Sunday, The Beginning of the End for Internet Radio
July 13, 2007 4:24 PM
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Increased royalty fees may force some internet radio stations to shut down
Over the last year, the online music industry has been in what many call as a major shakeup. Music artists and labels represented by SoundExchange say they are being treated unfairly, receiving less than a fair amount of money being generated by online radio stations. SoundExchange has been lobbying Congress over the last year to force online radio stations to pay for or pay higher royalties for songs played.
Working closely with Congress, SoundExchange has
successfully convinced the industry that increased royalties are a necessity
. The D.C. Circuit Court of Appeals has declined to put a stop on increased royalties. This Sunday, Internet radio stations will be slapped with a bill forcing them to pay higher royalties going forward and
pay for music aired in 2006
. By 2010, royalty rates will nearly triple what stations currently pay. Stations will also incur an annual fee of $500, but
the annual fee hasn't been fully worked out
. SoundExchange is unsure if it wants stations to pay $500 per station or per channel.
"This is just about the artists getting paid fairly. Artists and labels just want a fair share of the pie," said Richard Ades, a SoundExchange representative.
Late last month, many online stations banded together for a single day of silence,
marking their stance against SoundExchange and its demands
. Called "Day of Silence," the move created public awareness about how damaging the new proposed royalties could be. Despite the demonstration, SoundExchange chief executive John Simson said, the "rates are fair."
Tim Westergren, founder of Pandora, one of the largest Internet radio companies, said, although his company is able to pay for the new royalties he and his company would not go down without a fight. Pandora along with Yahoo, Rhapsody and Live365 represent the four largest Internet radio companies today. Whether large or small, all types of broadcasters will be affected. SoundExchange said it has taken this into account. Small and non-profit broadcasters will have a royalty cap of $50,000 per year -- still a very large amount.
"Nobody wins when Internet radio gets shut down, including artists who ostensibly are being represented by SoundExchange, the organization pushing for high rates. It's ironic. If SoundExchange gets their way, it means less money for musicians because people will cease to pay royalties all together," Westergren said.
Even with the cap, small broadcasters are still in distress. Michael Clark, owner of two small stations said that after Sunday, he would owe roughly $14,000 USD just for the holiday season of 2007. As for all the music that his station broadcasted during the 2006 year, Clark will owe $8000 on Sunday. One of Clark's stations already closed down because of the new changes and he was unsure of what to do after Sunday, he said.
Jake Sommers, owner of a similarly small station that plays jazz faced similar decisions and consequently closed down his station. Jazzplayradio.com closed on April 30th of this year when Sommers realized he would have to pay $2000 per month to keep his station of 20,000 listeners afloat.
"We never made a dime. It was a labor of love. Everything we made we put right back into radio station. It was a bunch of trumpet geeks playing music for other trumpet geeks," Sommers said.
As Patty Smyth once sang, "sometimes love just ain't enough."
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7/14/2007 10:31:29 AM
Tax avoidance becomes a factor whenever rates are raised, because those "other people" change their behavior in response. Raising royalty rates WILL introduce a similar response -- this is basic Economics 101 stuff.
The first 50,000 listeners, or so, should have a lower rate. It is in everyone's interest for a negotiated solution, one that pays Royalties to Copyright holders and one that recognizes the economic realities of growing a small business.
The LAST thing the Copyright holders should demand is a change in business model to pay for their uncompromising rate increases.
WHY? Because the host may change its behavior in a way that produces a new business model that is unforeseen and contrary to Copyright holders' long-term interests (it has happened before). Setting CD prices in a retail store by dictat is not so different from demanding revenue from a new technological platform.
It is in their interest to negotiate a voluntary compliance for their Royalty rate -- not the other way around, with enforcement by the courts.
In this instance, the Rate multiplied by the number of listeners equals the tax. Negotiate an equitable solution before a new business model permanently changes the way the number of listeners are accounted.
Without a negotiated and equitable solution, it is just a matter of time before your favorite mp3 player has a new "plugin" that shields your participation from streaming media taxation.
"There is a single light of science, and to brighten it anywhere is to brighten it everywhere." -- Isaac Asimov
Internet Honors "Day of Silence" to Save Online Radio
June 27, 2007, 2:17 PM
Live365 Latest Organization Requesting Stay on Royalty Increase
June 2, 2007, 12:01 PM
SoundExchange Forces Webcasters to Pay Royalties
March 6, 2007, 7:59 AM
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