FC NOW: The Fast Company Weblog
June 27, 2007
The Sound of Silence, or A Hypothetical on the Demise of Internet Radio
Internet radio underwent a "day of silence" yesterday to protest the impending royalty rate hikes that will be levied on Web radio come July 15. The protest was orchestrated by the SaveNet Radio Coalition and included popular stations like Pandora, Rhapsody, Live365, and LA-based KCRW.
The controversy has been brewing since March, when the U.S. Copyright Royalty Board determined that webcasters would have to pay a per-play fee (instead of the existing -- and much preferred -- method of allowing small webcasters to pay a percentage of their revenue). Adding insult to injury, when the increase goes into effect, it will be retroactive to 2006 -- imposing rates that, in many cases, far outweigh the yearly revenue of Internet radio stations. (To check the math equations done by some incredibly ambitious Consumerist commenters, go here.)
These rate hikes will raise music royalties by 5 percent for this year and last and up to 20 percent per year for the next three years. A recent article in monthly music magazine Paste elaborated on this point.
"There's also the issue of fairness. Internet radio stations pay no less than 10-12 percent of revenue in performance royalties. Satellite radio -- XM and Sirius -- pays 7.5 percent of its revenue to cover the same royalties. And good old fashioned terrestrial radio pays exactly nothing … Your local FM station gets weed, cash, and free sneakers in return for spinning the hits; your local Webcaster -- who's promoting all the other music -- is forced into bankruptcy."
In short, Internet radio was already paying a higher percentage of their yearly revenue for royalty rights than either Satellite or FM stations and now, if the pay-per-play method goes into effect, most of them will be forced out of business. Internet radio stations have soared in popularity in the past several years, with an estimated 50 to 70 million listeners, and provide a welcome respite from the dregs of Top 40 nonsense that plague most FM dials. With low overhead costs (as Paste wrote, "You just need a computer, some tunes, and an audience), these stations introduce listeners to countless new artists, songs, and genres. It will be an enormous setback to independent webcasters, non-mainstream artists, and the general listening public if these new rules are allowed to go into effect.
The House Small Business Committee is set to hold a hearing on the matter tomorrow and determine the impact of the royalty rate hike on both webcasters and artists. Stay tuned.
Posted by Aimee Rawlins at June 27, 2007 1:16 PM | Category: internet + web |
4 Comments
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It's good to see this article publicizing the internet radio issue! The more who know the better. This could have a huge impact. Write your Senators and Congressmen... I did!
It could very well be the end of internet radio except that controlled by the large conglomerates if you don't...
Rob
Internet radio is an amazing medium. There is absolutely no SANE reason why these broadcasters should have to pay more, to the extent they're run out of business. FIGHT BACK.
Totally in favor of a fair resolution to this whole mess. The Music industry is once again raising theirs greedy fingers and demanding more, more, more! From the little guy, of course. The big guys are too important to their dying business model.
Ironic, isn’t it… rather than embrace technology and change the way they operate… they want everybody else to pay because they can’t make as much profit the old way any more. Best of all... the very artists they are begging to protect are the same artists they've been screwing blind for years!
A small correction to the story, however. FM Radio does pay royalties each and every year based on percentage of revenue made... minus the weed, cash and sneakers of course...
Remember that iTunes basically evolved from Napster. There is a fair solution. Forwarding this article will help the cause. Get viral, people.