Web Radio and SoundExchange Make First Agreements on Royalties
By: Spacelab Research Staff
After a long and strange silent period in the battle/negotiations between web radio and SoundExchange and the decision handed over by the Copyright Royalty Board, there is news.
There are two fronts emerging here, as a difference (but not necessarily a split) is emerging between large and small webcasters. The proposals have been different for each category.
Large webcasters are primarily represented by DIMA, the Digital Media Association, and the list includes big heavies like Apple, Yahoo!, and Live365. Full disclosure here: Spacelab's own Spacelab Radio is powered by Live365, but we're no schill. Read on!
So DIMA agreed to 3 basic things with SoundExchange. First, the new issue of streamripping has come up as something that webcasters will work on, i.e. the ability of people to digitally record a broadcast. SoundExchange argues that this leads to proliferation of unauthorized music being distributed on the Internet. They'll work to make web radio broadcasts that are just that, only for listening.
The second agreement was the much need cap on the minimum per channel royalty, which has been set at $500. This would have left many big broadcasters with thousands of channels to quickly owing millions of dollars annually, something that would have driven them out of business. Now there's a $50,000 dollar maximum.
Lastly, SoundExchange gets a full-on report from broadcasters so that they can make detailed reports about who owes what. I'd love to see that kind of bureacracy in action, as it will literally be millions upon millions of individual records to maintain, but have fun with that SoundExchange!
Still yet to be decided: the biggest of all issues: what's the royalty rate on each song? This is the rate that was set to double over the next 4-5 years. They've put off this most important element as the final thing to negotiate.
So where does that leave the small webcasters? Without big representation, largely. SoundExchange has offered them a new rate of 10 - 12 % of their revenue, allowing some broadcasters the ability to still maintain their existence. But some aren't ready to jump in on that offer.
The category of small webcaster is defined by any station that makes less than $1.25 million per year. Rusty Hodge of SomaFM. in San Francisco thinks that the small webcaster should be defined as $6 million per year, opening them up to better representation in their negotiation with SoundExchange, as well as the ability to maintain their stations without going bankrupt.
"This isn't an offer. This is a restraint of trade," said Rusty. "So if we exceed that revenue cap, our royalties would go from $150,000 a year to over $2 million or more a year. In fact, if we extrapolate our current revenue to royalty ratio, our rates would go from $150,000 to $5 million at the point we hit the $1.25 million revenue cap."
What Rusty's saying is that this offer would only work for broadcasters like SomaFM as long as they kept their revenue under $1.25 million a year, keeping them cooped up and giving them no incentive to grow.
Small broadcasters have until September 14th to agree to or reject the offer.
