Even after compromises from SoundExchange and the CRB, web radio broadcasters are not optimistic about the future

The U.S. Copyright Royalty Board’s new rates “would bankrupt us,” says Tim Westergren of Pandora, echoing a sentiment reflected widely by the webcaster community. Spurred by SoundExchange’s efforts to raise the cost of broadcasting music on the web to what is widely believed to be unreasonable levels, webcasters everywhere are vigorously fighting what may very well be their end.

In a pair of interviews with DailyTech, Proton Radio’s Jason Wohlstadter and Pandora’s Tim Westergren shared their thoughts on what SoundExchange’s revised royalties plan means to them and their stations. The CRB’s rates are “disruptive for everybody, rightsholders included: even if you increase your rates, and if it puts those rate-paying stations out of business, then you’re going to get nothing. These rates [don’t rely on the] economics of web radio,” says Westergren, “so, I think it’s a terrible ruling and one that needs to be fixed.”

Kurt Hanson of RAIN estimates that the rate increase is around 400% ... that's pretty ridiculous no matter the reasoning is,” says Wohlstadter.

One of the biggest problems, argues Westergren, was that the original talks in 1998 and 2002 were hamstrung by politics and semantics, and as mentioned before, completely disconnected from reality.  “The committee had to abide by language in the federal statute … and that language was monkeyed with.”

“The CRB just missed it,” says Westergren, “if you read the ruling and the rationale as it’s articulated by the royalty board and their subsequent followup to it, it demonstrated a complete lack of understanding of the business that we’re in. I think that there were structural problems and I think that resulted in a really flawed decision handed down.”

Not everyone is affected equally by the CRB’s changes, however. In the case of some independent stations that deal primarily with underground music, deals have been worked out directly with the labels -- many of which are run by fellow enthusiasts. Such is the case for Proton, and Wohlstadler argues that the direct approach is far more valuable to niche artists:
“I see Proton as one of the main avenues of promotion for these artists and labels. We generate revenue for them by linking show tracklists directly to store fronts where listeners can buy songs they just heard. I believe this makes the labels more money than any royalty would. In our niche over 5,000 songs are released a week, our station is one of the few promotional outlets available to labels to extend shelf life.”
Westergren also touches on the challenges from working with niche music from Pandora’s collection of over 40,000 artists:
“We have over half a million songs in our collection. On a daily basis, 94% of those songs play … Of those 40,000 plus artists, 39,000 are not being aired or have never been played on any form of broadcast radio, so it’s a real vital channel for artists.”
The important thing to remember, both stations stressed, is that they have no problems paying the royalties if so compelled provided SoundExchange asks reasonable rates and existing agreements are understood.

“My hope is that if SoundExchange comes to us requesting royalties for Artist A on Label Z, our contract in place with Label Z would take us out of any obligations,” says Wohlstadler. Web radio, according to Westergren, “needs to survive and it needs to be nurtured. Not to say it gets a free pass, but as we resolve this rate debate, we need to really keep in mind the value that it’s offering for musicians.”

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