New Royalty Rates Could Kill Internet Radio

FlatCatInASlatVat writes "Kurt Hanson's Radio Internet Newsletter has an analysis of the new royalty rates for Internet Radio announced by the US Copyright Office. The decision is likely to put most internet radio stations out of business by making the cost of broadcasting much higher than revenues. From the article: 'The Copyright Royalty Board is rejecting all of the arguments made by Webcasters and instead adopting the "per play" rate proposal put forth by SoundExchange (a digital music fee collection body created by the RIAA)...[The] math suggests that the royalty rate decision — for the performance alone, not even including composers' royalties! — is in the in the ballpark of 100% or more of total revenues.'"

Comments

When will they learn....?

[Anonymous Coward]

There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary public interest. This strange doctrine is not supported by statute nor common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped or turned back, for their private benefit.
-Robert Heinlein "Lifeline"

Re:surprised??? never...

[Dred_furst]

theres another solution, switch servers to one that isn't based in an RIAA controlled country.

Genuine solution is actually really easy

[DigitAl56K]

When faced with the RIAA monopoly, many people propose a boycott that is unrealistic: People won't stop buying CDs, downloading from iTunes, or the like.

What needs to happen is for Internet radio stations to turn to independent labels. Consumers will buy the music they hear. If Internet radio stations commit to changing the majority of their playlist to artists on non-RIAA labels then the majority of profits will be diverted from the RIAA - they don't get per play royalties and they don't get royalties on purchases. It's a double-whammy. If you look at something like eMusic today, which doesn't carry the RIAA labels, you will quickly find that a little digging turns up more great music than you might actually expect. And it's not just Internet stations that should make the change - everyone can benefit from getting out of this monopoly stranglehold. The RIAA might eventually have to propose competitive terms to survive, artists will be better compensated, and labels which are smaller today will be able to grow faster not only because they will see a greater percentage of royalties, but because the best artists will be less drawn to the RIAA labels in the first place.

Perhaps, though, the RIAA is already starting to feel some bite, and this is why their proposed fees are so high. If you're paying 100% of your revenues to the RIAA, you aren't paying anything to the indie's.

My email to the RIAA

[EPDowd]

RIAA, I am very puzzled. I used to find out about new recordings that I might want to buy, by hearing them on the radio. For quite some time now it seems that Radio stations, AM and FM, all seem to play the same tiny group of music, over and over. I never hear the music I buy, and play at home, played on the radio. When people started using the Internet to make small "Internet only" stations there were enough of them so that I once again had a way to find out about new stuff. How would I ever buy it if I did not know that it existed? This morning I read: "Kurt Hanson's Radio Internet Newsletter has an analysis of the new royalty rates for Internet Radio announced by the US Copyright Office. The decision is likely to put most Internet radio stations out of business by making the cost of broadcasting much higher than revenues. From the article: 'The Copyright Royalty Board is rejecting all of the arguments made by Webcasters and instead adopting the "per play" rate proposal put forth by SoundExchange (a digital music fee collection body created by the RIAA)...[The] math suggests that the royalty rate decision -- for the performance alone, not even including composers' royalties! -- is in the in the ballpark of 100% or more of total revenues." I am puzzled. It seems to me that you are killing the best, largest, and only way for me, and others, to find out about new music from the artists that you say you are representing. For the life of me I cannot figure out why you are doing this. I can't buy it if I don't know it exists. I like Bluegrass, Swing Band, 1950's oldies, Traditional Country, Traditional Western, Western Swing, some Jazz, and several other types of music. I hear a very small portion of this, once in a great while on the radio. But so rarely that it is not worth sitting through the usual tiny, bland, group of stuff that is normally played. Most of it is just not played anywhere except on the Internet. Please let me know how you think I am going to find out about the music you want me to buy.

Clear Channel loses big, too

[zeropointburn]

Disclaimer: The company I work for is owned by Clear Channel. These comments are my own views and do not reflect the views of my employers.

  Have you considered who will be paying the most? This year, every Clear Channel station in the top 100 markets will be simulcast streaming. That's on the order of 1,300 stations, +/- 100 or so. Since I've already done the math, I'll clue you in.
  Using an average of one song per four minutes, each station will be playing 131,400 songs per year. That's $144.54 per station per listener. TFA quotes 500 listeners as average; that works out to:

100 listeners: $14,454 --- 500 listeners: $72,270 --- 1,000 listeners: $144,540

At 1,300 stations or so, that means this ruling will cost Clear Channel:

100/station: $18.8m --- 500/station: $94m --- 1,000/station: $188m

I can tell you firsthand they are not making that kind of revenue on their streaming side. Clear Channel stands to lose on the order of $100m this year. Ad revenue might help offset it next year, but we're still looking in the range of $100m or so for 2008 as well. CC most definately did not sign up to lose $150-300m in the next two years; it's really not a good time.

On a side note: If you want to hear something new on a Clear Channel station, call in or email the PD (production director). Tell him or her you want to hear it. Ask them to check CCADS ('seecads'). If it's not available, tell them to request it from Bobby Leach. Offer to lend them your cd, if it's safe for radio play. Call in or email your favorite jock; tell them to bug their PD about getting the track. Get your friends to request it. If you know people in other major cities, ask them to do the same. If you're not asking the impossible, they will listen and your favorite track will get played. As a bonus, if it gets into the system, anyone can request it in any city and they won't have as much hassle.

Re:Well,

[cpt kangarooski]

No, there are incentives aside from making money. For example, look at /. -- all of us here are posting creative works, in the form of our posts and responses in these threads, but none of us are making money from it. The incentive of socializing is enough for us. Other natural incentives include fame, art for art's sake, non-copyright-based economic incentives (e.g. commissions, the fine arts market, being first-to-market, etc.), scholarship, etc.

And in any event, the purpose of copyright law is to serve the public interest, where the public interest is tripartite, and consists of 1) wanting more original works created and published; 2) wanting more derivative works created and published, and; 3) wanting no or minimal (in scope and length) copyright laws.

Which brings us to the life+70 term (which is what it actually is in the US, at least for some works). For the vast, vast majority of creative works, they'll never make money at all. For the tiny minority of works that will ever make money at all, the vast, vast majority of them will make virtually all of the money they'll ever make within a year or two of release in a given medium. For example, let's take movies: When a movie comes out the opening weekend is absolutely critical. It'll make a lot of money that weekend, less the following week, even less the week after that. After a few weeks, it'll be gone from first-run theaters. After a couple of months, it'll be gone from pretty much all theaters. Whatever money it made from the box office during that period is basically all it will ever get in the theatrical medium. Then it comes out on pay-per-view. I have no idea who actually uses ppv, but apparently someone does, and again, when it first comes out, that's when it makes most of the money it will make from ppv. As the weeks drag on, it pulls in less and less. Eventually it drops off of ppv. Then come the sales to movie rental shops and the public, in the form of DVDs. The first week that the DVD is out is when most of the people who have been wanting to buy a copy of the movie will get it; people who have wanted to rent it (rather than use ppv) will get it then too, resulting in most of the rental store orders to have been placed early. But again, as the weeks drag on, sales drop off. A little bit more money can be squeezed from licensing the movie to the cable movie channels, and after that, to regular tv channels. And you can go through the same cycle in the foreign markets. But then, that's basically it. You have gotten 99.44% of all the money you will ever make from this movie. Most of that (box office, ppv, dvd sales) took place in the first three months or so. (Newspapers and some tv shows have the shortest periods, while books probably have the longest, but even for books, it's a couple of years)

So the issue is, if all that the remaining years are worth is the paltry 0.56% remaining money to be wrung out of it, which is true for the vast, vast majority of movies that ever make any money at all, since so very few ever have the lasting popularity to keep making a significant amount of money over the long run, is it important that the copyright lasts so much longer?

If Alice will paint Bob's house when Bob offers to pay her a million dollars, then that certainly has an incentivizing effect, but it is rather costly. If Alice will paint Bob's house when Bob offers to pay a thousand dollars, then that has incentivized her just as much, but in a much more cost-effective manner!

Well, for creative works, we need to provide the least amount of incentive we can in order to get the most works we can -- basically we're looking for how to get the most bang for our buck. If a five year copyright would get nearly as many movies made as a 95 year copyright (the term length most commonly applicable in the US for movies), then surely the five year term is a better bargain. Adding more incentives -- by lengthening the term -- might get a handful of extra films made, but are they worth the cost to the public of having to endure such long copyrights? Probably not. So don't just look at the incentivizing effect, look also at whether or not it is worth it, and just how much of an effect there actually is.