term "non-precedential" to refer to the offered discount rate, which may indicate that new members would have to agree that just because they're being offered the rate now, doesn't mean they'll be guaranteed that rate after 2010.
So, Standard Oil is running the Dept. of Energy..thats basically what you're saying, eh, Washington?
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|How un-American is this? Talk about infringing on one's right to conduct business. SoundExchange is evil.
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|The whole system is broken. Radio and net-radio shouldn't be paying anyone to play a song. The artists/labels should be paying them. It's advertising. They're advertising a song to entice people to buy the CD or online download. No different than advertising a car or TV show. They should pay for the playing, not the other way around. This is absurd and stupid. Why anyone accepts this as "normal" is insane.
So what if they make any revenue/profit. You don't see the broadcast networks paying a royalty back to McDonalds or Ford for profits from Superbowl ads.
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|GOD only knows just how many people are listening to a particular radio station. Mere mortal men, who make such claims are just fulla crap...
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|Most broadcasters already pay annual royalties because they play music in your radio's speakers. Why pay more just because they are on line too? If they're telling me that LIVE 365 and other exclusive webcasters pay nothing for the music, well that's a different story...
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|most Land based broadcasters pay per play, so if you play X artist 30 times a day for 30 days you would pay the royalties to the record company for 900 plays and the broadcasters by law must keep records of how many times play a song. With Sound Exchange is not how many times you play a song but how many Listeners you may have by their calculations.
Live365 are Our Agents. They are paying the royalties on our behave. You and I are the ones broadcasting. Webcasters like Live365 make it easier to broadcast for us. They provide software for us to broadcast for free which can cost a fair bit of money if had to purchase it. They can also supply storage for your playlists and They do all the administration that has to be done. They pay the royalties for us and thay can even give you how many listeners were listening at aiven time. All for a monthy fee that you choose. not a bad deal is it.
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|I'm not wanting to play devil's advocate here, but I've never seen the big deal about online streamers having to pay royalties.
So someone explain to me what's so bad about this? Radio stations - even those with few listeners - don't get to play music all day long for free, why should online be any different. Just because it's got less listeners?
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|The main reason is because most stations are smaller, that are run out of the house or such. Those real small stations have to pay too, and paying these royalties is INSANE, considering some to most don't even bring in any profit.
The royalty rates are pretty steep.
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|Thanks, I've been wondering about the whole setup. I can sympathize a little with both sides (much as saying that will probably get lots of angry people wanting to beat me).
I wouldn't want to broadcast to 100 people if it's going to extract endless cash from me. Once it's into a thousand listeners or so, though, I can sort of see the problem if there's no royalties being paid.
I guess it comes back to a fine line and difficult balance with music and the internet.
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|Babylon2x, it's not that we are unwilling to pay royalties it is the amount. Here is an example using 6944 from the article and it cost you $0.001 per listener. Your cost at any one time would be $6.94. Now Sound Exchange wants to increase their charge 300%. That means you are going to pay $0.004 per listener. Your Cost now will be $27.77. And now add Sound Exchange want you pay that amount every day for the last 3 years. You also have to realise that a lot of these independent broadcasters are doing this as not for profit but for the love of the music. With this increase this will shut down a great many of these Stations. Who is the loser Babylon2x? I can tell who is going to lose, You, Me, the Independant Broadcaster and the Artist. Let us use common items that we may use every day to see what would happen. Plain cup coffee is about $1.50 you would be paying $6.00, a Gallon of Gas is about 2.00 you will be paying $8.00 now and all the coffee and Gas you bought last year and the year before you pay for that too. You would be madder than hell and not telling your Government Officials to something, You would demand it. I'll get off soap box now and I know that you are only playing Devil's Advocate Babylon2x, but right now I be telling my Elected Official (Dem. or Rep.) if you want my Vote next Nov. You Better Fix this problem NOW.
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|I'm in the UK, I genuinely had no idea about the whole situation in depth. Thanks for explaining.
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|There were not "no royalties being paid", ever since the first ruling on this back in I think 1999. They were paying similar rates as terrestrial radio I believe. What is under discussion is a massive increase due supposedly to the easier ability to record what you're listening to on a computer. Of course anyone who has ever taped anything off the radio (read: millions of people) knows that's not necessarily true, especially for the less technically inclined.
The bottom line is where there's a will there's a way when it comes to recording - every method of distribution is vulnerable and realistically speaking terrestrial radio, satellite radio, and 'net radio are all similar in that regard. There are arguments about quality, etc. (satellite and 'net radio can be closer to CD quality in theory), but at least in the case if web radio these are highly dependent on the station as many only broadcast at say 56kbit/s 22khz to conserve bandwidth. So to legislate particular rates against the entire industry just because the capability is there for higher quality seems extremely unfair. Better if anything to legislate a maximum quality to be allowed - I know a lot of people wouldn't like that but I'd prefer it to a lot of stations being silenced!
- Oshyan
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|Fm radio doesn't pay performance royalties. They only pay the songwriter and publisher. These new ruling are making net radio pay performance royalties on top of songwriter and publisher.
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|No Problem Babylon2x. You would have a simular system there in the UK as well. The bigger problem is that if this increase continues here in the North Armerican Market(US)it will affect all. The Copyright holders ( Record Companies) will now try to ramrod this American Law down the throats of Regulating Bodies in the world. In time this will affect all web broadcasting markets like UK, Canada, Europe ,Asia Pacific & Afican Markets to name a few. What Sound Exchange has done is fired the First Shot in the War of Indepenance for Web Broadcasting. What Sound Exchange and the Record Compaines have done is simular to the attack on Pearl Harbour during WWII. But unlike the Japanese General that Said " I fear that we have Woken the Sleeping Giant." Unfortunatly they (Sound Exchange and the Record Companies)think they will win beacause of the appathy of the Comsumers and the Broadcasters. I can only speak for myself Babylon2x. I stand behind 100% what I am about to Say.
To Sound Exchange and the Record Companies.
You are Gravely mistaken if you think you can destroy this industry. I will fight you tooth and nail from now on. I will tell you exactly how. I will use the ultimate Weapon against you. My Purchasing Power, Your Bottom Line.
Go ahead and Laugh. Big deal 1 person. Right? Unfortunatly there are alot more people that feel the same way that I do. We Are Fed Up with You. Broadcasters, Not Just the internet, but your MainStream Broadcasters are getting Fed Up as well.
It is about time You open your eyes and take a good look around, because your biting the hand that feeds you. Without the Broadcaters both Internet and Mainstream and the Buying Public you would be out of business.
You are about two steps away of making a line in the Song American Pie Very True.
"The Day the Music Died".
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|Wow.. If Congress does not act on this they cached the RIAA checks in FULL..
They should also put a cause in if they are offered to be purchased by a RIAA company they have to accept at a discounted rate also..
TIME TO BREAK UP THE RIAA COMPANIES..
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|So in other words, this is just simply a "stay off our turf" incentive. Whatever. Instead of an agreement, write this into the decision. This is clearly a "make 'em happy for now" deal, where this deal will end.
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