DailyTech - SoundExchange Forces Webcasters to Pay Royalties

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Internet SoundExchange Forces Webcasters to Pay Royalties
Tuan Nguyen (Blog) - March 6, 2007 7:59 AM

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13 comment(s) - last by rkrause.. on Mar 8 at 12:52 AM

Webcasters must also pay royalties retroactively

The Copyright Royalty Board (CRB) thoroughly rejected arguments made by the International Webcasting Association that music broadcast online should remain royalty-free. Instead, the CRB sided with the SoundExchange royalty organization.

Webcasters are now faced with new and increased royalty rates for songs that are streamed to listeners. Additionally, webcasters are forced to retroactively pay for songs that were streamed before the new law was even introduced.

The SoundExchange royalty program was only accepted by the CRB this month, the royalty program applies to webcasts in 2006 as well. According to the royalty rates published by the Radio and Internet Newsletter, RAIN, fees are applied on a per song, per listener basis:

2006: $0.0008 per performance
2007: $0.0011 per performance
2008: $0.0014 per performance
2009: $0.0018 per performance
2010: $0.0019 per performance

Each performance is defined as a session between the radio channel and user.

The rates applied by the SoundExchange program also increase as each year rolls by, adding costs to webcasters very quickly. According to RAIN, the average station plays 16 songs per hour, which would add up to $1.28 per hour, per 100 listeners for 2006.

Additionally, there is a minimum fee of $500 per channel per year, though the CRB has not clearly defined "channel" yet. The rate implementation still can be appealed by organizations like the International Webcasting Association within 30 days after it is published in the Federal Register.

SoundExchange and the Recording Industry Association of America also successfully leveraged XM Radio into charging fees for its online streaming radio service. The RIAA sued XM early last year to retroactively reclaim royalties on streamed music.

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What???

By BMFPitt on 3/6/2007 11:24:23 AM , Rating: 4

Webcasters are now faced with new and increased royalty rates for songs that are streamed to listeners. Additionally, webcasters are forced to retroactively pay for songs that were streamed before the new law was even introduced.

Can someone explain how they reconcile that with the Ex Post Facto clause in the Constitution?

RE: What???

By Chernobyl68 on 3/6/2007 12:34:53 PM , Rating: 4

Don't you know that IP laws supercede the Constitution? Sheesh!

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RE: What???

By eppenoire on 3/6/2007 3:42:04 PM , Rating: 3

I dropped out of law school so I may not be the best to answer this. In this case, the courts are saying that royalties were due in the past however the webcasters failed to make due payments. This of course would fall under Ex Post Facto if no payments were ever defined in the past and the webcasters could never have known that they were due. I would have to read the briefs to really make an educated analysis of this but, my guess is that royalities were on the table, but never enforced.

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Math wrong, I think

By dbwells on 3/6/2007 12:27:07 PM , Rating: 2

quote:
which would add up to $1.28 per hour, per listening for 2006.

I am pretty sure the fee is actually $0.0128 per listener per hour, that is, a little more than one cent.

dbwells

RE: Math wrong, I think

By FITCamaro on 3/6/2007 12:53:12 PM , Rating: 2

Either way it adds up to huge fees when you're talking about thousands of listeners per hour per day.

1000 listeners x even .0128 cents/hr = $12.80/hr * 24hrs/day = $307.20/day * 365days/yr = $112,128 year

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RE: Math wrong, I think

By FITCamaro on 3/6/2007 12:55:56 PM , Rating: 2

And thats just 2006. By 2010 it'd be $.0304 per listener per hour so:

.0304 * 1000 = $30.40 * 24 = $729.60 * 365 = $266,304 for the year!

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RE: Math wrong, I think

By psychobriggsy on 3/6/2007 1:45:35 PM , Rating: 2

I think he meant to write 'per 100 listening' there.

How does this law affect radio stations that only play "public domain" and creative commons licensed media?

Do they still have to pay that $500 fee? Do they still have to pay the per-performance fees?

As for the mainstream music playing radio stations, this could affect things like last.fm and so on who are actually working great as advertising mediums for music. I don't think they're going to be happy to PAY TO ADVERTISE music to their listeners. I bet many people have bought music as a result of hearing it elsewhere...

The thing is, the music industry is not happy to have a wide variety of music on offer, they just want to sell vast quantities of a limited selection of music (cheaper to advertise fewer acts). Selective, albeit low-listener, radio stations do not help this, especially last.fm that recommends music based upon your likes and dislikes. These actually help smaller record companies, and hurt the big record companies. This law will make small radio stations untenable, leaving ClearChannel et al to play you the top 40 on repeat with no competitition.

Laws like this stifle the industry. Shame that the politicians are too brain dead and buyable to actually do something good for their country. A few people, shock horror, might record the broadcasts for future use, or use the broadcasts instead of buying music. OH NO! That minor number of people is not an issue, and many of them couldn't afford the music anyway. It's no excuse to damage society so much.

Err, that's a bit more ranty than I thought it would be ....

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retroactive laws

By lucyfek on 3/6/2007 10:30:18 AM , Rating: 3

this is a good one. what's next.
i hope that they won't slam podcasters with fees for using english language (retroactively), as the music free podcasts are the only junk i listen to.

RE: retroactive laws

By johnny3d on 3/6/2007 1:40:56 PM , Rating: 2

No, but Alcatel-Lucent might want payment for using their MP3 format. Isn't technology grand?

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should be surprised

By Anosh on 3/6/2007 10:31:57 AM , Rating: 2

After the push of DRM sold to the end user something like this, I guess, should be expected in other areas also for others than the end consumer.

Way around $500 minimum.

By Eldercat1 on 3/6/2007 5:02:30 PM , Rating: 2

As stated in the article there still exists a loophole because they have not defined what a "Channel" is. Several webcasting Co-ops have started to spread the cost of webcasting among several small webcasters.

The one I use is:
http://www.swcast.net/

How the Law Works

By wrsamuels on 3/7/2007 3:52:40 AM , Rating: 2

1. In the US the Constitution is the supreme law of the land. And, yes, patent and copyright are protected in the Constitution. But IP laws are not above anything in the Constitution.

2. Ex post facto laws are unconstitutional regarding criminal matters. However, where the issue is civil then you may be penalized for past behavior--essentially you must pay damages for past civil transgression.

3. The issue is the copying--it doesn't seem extremely strong, but it is a consideration of the law.

Coalition of Webcasters

By rkrause on 3/8/2007 12:52:30 AM , Rating: 2

A Webcaster collective is now gearing up to form a trade association and hopefully take this issue to the next level (i.e. Congress). The possibility of a settlement agreement like what happened in 2002 would be ideal.