Save Internet Radio

Joy McCann is urging readers to contact their representatives to support H.R. 2060 and save Internet radio. She points to a longish explanation by Michael Minn*:

On July 15, 2007 (recently extended from May 15), a new royalty structure will go into effect that will shut down most streaming Internet-only music broadcasters and cause havoc with streaming from NPR affiliates. Representative Jay Inslee (WA-1) has introduced HR 2060 to reverse these changes and give the industry an opportunity to work out a new structure that will not destroy this nascent medium.

For decades, all broadcasters have paid royalties on songs to songwriters (not performers) through the licensing agencies ASCAP, BMI and SESAC. However, in 1995 the Recording Industry Association of America, an industry organization representing the major record companies, lobbied the new Republican Congress to pass the Digital Performance Right in Sound Recordings Act (Public Law 104-39, 109 Stat. 336 – 1995), which required an additional performance fee specifically on digital music. This has required Internet broadcasters (but not terrestrial AM/FM broadcasters) to pay an additional royalty to the record labels through SoundExchange, an organization set up by the RIAA to collect and distribute digital royalties.

In 2005, the digital royalty was 0.07 cents per song streamed (per listener) and small webcasters were able to calculate royalties as a percentage of revenue rather than on a per-song basis. This made it possible for small, often niche, webcasters with limited revenue streams to be financially viable, although most webcasters did it for love rather than money and usually lost modest amounts of money on their webcasting ventures. A typical small Live365 webcaster paid around $600 per year in digital royalties.

On March 2, 2007 the Library of Congress’ Copyright Royalty Board (CRB), which oversees royalty rates, got rid of the revenue-based royalty provision, mandated a minimum royalty of $500 per channel per year, and established a higher royalty rate that will increase to 0.19 cents per song streamed per listener in 2010. For a webcaster that broadcasts 15 songs an hour to 500 listeners, that will increase the royalty to over $72,000 a year in 2010. For the six largest Internet-only broadcasters (who are financially marginal, at best), the royalty increase will represent over 50% of their total income. Pandora.com’s founder, Tim Westergren, told Newsweek, “If this stays, we’re done. Back to the stone age again.” My favorite station, JazzPlayerRadio, has already left the web because the new rates will be applied retroactively to the first of the year.

This isn’t an issue I’ve paid much attention to. Frankly, it strikes me as odd that a federal regulatory agency is setting the royalty rates that copyright holders can charge for the use of their work. Frankly, if the recording industry wants to keep their material off the Internet, it ought to be their right to do so; my guess is that recording artists will eventually just bypass the labels and the RIAA and render the problem moot.

Given that ending the CRB isn’t on the table, though, it seems unfair to require a much higher government-imposed rated on nascent businesses than on existing, commercially viable ones.

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*Minn does not have a Google friendly name, in that several plausible candidates emerge on a search for “Michael Minn.” I am, therefore, not sure what his incentives are here.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.