Internet radio royalty ruling: who’s being served?

You may have noticed stories about the Copyright Royalty Board’s recent decision to jack the fees it charges Internet radio outlets. The initial response was dire – this move could force most Net radio off the air.

Broadcasters appealed, but to no avail. And if the ruling makes no sense to you, you’re not alone:

The new rates would require Internet broadcasters to pay $.0011 per “performance,” defining a performance as the streaming of one song to one listener; thus a station that has an average audience of 500 listeners will rack up 500 “performances” for each song it plays.

Anil Dewan, director of new media at KCRW, told that the rate change would send his station’s royalty payments skyrocketing to $350,000–more than twice the station’s current webcasting budget. N. Mark Lam, the CEO of Live365, told the Associated Press that under the new royalty rules, “there is no industry.” (Story.)

It’s also important to understand that it makes no difference whether the broadcaster is raking in big ad dollars or doing it for nothing – the same rates apply. It doesn’t matter whether the station’s mission is profit or simply a labor of love designed to provide up-and-coing bands an opportunity to be heard. I mean, it’s not like “real” radio is doing that.

So, who does this ruling serve?

  • Internet radio? Hardly. They’re out of business.
  • Listeners? Well, you now have even fewer options than you did before to find new music.
  • Bands? I mean, they get the royalties, right? Bitch, please – the amount of money a hungry young band might realize from Net radio royalties under this plan is nothing compared to the exposure and credibility the stems from getting your music played on the radio. Any radio.

Wow – who’s left? Major labels? (Duh.) Clear Channel and the RIAA? (Ping!)

Perhaps no corporation in the last decade has exerted a more corrosive influence on the American cultural landscape than CC – they haven’t completely killed music, but it’s not for a lack of trying. And the RIAA is perhaps the most morally bankrupt “trade organizations” in the world today. Here’s how they bill themselves:

The Recording Industry Association of America (RIAA) is the trade group that represents the U.S. recording industry. Its mission is to foster a business and legal climate that supports and promotes our members’ creative and financial vitality. Its members are the record companies that comprise the most vibrant national music industry in the world. RIAA members create, manufacture and/or distribute approximately 90% of all legitimate sound recordings produced and sold in the United States.In support of this mission, the RIAA works to protect intellectual property rights worldwide and the First Amendment rights of artists; conduct consumer industry and technical research; and monitor and review – – state and federal laws, regulations and policies.

I count at least one lie in each sentence. I’m especially interested in understanding the Orwellian premise that policies making it harder and harder for a vast majority of the musicians in the country to get their voices heard somehow promotes the First Amendment rights of artists.

Of course, the RIAA and Clear Channel had nothing to do with this decision. Nothing at all. Nope.

This showed up in my e-mail box a few minutes ago:

Because of the Copyright Royalty Board’s recent rate hikes applicable to Internet radio, I’ve decided to shut down Whitsbrain, my Internet radio station that was being broadcast via The royalty rate hikes are just too high and the risks financially are too great to continue on. I’m uncertain what the fate of my website will be, but, whatever.

My station was always an expense to me and was not anything that I ever made a cent on. It was something I created because of my love of the music. I wanted others to hear it.

This rate hike is unreasonable and it is highly unlikely that most of the artists I played on the station will ever see any royalties paid to them. Beyonce, Timbaland and Fergie will probably get paid, but I doubt independents like Class Three Overbite or Wiretree will ever see penny number one.

I don’t know how many of you listened or contributed your music, but if you did, I’d like to thank you from the bottom of my music-loving heart. -Whit (

Then this:

As I’ve had to shut down my Pure Pop 24/7 stream, I know what Whit is talking about. The rates have been hiked by the Copyright Royalty Board, and they will amount to something like 140 percent over five years.

The new rates went into effect earlier this week, and they are substantial–and retroactive to Jan. 1, 2006. Plus, a $500.00 yearly fee for all webcasters will be due by, I think, May 15. Live365 has a page on their site that talks about having to increase rates for webcasters. They may not do it right away, but they won’t have a choice pretty soon. They’ll probably try to absorb some of the extra cost, but rates are going to go up.

For info, go to There, you can read the decision handed down by a judge after webcasters pleaded for another look at the issue. The judge turned everyone down flat. Very sad. – Alan Haber

Oh – and this:

I enjoyed running my Worldwide Eclectic broadcast on Live 365, until I just didn’t have the time to keep up with some constant updates. I was half thinking about starting it again, but this kind of puts the stops on it. – Michael Curry

Congratulations, Copyright Royalty Board. Thanks to you there’s less music in the world today.

And by the way – I need help with a math problem here. How many royalty dollars do stations that go out of business generate for all those artists you’re working so hard to represent?

:xpost Lullaby Pit:

24 replies »

  1. Sad, sad, sad. Bad, bad, bad. Glad my budding career as a rock star doesn’t have a financial incentive. If it did, it’s dead now.

    But I wonder: Does this make the folks at iTunes really, really happy?

  2. If I were them I’d be unhappy with anything that in any way stifles the emergence of new artists. If a band gets a little traction on Live365 they might evolve into something iTunes can charge for. No new bands = bad business for those who sell music.

    The other thing I’m going to be interested to see is how the forthcoming MySpace challenge to iTunes goes – link all that viral to an iTunes like store right through the band’s MySpace page. We’ll see.

  3. Goddammit. Every time the people try to take music back, fucking corporate assholes who care about NOTHING BUT FUCKING MONEY find a new way to strangle it.

    The message is clear (channel): “YOU will listen to the shit WE purvey and NOTHING ELSE. Any attempt to be creative will be STIFLED. Any attempt to build a music career from the grassroots up will be CUT OFF AT THE KNEES. YOU have no business deciding for yourself what music is. WE will decide that – and then, by god, you’d better BUY it from us – or we’ll come after YOU.”

    Did I miss anything?

    Fuck them all to hell for a billion fucking years.

    Not that I’m angry – I’m just terribly, terribly disappointed….

  4. I’d like to be able to point out that no, it’s not like that at all. But, you know, I really can’t.

    It’ll get better once CC is sold to Mitt Romney, though. I’m sure of it.

  5. I don’t see how this ruling will stop internet radio.

    What’s at question is who gets to play whose music and under what terms. Normally, a webcaster would have to obtain permission from the owners of any music they play. Whether you agree with it or not, this board is a way for webcasters to get around seeking permission and to play the music for a rate that the board sets. Even though the board may have changed their rates to a level that most webcasters can’t afford, webcasters still have the option of playing music if they obtain permission.

    It may seem that is is unfair that the rates were hiked so high, but shouldn’t the people who own the music decide what the fair price is? It’s no different than if, for example, you set up a garage sale and tried to sell your computer for $1,000,000. People may laugh at you and nobody will buy the chair, but it’s *your* chair and you get to decide what it is worth *to you.* The same applies to the RIAA and all music they own. Whether one likes it or not, when a musician signs a contract with a big label to sell the rights to their music, the big label owns the music. And the big label gets to decide what they will charge for it.

    No matter what the RIAA does, people are still free not to buy their music, musicians are free to give away their music instead of sell it to the RIAA, and webcasters are still free to play music of those that have given them permission.

  6. Darren,

    I don’t this is an either/or argument. The choices aren’t “nobody gets paid” vs. “no Internet radio.” We had a model in place where casters were paying royalties, and if you listen to them, they’ll say they think that is just and fair. One of the guys quoted in one of the articles I think speaks for a lot of these guys – he WAS musician and certainly gets the importance of artists getting paid. I haven’t heard any of the casters I know bitching that they don’t want to pay.

    The problem is finding the royalty level that serves the bands, who lose when these stations have to go off the air. Is it more than it was? Maybe. But when you jack the rate they way they did, that’s a decision that serves all the wrong people and none of the right ones.

    I’d like to see a fair rate that gets as many Net radio stations as possible on the air playing as many bands as possible and putting as many dollars as possible into those bands’ accounts. This decision accomplishes just the opposite.

  7. Webcasters may believe the royalty rate was fair, but the owners of the music the RIAA was publishing did not. I believe that only those who own the content should get to decide the royalty rates that are charged for that content.

    I don’t see a major difference between webcasters who think they should be able to publish music for free and those who are willing to pay last year’s royalty rates. One will pay the artist *something,* but both accept the premise that they should get to stream music without obtaining permission of the artist. If one really wants to stand for the rights of artists (or for all individuals, for that matter), they should reject that premise.

    I think that the RIAA has made it pretty clear that they think webcasters should have to pay more to play the RIAA’s music. Therefore, they are raising their rates. Webcasters can take it or leave it.

  8. Sorry, I wrote that first paragraph in a hurry. The first sentence should have been: Webcasters may believe the royalty rate was fair, but the owners of the music the webcasters were streaming did not.

  9. Another problem with Darren’s argument is in this construction: The RIAA owns the music, rather than the artist. Once you get through the startling number of hoops a band has to get through to actually gain any money on royalties from radio play, it isn’t much. Only the largest artists and bands actually make any serious money from royalties, and that’s contingent on how often their songs get played.

    Why do you think so much of modern terrestrial-radio music is so sad, cookie-cutter, and generic? Because that’s what it takes to get sufficient rotations on a playlist in order to get money. People who don’t want to go that route have to make their bank from touring, merchandising, etc.

    And if stations aren’t playing your record, who’s going to see you live?

    This is where Web radio comes in, and this decision is absolutely designed to destroy it. Shameful.

  10. The RIAA owns the rights to all music it purchases from the artist. Once the artist signs a contract that transfers the ownership rights from the artist to one of the music labels, the RIAA has the same rights to that music as if they created it themselves.

    This actually is an extension of the artist’s right to own whatever he or she creates. Artists have the right to trade their product to anybody they want for any amount of money. If the government’s copyright board were to step in and take away the RIAA’s right to sell their product, it would be the same as if they took those same rights from the artists. The government would be telling the artist (or RIAA, or whomever else owns the music), “You may not sell your music for that rate, it’s too high. Internet broadcasters only want to give you 0.0001 cents per play, and what they want is more important than what you own.” Who really loses in this deal?

    The RIAA is always made to be the bad guy, but the RIAA has one thing over webcasters that are pushing this “Save Internet Radio” campaign: The RIAA won’t take an artist’s property if he or she don’t want to sell it to the RIAA. The RIAA respects the rights of the artist, because it’s those same rights that allow the RIAA to function as a business at all. Webcasters, on the other hand, will try to compel the government to *force* content owners to sell their products at a lower rate. Webcasters are right in one respect: Only one side in this debate is really looking out for the rights of the artist.

  11. From what I gather, magnatune is still safe, and from their tag line “not evil”.

    They use the Creative Commons license to avoid crap like this. You can listen to CDs in their entirety for free, download them for approximately $5.00, or you can buy the CD from them.

  12. The problem – well, one of the many – is that it’s a rigged game, and I’ll gladly pay you $100 for every artist the RIAA is actually benefiting if you’ll pay me $1 for every one they’re not benefiting (or are outright fucking). The RIAA most assuredly does NOT represent the best interests of most artists – the top .0001$ of revenue grossers, maybe – and their policies are a pox on everybody else.

    It is technically accurate that Webcasters can take it or leave it. However, when the price they set is high enough that almost all of them choose “leave it,” in what way, precisely, are the artists who are no longer being heard being helped? They’re not getting the exposure, which is bad. And the rest is a math problem: which is more – X% of Y or 2X% of nothing?

    I hate to get to the point where I’m evaluating statements based on the credibility of the speaker alone instead of carefully considering the merits of the argument. But the RIAA and wanks like the folks at the Copyright Royalty Board don’t make it easy. If you were to assert that “every word the RIAA says is a lie,” I’d be hard-pressed to disprove it.

  13. Darren,

    Most people who get into music don’t think in terms of music as “property” to be bought and sold. They view it as art, as creation, something to share. Sure, they want to get paid for their work, and they absolutely ought to be. Indeed, one problem I have with the RIAA and the current music industry is that–as Sam articulates upthread–too many OTHER people get paid off the artist’s work before the artist does.

    Web radio broadcasters don’t do it because they get paid. Far from it–even before this new royalty decision–they were often operating at a loss and required assistance to keep up expenses (as in the case of the fellow commenting at your blog here:

    Art is not about property or commerce. It can be used to generate commerce and as property, but that’s not what it is. Most musicians just want to be heard, and this decision makes it harder for them to do so. The RIAA is in the business of taking artists’ work and putting the profits in its own coffers. This is just the latest example.

  14. Let me illustrate something about how this industry works. This is from the president of a record company who also runs an Internet station:

    I control the rights to EVERYTHING on my radio station….and under this legislation I would still have to pay a fee. And there has still been no explanation as to how I am to get paid for the material once the fees are collected from everyone who is broadcasting. I should be exempt from playing my own music….but if I’m not (as the case seems to be)….I should be getting paid for what was played when the royalties are collected and divvied back up.

    Jaimie Vernon,
    President, Bullseye Records

    So if you’re tracking this, it means that an indie artist makes music, the music 100% wholly owned by him and the label, but if that label uses that music on a Web station to promote the artist, royalties must be paid. However, those royalties, in theory, funnel back to the artist. Except that … they don’t?

    In some of our less upscale neighborhoods this is called “protection money.”

  15. I appreciate you letting me come on your site and debate this. I really don’t mean to come here to cause trouble, I just saw your blog post on this issue and thought I’d present the other side.

    Vernon’s statement that he can’t stream his own music without paying this fee is false. If he controls *all* rights to the music, then he can do whatever he wishes with it. I wonder if there is some context to his statement that you’re not providing, such as if he’s talking about operating his radio station with a service that requires the webcaster to pay the fee for all music, no matter what that music is (in which case, it would be an issue with the service, not the law). I challenge you to find the provision that forces Vernon to pay the RIAA to play his own music.

    But for the sake of the argument, let’s pretend this is true and Vernon has to pay a fee to play his own music. The problem is that Vernon is forced to pay someone else to play his music, no matter if the rate is today’s high rate or yesterday’s low rate. The solution to this problem is to get the government out of the royalty-rate business all together. That’s not what webcasters want, though, because they want the government to set the rate.

    But all of this discussion is really for nothing if you don’t believe that property rights extend to music.

  16. I’m not sure what you mean when you say that I “trust the law to be what it professes to be.” I’ve discussed this issue with an individual who has his own radio station and is sort-of an activist for the anti-RIAA side, and he stated that radio broadcasters have two options if they want to play copyrighted music. They can either get permission from every copyright holder for every song they wish to play, or they can pay SoundExchange. He even said that there are radio stations that exist without paying SoundExchange. So no, I don’t believe your assertion that I would have to pay the RIAA if I distributed offered a streaming version of my own music.

    I don’t think we agree on principle, either. I’ll be repeating myself here, but an artist owns everything he or she creates. Part of that ownership right is the ability to tranfer ownership to anybody, including a big label. If an artist voluntarily signs a contract that transfers ownership (or publication rights, or whatever, I know contracts are different) of the music to another party, then that second party owns those rights the same as if they created the music because they were given by those that created it. It’s the same as if you sell your car, or your house, or your labor. You find a party that is willing to buy what you sell, and you make an agreement. So long as neither party is forced to enter into the agreement involuntarily (and when I say “forced,” I mean physical force), I think the deal is fair.

    That’s what the free market is really all about. It’s more than people buying and selling things for money; it’s also about respecting individuals and their rights to their lives and their property. We might not like or agree with what people do with their stuff, but we have to respect their rights. That’s the principle I’m talking about. If you think that streaming music over the internet is important enough to violate those rights, then we don’t agree in principle at all.

    But I appreciate the debate! This is where I’ll stop. Just so you know, I wasn’t trying to start a rancorous fight, I just thought I’d respond and talk about some of the things I read in your blog post. That’s what the internet and blogs are for, right? 🙂 Thanks!