Did you tune into KCRW this past Tuesday only to hear….nothing? It’s not your cable connection. On Tuesday, thousands of webcasters participated in a "Day of Silence" as a simulation of what might happen to internet radio if higher webcasting rates go into effect on July 15, 2007.
The campaign is just one of the efforts that webcasters have been employing to protest the new royalty rates set by the Copyright Royalty Board in March. The royalties are paid to SoundExchange, which then distributes them directly and simultaneously to performers (45%), sound recording copyright owners (50%) and non-featured musicians (5%).
When the CRB published these rates in March, many webcasters - especially the small and noncommercial ones - claimed that this royalty rate was far too high, in many cases exceeding their available revenue. If the financial impact is as severe as stated by some small webcasters, these new rates could mean less music and more advertising or, even worse, stations going off the air altogether because they can’t afford to pay the new rates.
Over the past few months, webcasters have appealed the CRB for a rehearing (denied), filed an emergency stay in the courts (in process), and urged Congress to introduce legislation to amend the CRB decision. SoundExchange, for its part, has continued to support the published CRB rates. In late April both the House and Senate introduced the Internet Radio Equality Act, which would nullify the CRB’s rates and establish a "transitional" royalty rate of .33 cents per listener hour, or 7.5% of annual revenues.
Details about the bills here by Kurt Hanson
http://www.kurthanson.com/archive/news/042707/index.shtml
On the surface, the webcasters’ efforts - managed primarily by SaveNetRadio - have generated lots of visibility. The Inslee bill now has over 123 House co-sponsors, there are reports that Capitol Hill offices have been deluged with calls and emails about the issue and the House Small Business Committee held a hearing on the matter today, Thursday, June 28 (see details). FMC has filed testimony with this office.
But, it has also been reported in the Washington Post that it’s unlikely that Congress will be able to pass this bill, given everything else on its policymaking plate.
Where does that leave the webcasters? And, more importantly, what is the status of the royalty-rate setting process? And what does all this mean for musicians?
It likely means that groups of webcasters (small, noncommercial, college, large, etc) will rely on the results of direct negotiations with SoundExchange. Some of these negotiations are in the works, and we hope that all of them are completed before July 15.
While following this tumultuous process, FMC has reiterated four key points:
1. Internet radio is an incredibly valuable music platform for musicians, fans and labels
FMC supports the continued growth of internet radio. It has the unparalleled ability to develop loyal, worldwide audiences for niche musical genres — from 60s rock to contemporary classical to southern blues. Small and noncommercial webcasters in particular have proven to be a valuable promoter of both independent music and genres that are routinely ignored by commercial broadcasters.
2. Performers and labels should be paid.
We have and always will support the digital performance royalty As webcasting continues to grow, and as consumers increasingly trend towards paying for access to music delivered to them via subscription services, satellite radio, etc, the digital performance royalty becomes an even more important revenue stream for artists.
3. Rates proportionate to the size of the webcasters.
We also believe that the "one size fits all" approach that was part of the March 2007 rate setting decision would be harmful to the small and non-commercial webcasters. There’s a vast difference between the staffing and revenue generated by a volunteer-run internet radio station and an AOL or Clear Channel. These differences in resources and revenue - not to mention motivation for running a station - makes a tiered system the most sensible solution.
4. Streamline the reporting process.
FMC continues to believe that it’s important to develop a reporting process that ensures that even the smallest webcaster can file timely and accurate playlists with SoundExchange. For years we have urged the development of an authentication database, managed by a neutral third party, through which copyright ownership and performer information would be verified. Such a database would reduce filling time and errors on playlists, thus making sure more money flows directly to artists.
To summarize, FMC believes that large commercial webcasters should pay rates comparable to their size and revenue, and we call on the other parties to adopt reasonable rates and reporting requirements for clearly-defined categories of small, noncommercial and hobbyist webcasters that will ensure the future development of this medium.
In the end, whether through legislation, court action or negotiation, FMC hopes that the webcasters and SoundExchange can work together to strike a balance that recognizes the value of webcasting to creators and listeners, but also properly compensates performers and labels for uses of their work.
FMC’s Testimony to House Small Business Committee for "Assessing the Impact of the Copyright Royalty Board Decision to Increase Royalty Rates on Recording Artists and Webcasters" Hearing
June 27, 2007
FMC Press Release: Congress should strike a balance on webcasting rates
June 27, 2007
Web Radio Stations Hope Silence Speaks Volumes About Fee Hike
Mike Musgrove, Washington Post, June 26, 2007
Web spinners and royalty collectors
Should webcast hobbyists have to pay like pros? Publisher Kurt Hanson and attorney Jay Rosenthal debate the economics of online music in a five-day series.
Los Angeles Times, June 11-15, 2007