The Royal Scam
KCRW.com and other Internet broadcasters go silent on Tuesday to protest devastating new royalty rul
On Tuesday, June 26, hundreds of Internet radio stations across the country went silent in protest. The Day of Silence was spearheaded by KCRW, Santa Monica's National Public Radio affiliate, in an effort to unite radio webcasters in the fight against the exorbitant new music royalties established by the Copyright Royalty Board in March. Big and small webcasters all over the Internet either shut down or pointed their audiences in the direction of KCRW's webcast, which aired a special broadcast continuously all day.
KCRW.com was silent for 24 hours: the one-hour special, D-Day For Webcasters, was broadcast twice to inform listeners and rally support for the Day of Silence. Guests included webcasters
Live365.com, AccuRadio, Pandora, NPR, BAGeL Radio, Yahoo Music, and WAMU-FM. They joined KCRW's General Manager Ruth Seymour to explain the effects the new rates will have on their ability to stream and to serve audiences online.
"The idea is to attract the attention of representatives in Congress and the mainstream news media," explains Paul Maloney, executive vice-president of programming at AccuRadio. "We want to bring attention and motivate fans and listeners to contact representatives in Congress. We want to encourage them to support the Internet Radio Equality Act."
The hope of radio webcasters is that Tuesday's protest will help propel the IREA through Congress. The bill, sponsored by Rep. Jay Inslee (D-WA.), would overturn the Royalty Board's March ruling.
That ruling changed the way Internet stations pay for the use of songs. Beginning July 15, webcasters who use music online in any manner will be required to pay new higher royalty rates to musicians and record companies, based on the number of listeners to a song, rather than calculated as an affordable percentage of revenue. Inslee's bill would instead return to the original percentage-of-revenue rating and apply the same standard to commercial outlets across the board, including Internet radio, satellite radio, cable radio, and jukeboxes - 7.5 percent of revenue.
Seymour hoped the Day of Silence would be a dramatic indication of what will happen July 15 if there is no reduction in rates. "Ironically, radio broadcasts were exempted from royalty payments because way back, at the very beginning of radio, Congress wanted to give what it called 'a fledgling industry' a leg up. Now, the Internet is just that, and it pays more than anyone," she says.
If Congress failed to notice, the predictions are dire. Many music webcasters may be forced to close down as a result of these unrealistic new royalty payments. Some expect to go bankrupt, and others may have to limit or end their service. Companies like Pandora and Rhapsody face paying millions of dollars because the CRB instituted a rate of $500 per channel, and for companies like AccuRadio, it meant they went from paying about 12 percent of the station's revenues to paying about 150 percent.
"The royalty boards are mandating that we pay for each listener of each song. So these rates are not based on money, they're based on the size of the audience - it's a disincentive to grow," says Seymour.
For the public radio webcasters, there is a monthly cap on the number of listeners that a station can have to pay the lesser non-commercial rates. KCRW exceeds that cap in two and a half days. Seymour explains, "One of the most egregious statements made by the Copyright Royalty Board was the allegation that stations such as KCRW, stations with large audiences, will compete with commercial entities, and therefore should be charged like commercial entities. We don't oppose royalties - reasonable ones for artists and their labels. We're saying we believe the artists and labels should be compensated, but not to the point that we are shut down. We've always had to defend public broadcasting against the charge of being elitist, and now we have to defend it against the charge of being populist."
Not only do the higher royalty rates not bode well for big and small webcasters alike, but the new regulations are potentially devastating for the artists, as well.
"If the majority of webcasters go out of business, these independent and up-and-coming artists are going to lose an important medium; it shuts that avenue for exposure," says Maloney. "Anything not on the big four labels won't get played."
Even for the few webcasters that could survive despite the rising royalties, there's a downside. "The only way they will continue to broadcast will be if they make a direct deal with copyright owners. And what these record labels and SoundExchange are saying is that the artists aren't getting enough royalties, but with this, for most artists, it means they are going to go from getting a little bit of royalties to no royalties," says Maloney.
Published: 06/28/2007
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