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Music Royalty Rates & Internet Radio ..::.. Excellent Read.

This is a very good read. Gives you an idea of what really is going on behind the curtains of your favourite internet radio station.

I am sort of 50 / 50 on this situation. I totally understand that the artists and copyrights people do need to get some kind of money for having their stuff being played on the radio but at same time these rates seem a bit too much for a Internet Webcaster like DI.fm and majority of this money will be paid to Record labels who in turn will take their contribution out of it and by the time the money reaches the artists we are talking few dollars here and there.

This has been decided upon by US Government by it indirectly implies to alot of us since alot of internet broadcasters are based out of US. I dont know if this would also mean that webcasters from other countries broadcasting in US will have to pay also since the music they might be playing is of those copyright people that are from US.


New Music Royalty Rates May Shut Down Internet Radio

On Friday March 2nd, the U.S. government, through the Copyright Royalty Board (CRB), made a determination of the royalty rates Internet Radio webcasters must pay the owners of sound recording copyrights to license the music they webcast for the years 2006-2010. The license is paid to SoundExchange, a nonprofit organization that collects royalty payments from digital music broadcasters and distributes them to rights holders.

The issue is that the new rates completely ignore the business and market realities of Internet Radio. In a nutshell they expect many webcasters, such as at Digitally Imported, to pay far greater money for licensing than we ever even collect from all of our services, effectively driving webcasters out of business.

For commercial and for larger non-commercial webcasters the judges set a pay-per-play rate of:


$.0008 per play for 2006
$.0011 per play for 2007
$.0014 per play for 2008
$.0018 per play for 2009
$.0019 per play for 2010
No need to adjust your glasses, you are seeing it correctly. Not only are the rates outrageous but they also continue to increase wildly every year. For example, by 2007 the rate jumps 37% from 2006!

What's ironic is that even if the Internet radio advertising market was fully mature, which it isn't, and we played as many audio ads for you as we could - then not only we'd be in for a prize for most ads played by any entity, as one other webcaster joked. But we still would be very far from reaching the required revenue numbers and being able to pay such rates. It's just completely unrealistic to expect any sort of a model to exist both now and in next years that would come close to being able to justify these rates. Maybe the big corporations of the world such as Yahoo and AOL could in theory afford to loose on such rates and still provide music, but that doesn't mean all other businesses have to go as a result. Do you really want to have just a few big corporations playing the music for you in the future?


You may ask us about why don't we just play unlicensed tracks or make an agreement with artists directly to avoid paying so much. The reality of the business is that it is virtually impossible to micromanage things this way. You'd have to have a world class communication company to be able to track down so many artists or labels, find where who is, who to contact, what forms to sign, talk them into it, etc. Plus you'd be surprised just how much of the non-mainstream music you love so much here is really signed to a label. That's why in theory the law that allows for a blanket license is really convenient - it's just that the rates which were set now are truly hopeless and stifle any kind of competition. What are we supposed to do, wave a flag and and turn into a payola service? Put a banner out that says "hey, whoever pays us the most in advance gets to have his or her track heard on the radio!"? Because that's the only model that is going to work with these rates.


This All Sounds Familiar, What Happened Last Time?

If this all sounds familiar it is because it is very similar to what happened the last time around 2002 and the Day of Silence campaign. Then too very bad rates were proposed for the period up until the end of 2005. Much hype was raised because then as now the industry was about to die. You wonderful listeners wrote in droves to your congressmen whether by submitting online forms, emails, letters, or phone calls, and they in turn heard your message. With the urging of Congressmen last time, SoundExchange and the small commercial webcasters such as Digitally Imported settled on a deal (SWSA) that allowed us to pay a percentage of revenue or expenses instead of per performance, with the rates ranging around 10-12%. Even though officially the rates set by the Copyright Royalty Board (CRB) last time were also bad, this negotiated deal allowed us to use another model and continue to exist. There was no such option allowed by the CRB this time, and the jury's still out on whether anything will be negotiated like it was last time.

Frequently Asked Questions

1. Okay, what's going on?
On Friday March 2nd, the U.S. government (specifically, the Copyright Royalty Board, or "CRB") announced its determination of the royalty rates Internet radio webcasters must pay the owners of sound recording copyrights to license the music they play for the years 2006-2010. The owners of these sound recording copyrights are, in the vast majority of cases, recording companies ("labels").

While successful webcasters which have built loyal audiences can usually cover most of their costs from their revenue (and sometimes even make a little profit), these new rates will almost certainly destroy the Internet radio industry, as they amount to well over 100% of even the most-successful webcasters' online radio revenues. In other words, these fees are grotesquely disproportionate to any other expense a webcaster would normally face, and certain to bankrupt him or her.


2. Are the rates really that high?
First of all, the rates webcasters pay are "per performance," meaning any time ONE listener hears ONE song (or any portion of a song), that's a "performance." If ONE listener hears ten songs, that's TEN performances. If 1000 listeners hear ten songs, that's 10,000 performances. Still with me?

The rates announced for 2006 (long story, but the licensing term is for 2006-2010, and it took this long to figure out the royalty rate, thus webcasters will pay "retroactively" for 2006) are $0.0008 per performance. Now, that's only 8/100ths of a cent, but let's do the math to see what happens.

Let's imagine a webcaster with an AVERAGE audience of 10,000 listeners (obviously, listeners come and go, and no one listens 24 hours a day, but we're talking about an average number... so sometimes there'll be lots more than 10,000 folks listening, sometimes lots less... but for math's sake, let's deal with the AVERAGE audience). Our webcaster plays 16 songs every hour, 24 hours a day, 365 days a year, to an audience that averages out to be 10,000 people.

$0.0008 X 10,000 listeners X 16 songs/hr. = $128. It'll cost our imaginary webcaster $128 to play one hour of music for 10,000 people.
At the end of the day, that's $3,072 ($128 X 24 hrs./day) -- for just a single day! After a week goes by, it's $21,504 ($3,072 X 7 days/wk.). And for all of 2006, this webcaster with a steady average audience of 10,000 listeners would owe $1,121,280!! (the $3,072 X 365 days/yr.)

That takes care of 2006. For 2007, the rate increases 37.5%! So, with no audience growth, the cost of streaming music for the year would increase to $1,541,760.

And the royalty rate goes up another 28% in 2008, and another 28% in 2009, topping out at a $.0019 per performance rate in 2010 (resulting in a royalty obligation of $2,663,040 for that same audience averaging 10,000 listeners) for that year. I wish my boss gave me raises at those rates!

3. What about the commercials I hear? Aren't webcasters making money from those?
Advertising rates are expressed as a "cost per thousand" ("CPM," as M stands for thousand). Rates vary, but national radio ads (pretty comparable to Internet radio) go at about a $2 to $3 CPM. In other words, an advertiser would pay $2 or $3 for every 1000 people that heard their commercial one time. For our hypothetical webcaster, let's go with a $2.50 CPM. The webcaster would earn $25 ($2.50/1000 X 10,000 listeners) to run a commercial.

If this webcaster ran an average of 5 commercials an hour from 6 am to midnight every day, not only would he or she win the "set of steak knives" for selling more ads than any other webcaster ever, but would earn $821,250 in ad revenues ($25 X 5 commercials X 18 hrs./day X 365 days/yr.). Not a bad job, but unfortunately, it'll cover just about three-quarters of our webcaster's royalty obligation for 2006 ($1,121,280). And you can be sure ad rates won't increase 37.5% in 2007, 28% in 2008, another 28% in 2009, etc. like royalty rates do.

4. Can't you make a "percentage of revenue" deal -- you know, the more money you make, the more you pay?
Not this time... small webcasters were able to operate with just such a deal for the previous 5-year term, but the CRB made sure all webcasters would be subject to the "per performance" method of royalty calculation.

5. Well... independent music is cool. Why not just play independent music?
This is very important to understand, as lots of people see this as a solution. The statutory webcast license covers ANY copyright music, from the biggest labels, down to the smallest, and even independently-released music. Again, the license covers ANY copyright music. The copyright owner need NOT be part of SoundExchange or the RIAA. The ONLY exceptions to this are (A) direct deals with each and every sound recording copyright owner, (B) copyright owners that are willing to make a blanket "waive" of fees, or (C) non-copyright, public domain music.

I posted a similar article a while ago, and not a single post. Apparently TA's aren't concerned about internet radio, though you know who will be first in line in the bitch-fest once/if it's gone.


http://www.tranceaddict.com/forums/...hlight=Internet

sorry about the double thread Chris i looked through the TOTA to see if there was something similar posted but didnt find anything. my searching skills suck.

but it is not about people posting in here. rather if they just read and pass on the info and know whats really happening thats all i care for. and yup you are right when and if it is gone there will be a huge void in the music industry and it will just increase piracy alot more in my opinion.

quote:

Originally posted by TranceGrooves it will just increase piracy alot more in my opinion.

exactly.
whoever came up with the above mentioned rates, really seems to live in a bubble

i already know that Ari (owner of DI.FM) is barely breaking even with sponsers paying for his ginormous bandwidth, but now this stupid law may push him to the brink...


a thought, why not relocate your radio offices to a neutral country like Sweden, a haven for copyright sensitive companies like Piratebay and now internet radio stations?

quote:

Originally posted by FunkyCrew exactly. whoever came up with the above mentioned rates, really seems to live in a bubble

Nah. They just assume that people will keep listening to internet radio and they can rack in more cash.

May be a stupid idea, but I think producers should form own company that deals with rights for air play. Leave the record labels solely on sales of tunes.

Seems more efficient, cost less than chasing each record label for rights.

quote:

Originally posted by EvilTree May be a stupid idea, but I think producers should form own company that deals with rights for air play. Leave the record labels solely on sales of tunes. Seems more efficient, cost less than chasing each record label for rights.

but that would almost mean the same thing as having a record label.

you see most artists dont have time to do these sort of dealings so they have to hire people who would look after these matters for them. and when such is the case you have to take in consideration the fact that now as a artist you have to pay these people also so we are back on the page where they need to charge more money for each performance so they can survive.

i was thinking something along the lines of having collective agreement where a certain percentage is paid depending on the number of listeners the webcaster has for the perticular performance.

quote:

Originally posted by TranceGrooves sorry about the double thread Chris i looked through the TOTA to see if there was something similar posted but didnt find anything. my searching skills suck. but it is not about people posting in here. rather if they just read and pass on the info and know whats really happening thats all i care for. and yup you are right when and if it is gone there will be a huge void in the music industry and it will just increase piracy alot more in my opinion.

No, that wasn't my point, no harm in double posting whatsoever. In all honesty, this needs to promote more awareness.

My gripe was with the lack of interest in the situation at all from the community.

quote:

Originally posted by EvilTree Nah. They just assume that people will keep listening to internet radio and they can rack in more cash. May be a stupid idea, but I think producers should form own company that deals with rights for air play. Leave the record labels solely on sales of tunes. Seems more efficient, cost less than chasing each record label for rights.

no it won't be efficient at all, piracy will just be continuously growing, radio sets will be downloaded illegally, and i'm sure pretty easily too

The solution if this passes is to move the operation and business to a foreign country (for now) and fight to change these laws in the US.

A better rate for internet companies would be how FM radio does it. A fixed rate per play not per listener. And right now FM pays pennies per song per play. Yes thats right, PENNIES!

This is just a ploy by the big labels IMO to put the independent broadcasters out of business so that they will control even more of what you listen to and how it's delivered.

quote:

Originally posted by Jayx1 This is just a ploy by the big labels IMO to put the independent broadcasters out of business so that they will control even more of what you listen to and how it's delivered.

fully agree

quote:

Originally posted by Jayx1 The solution if this passes is to move the operation and business to a foreign country (for now) and fight to change these laws in the US. A better rate for internet companies would be how FM radio does it. A fixed rate per play not per listener. And right now FM pays pennies per song per play. Yes thats right, PENNIES! This is just a ploy by the big labels IMO to put the independent broadcasters out of business so that they will control even more of what you listen to and how it's delivered.

look who's back, back again

quote:

Originally posted by FunkyCrew look who's back, back again

Really glad to see him back myself.

I have missed Jay's commentary on matters. We most always seem to view shit from the same angle.

It's nice to see.

Hopefully he'll be back in full force

im not back i just simply had to input on a topic thats very very important to me.

Now to the second part of wht this is happening. Big record labels are hurting which is causing them to be more ravenous. EMI just laid off a ton of people as did Sony. Labels are merging like crazy and even satellite radio is about to merge meaning a lot of laid off and fired talent as well as less choice for the consumer.

WHY?

Downloading.

People think they are screwing big labels when they steal. Well they are. So how do the labels respond? By joining forces to dominate even more of the shrinking market to marginalize their losses. It's a reactive approach to ensure their survival.

So basicially internet music stealing is leading to FEWER choices in the long run and MORE dominance of the labels everyone seems to hate. Sure, an artist will get more exposure on the net but so what? Hes not getting paid so eventually the said artist will have to get a 9 to 5 and give up.

This goes for songs in mix sets as well?

quote:

Originally posted by samhouse This goes for songs in mix sets as well?

in a way Yeah. now a days you have cue sheets. mix sets or radio sets that are around for download can be ripped off with single tracks using these cue sheets.

i wish people would stop and think twice before taking part in piracy. it would be a shame if it got to a point where we would have to pay huge membership fees to internet broadcasters jus to listen to our fav artists.

quote:

Originally posted by TranceGrooves i wish people would stop and think twice before taking part in piracy. it would be a shame if it got to a point where we would have to pay huge membership fees to internet broadcasters jus to listen to our fav artists.

I'm sorry buddy, but RIAA and the like are just digging their own grave. It's incredible how they don't see that the more measures they take to "prevent" piracy by punishing and restricting their legit users, the more they're facilitating piracy in the first place. With each new restriction they enforce on buying music, they do more harm to legit users than to the pirates (the effect of DRM on piracy was zero, but it inconvenienced soo many people who actually bought their music), which means more and more users who will jump from legal to illegal because they cannot stand how the rights they have to the music they bought are shrinking with each new limitation. They're blindly alienating the very same user base they're trying so hard to control.

Same thing here. Yeah, the artists will temporarily get more income from online radio when the new rates come into effect, but it's just going to eventually force the stations to shut down. You can pretty much guess what is most likely to happen next - more piracy. I'm sure the artists will be gleeful over all the extra income that will bring them.

And so, I'm anxiously awaiting the day when RIAA and the whole shebang collapses on itself. They can bang their head against the wall all they like, but piracy, like the drug and sex trade, is here to stay. I don't think for a minute that the creation of music will stop because there'll be no more RIAA. Music is an art, not a business. If anything, it just means there won't be any more well-marketed and fully-fabricated "musicians" like the Britney Spears and the Avril Lavigne. And good riddance to that. Music will perservere, retarded corruption and rights-fascism will not.

quote:

Originally posted by TranceGrooves it would be a shame if it got to a point where we would have to pay huge membership fees to internet broadcasters jus to listen to our fav artists.

i'm not sure if this will ever happen

quote:

Originally posted by Cosmic Fur Music is an art, not a business. If anything, it just means there won't be any more well-marketed and fully-fabricated "musicians" like the Britney Spears and the Avril Lavigne.

i completely agree, the internet is forcing a complete democratization of music for music's sake. instead of britneyspearsforums.com, we have niche sites like TA (for example) pushing the boundaries of musical tastes. instead of being prefed fabricated music, hopefully in years to come, the people will speak, and we have real artists getting recognized by the people.


it's happening right now as we speak, in other forms of media. take news for example. instead of watching 'fabricated' news shows on tv (eg. cnn), user created/voted news sites like digg.com and del.icio.us are exploding in popularity. Do i watch TV (fabricated) news now? hell no. but i do check Digg.com religiously every day.

There needs to be a better system to promote and expose true musicians.

quote:

Originally posted by Jayx1 This is just a ploy by the big labels IMO to put the independent broadcasters out of business so that they will control even more of what you listen to and how it's delivered.

EXACTLY what it is

quote:

im not back i just simply had to input on a topic thats very very important to me.

following this logic, i guess you were never really here then?

the riaa would be trying to control the industry to the same extent regardless of the level of piracy, its in their best interest either way

quote:

Originally posted by Porky i completely agree, the internet is forcing a complete democratization of music for music's sake. instead of britneyspearsforums.com, we have niche sites like TA (for example) pushing the boundaries of musical tastes. instead of being prefed fabricated music, hopefully in years to come, the people will speak, and we have real artists getting recognized by the people. it's happening right now as we speak, in other forms of media. take news for example. instead of watching 'fabricated' news shows on tv (eg. cnn), user created/voted news sites like digg.com and del.icio.us are exploding in popularity. Do i watch TV (fabricated) news now? hell no. but i do check Digg.com religiously every day. There needs to be a better system to promote and expose true musicians.

so everyone has their own forum. If they arent getting paid they wont for long. What people dont understand is that music is a business and HAS to be a business in order to survive. No money means no production. How can you produce when you have to make ends meet by working at Starbucks??

What needs to happen here is the record labels need to figure out how to make money without being protectionary or trying to keep the marketplace from changing at the speed it is.

These guys have no understanding of the cutomer or the digital space. It's quite sad really. Do you have any idea how much money goes to the record label from a download sold on iTunes or any other digital provider? It's the vast majority of that $0.99 - believe me.

Monetization for artists and labels will and should come in the way of touring, merchandising, alternate digital deliveries (ring tones, etc.), and as some might say - third party promotional deals. Not through P2P or streaming content. Music has become a commodity, and this meanst that the money available from selling albums is rapidly disappearing. The music landscape is changing, and it's time these labels woke up to it. I'm guessing we'll witness the death of one of the majors in the very near futre.

And as for the RIAA - they can continue to sue college students, grandparents, children and the mentally challenged. We'll see how far this gets them in the customer's eyes.

The customer should and will make the ultimate decisions when it comes to paying for music. Punishing customers and those that provide the music is not the way to go.

quote:

Originally posted by Jayx1 so everyone has their own forum. If they arent getting paid they wont for long. What people dont understand is that music is a business and HAS to be a business in order to survive. No money means no production. How can you produce when you have to make ends meet by working at Starbucks??

there has to be some better way i agree.

but consider this. if your music really sucks you don't deserve to be paid anyways, which goes for alot of artists today. but if you really are talented, people will find a way to seek you out, attend your gigs and support you that way.

i remember reading about when Tiesto first started in the late 90s. he never started getting gigs until he started producing. when ppl recognized his songs (gouryella, kamaya painters, alibi... ) they started going to his shows, which may not be alot at first but i'm sure he makes a pretty penny now from his 'concerts'.

the same artists who are crying wolf online today about not making money are probably the same ones who produce crap anyways. and alot of the edm artists who are successful and play to huge crowds, should realize the value of the internet, which helped proliferate their music in the first place.

i never really started listening to edm until 1999 when i downloaded pvd's Tell Me Why from napster. who knows how long i would have been listening to other kinds of music.

quote:

Originally posted by Revival160 Monetization for artists and labels will and should come in the way of touring, merchandising, alternate digital deliveries (ring tones, etc.), and as some might say - third party promotional deals. Not through P2P or streaming content. Music has become a commodity, and this meanst that the money available from selling albums is rapidly disappearing. The music landscape is changing, and it's time these labels woke up to it. I'm guessing we'll witness the death of one of the majors in the very near futre.

Not all artists can tour...Not all have music formats that sound well in a live setting nor are many very asthetically pleasing to watch (which sadly is sometimes more important now than the music itself) and if they can most arent willing to pay to see them. People stay home more and more due to the internet and the cacooning effect. Also, the only artists who make substantial money on the road are the big guys. You dont make much money playing in little bars that charge $5 cover.

Ring tones etc are also being stolen now at a very high rate.

What needs to happen is that people need to start to understand that music is something that needs to be paid for. If they dont pay for it it will simply go away. The death of 1 major label means that 1000s of smaller ones have already bit the biscuit..

PS many deaths of major labels have already occurred in the last few years by way of mergers. Virgin Records is goners, as is BMG. And guess what? The fewer big record labels there are THE MORE CONTROL THE REMAINING ONES WILL HAVE ON WHAT EVERYONE LISTENS TO!

Seriously folks, wake up before its too late

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