Why The New Webcasting Rates Are A Death Sentence For Webcasters

from the plainly-ridiculous dept

When the announcement came out this week that webcasters had somehow “come to an agreement” with SoundExchange over webcasts, what was unbelievable was that many presented this as a “victory” for webcasters. Hell, even SoundExchange made public statements about how it was disappointed by the rates, but it was an “experiment.” But when you looked at the actual numbers, this made no sense. The rates are ridiculously high when compared to royalty rates for traditional radio or satellite radio. Michael Robertson breaks down the numbers and explains away the myths of this deal. It will almost certainly bankrupt nearly every webcaster out there. Robertson focuses on the big webcasters, and points out that the 25% royalty rate promoted by the press isn’t accurate at all, and for a company like Pandora the real rate will be north of 40% of revenue — which is not even close to sustainable.

Meanwhile, small webcasters don’t get much of a break either. Live365 is pointing out that these rates will basically kill off every webcaster it hosts by requiring a $25,000 fee. As the company notes, the guy running the Armenian folk music station for $10/month isn’t going to pay $25,000 and certainly isn’t going to make enough revenue to pay up.

Make no mistake: these new rates are effectively going to kill off a significant portion of online webcasters. The recording industry, of course, doesn’t find this problematic, because they don’t like the fact that they can’t control webcasters the way they can radio, so they are fine with taxing them out of business. But what a waste of what technology allows. These days, anyone can and should be able to effectively express their own musical views by webcasting what they like. And that’s about to become prohibitively expensive for no reason other than that SoundExchange/RIAA have a gov’t granted monopoly over any kind of broadcasting.

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Companies: live365, pandora, soundexchange

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Comments on “Why The New Webcasting Rates Are A Death Sentence For Webcasters”

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67 Comments
Anonymous Coward says:

Re: Re:

The internet isn’t a fad – but webradio as defined is a non-functional business model, where paying fees as demanded is a non-starter. Most internet listeners want a premium product (everything personalized, no commercials, latest stuff, no interruptions) but they aren’t willing to pay for it.

“the guy running the Armenian folk music station for $10/month isn’t going to pay $25,000 and certainly isn’t going to make enough revenue to pay up. “

Mike is all about workable business models. blog style home made radio stations (live365 style) isn’t a workable business model. The rules of common sense aren’t suspended just because we attached the “internet” tag to something.

Luci says:

Re: Re: Re:

“Most internet listeners want a premium product (everything personalized, no commercials, latest stuff, no interruptions) but they aren’t willing to pay for it.”

I’d like to know where you came to this conclusion, as I certainly do not see it. ‘Most internet listeners’ as I have observed certainly are willing to pay, just to remove commercials, personalize their streams, and limit/remove interruptions.

mobiGeek says:

Re: Re: Re:2 Re:

And exactly what is this “leeching” leading to? These internet listeners are expanding their exposure, raising the likelihood that they’ll expose others (increasing the fanbase). That in turn leads to opportunities to sell things that don’t cost ZERO to reproduce.

Killing off any of these marketing streams that cost nothing for the artists to WIDELY PROMOTE themselves isn’t a sound business move.

Anonymous Coward says:

Re: Re: Re:

“Mike is all about workable business models. blog style home made radio stations (live365 style) isn’t a workable business model. The rules of common sense aren’t suspended just because we attached the “internet” tag to something.”

It’s workable provided these corporations don’t lobby the government for laws that make them unworkable.

Also, they should only have to pay royalties to music that is owned by the RIAA. So why not regular Intenret users make songs, without record contracts, and release them to these Internet radio stations under their own terms? That way people can listen to online radio stations and the RIAA doesn’t have to profit any.

Anonymous Coward says:

Re: Re: Re:

blog style home made radio stations (live365 style) isn’t a workable business model.

And why not? Because of ridiculous liscencing fees. A minimum of $25,000 means it can’t be done as a hobby the way most blogs are. even if fees were more akin to satelite, let alone terrestrial radio, it would be a much more viable endeavor, and it would be better for the artists and better for the public.

Osno (profile) says:

As I see it, this is just fail for the US. If the rest of the world doesn’t follow suit (and this is a case where the RIAA probably doesn’t have as much influence because it doesn’t have to do with “you’re stealing my copyrights” as much as with rates), the rest of the world can still build a healthy webcasting scene. I’m thinking Sweden, Russia, China…

Chris P (profile) says:

Downright creepy.

Tons of musicians of any kind want to have more exposure. Most of my favorite bands aren’t on the radio or in the popular press at all. I found them via word of mouth, or through sites like Pandora and Slacker. There really must be some crazy plot underneath, that is the real reason that they actually don’t want more money.

Anonymous Coward says:

Re: Downright creepy.

Tons of musicians of any kind want to have more exposure.

Yes, but the purpose of this system is to make the musicians go through “the system” (i.e. RIAA/SoundExchange) to get that exposure. They obviously wouldn’t want musicians to go independent and bypass them (which would be a real danger otherwise if there were a bunch of independent little Internet stations to provide that exposure). This way there will be far fewer stations and they will all be beholden to the record industry. Stations will really only be able to afford to play music from artists that the industry promotes by giving the stations kickbacks (i.e. payola) for playing. And the beauty of it is that that payola won’t cost the record industry a cent because the money will come from the fees paid by the radio stations themselves!

But wait, it gets better. The record industry will even get to collect fees from the playing of independent artists. So that means that, if you are an independent artist, not only will the industry *not* promote you, but you will get to help finance the promotion of the industry’s own artists instead! Sweet, huh?

Ah yes, the best government money can buy.

Observer says:

Re: Re: Downright creepy.

“Stations will really only be able to afford to play music from artists that the industry promotes by giving the stations kickbacks (i.e. payola) for playing.”

Payola is completely legal for web stations, it seems. Maybe this is the reason Pandora sees this as a good deal: Because their business plan is to become an RIAA whore and jump on the payola gravy train. Their jubilation makes sense now.

I expect to see a lot of webcasters jump into the record industry’s pockets now. Of course, they will deny it and nobody will be able to prove otherwise because the payola will be hidden from public view, but the record industry, not listener demand, will be calling the programming shots for any stations that want to stay in business.

Auditrix (profile) says:

SoundExchange Monopoly

The SoundExchange monopoly was improperly strengthened by the US Copyright Royalty Board, which doesn’t incentivize the parties to reach fair market rates. See my blog today.

However, the 2009 SoundExchange rates are not as “ridiculously high” as Mr. Masnick suggests. Moreover, record companies are desperate to monetize digital uses, so if the rates put too many webcasters out of business, SoundExchange may be agreeable to a reduction.

In my view, the United States is long overdue to require master and video performance royalties, like the rest of the world before it.

Do you know that other countries worldwide refuse to pay US artists and record companies performance royalties solely due to the fact that we in the USA do not reciprocate?

Considering the international stardom of so many US artists, the US has forgone a significant stream of income for a long time. When the US begins paying out such master performance royalties to foreign entertainers, it stands to collect untold millions of dollars from foreign collection societies.

Music is valuable. If the webcaster business model doesn’t account for that, then it needs to change. Owners and creators are entitled to their fair share of the revenue pie.

I just think all of this would work better if SoundExchange had competitors and artists could designate their own affiliations, including agents with lower rates.

Luci says:

Re: SoundExchange Monopoly

Excuse me a moment, but let us disregard the rates which /are/ ridiculous as compared to other media. Are you, then, suggesting that paying $25,000 just to be allowed to operate a station (which can be set up literally for free if you already have the computer and connection) is not excessive? I’m all for the artists getting paid, but this does not seem the right way to do it, especially considering that if I, assuming I were an artist, would likewise have to pay this set-up fee to play my own music? Seriously?

Mike Masnick (profile) says:

Re: SoundExchange Monopoly

However, the 2009 SoundExchange rates are not as “ridiculously high” as Mr. Masnick suggests.

How is 25% — as a base — not ridiculously high compared to other forms of royalties?

In my view, the United States is long overdue to require master and video performance royalties, like the rest of the world before it.

Right… pay us to help advertise us. I don’t see how that makes sense at all.

If performance royalties are so important, how do you explain payola?

Music is valuable. If the webcaster business model doesn’t account for that, then it needs to change. Owners and creators are entitled to their fair share of the revenue pie.

Promotion is valuable. Hence payola. Clearly the labels have long valued the promotion over the royalty. Why should that change now? And why should it change via gov’t fiat?

Anonymous Coward says:

Re: SoundExchange Monopoly

other countries worldwide refuse to pay US artists and record companies performance royalties solely due to the fact that we in the USA do not reciprocate?

Solely? I think that’s a pretty good reason to not pay royalties; I think you’re minimizing it by adding “solely.”

Considering the international stardom of so many US artists … untold millions of dollars from foreign collection societies.

Now I think you’re mistaking which way things are flowing. US stars get more play in foreign lands because they domn’t have to pay royalties on the music. If it was a level playing field, I think you’d see far fewer US artists getting “international stardom,” passed over in favor of “local” artists. And THEN the US would see a loss of untold millions as the revenues from shows and merchandising tied to those stars would dry up. In grasping for one more straw you’d risk losing the whole load. better to have free promotion and then monetize the exposure.

RD says:

SoundExchange Monopoly

YOU are HOT!

On a more serious note, the imbalance between the US music royalties and other countries, as well as within between industry and artist, is one of the most egregious out there. The problem with these “collection societies” is they collect even if they dont represent you, and then they “have difficulty” in “finding” you to pay you the share they illegally collected on your behalf. It’s a massive rip off and the artists and consumers suffer for it. The execs at these companies suffer not at all.

Ron (profile) says:

The Day That Music Died

Do we really need music anymore? It is getting old after all. Maybe we should just get use to the idea that music is dead and start to figure out how to live without it. Music has been around since the beginning of time. So it is a bit outdated after all.

Or maybe listening to music from countries that are not owned by the RIAA is the way to go.

Wait…. Can we even listen to music from another country or is that wrong to? Can we whistle or hum, tap the desk with a pencil that may sound like a drum solo that is copyright protected?

Yeah none of what I said really makes sense. Goes along with what they are doing.

I support unsigned artists. Simple. I have for awhile now. Most of them offer their music for free, or a small charge to buy it (which is a good way to show them you like it and supporting them) and best of all unsigned or artists that are not know from small labels, they don’t care if you play there music online. It gets more people to listen to them, free publicity at no cost to them. Soundclick will be the future. Until the RIAA tells politicians to pass laws that say music that is almost like their copyrighted music, maybe a few notes difference and different lyrics, means they get paid. What about tribute bands? Have they come down on them yet? If not it is only a matter of time.

Mike Masnick (profile) says:

Re: Are you sure this is bad news for Pandora?

Because they seem to be rejoicing

They’re rejoicing because:

(a) they were out of money and they needed this deal to close so they could close their round (note, the round for $35 million closed two days after this deal came through)
(b) it gives them more time to now go and complain via congress and hope to get the rates changed.

They were between a rock and a hard place. This gives them a little more breathing room. Without this deal they were dead next week. Now they have maybe a year to figure things out.

Anonymous Coward says:

Re: Re: Death Sentence For Webcasters

What if a service, say google, wants to allow any unsigned artist to submit his music to them so they can play it? and that service itself supports the bandwidth. Then do they have to pay some unnecessary third party for this? Where is the law that says this?

Anonymous Coward says:

Re: Re: Re: Death Sentence For Webcasters

Then do they have to pay some unnecessary third party for this? Where is the law that says this?

Yes. Because of the way performance liscencing works. SoundExchange collects all royalties for all artists, whether those artists want them to or not.

Anonymous Coward says:

Re: Re: Re:2 Death Sentence For Webcasters

This assumes the creator of the song owns the copyright and didn’t opt out (even though he is unsigned). It’s like with books, copyright is opt out and the creator of a book owns the copyright automatically unless he ops out (even if he is “unsigned”). If the owner of a song opts out of copyright, likewise, SoundExchange would be unable to collect on his behalf.

Think of it this way. Soundexchange collects royalties based on the copyright status of a song. Copyright is opt out and if you don’t opt out your song has a “default” copyright status that permits Soundexchange to collect on your behalf. If you’re “signed” the copyright status of the song could still be the default one but it may simple be transferred over to those you signed with. Signed could just mean someone else owns it without changing the copyright status of the song itself. However, if you own the copyright on a song you are able to change the status and you can license it under a copyleft license such that soundexhcange is not permitted to collect on your behalf.

Anonymous Coward says:

Re: Re: Death Sentence For Webcasters

“Yes. They have a monopoly on all webcasters.”

(hypothetically speaking) My neighbor pays for a bandwidth to host stuff on the Internet, including his webcasting site. I make a song. I give it to my neighbor to host on his webcasting station and I don’t charge him anything. I’m unsigned (and lets assume a bunch of his neighbors also give him songs and they don’t charge anything and they are unsigned. So he only hosts songs by unsigned neighbors that he knows who won’t charge him anything). What law says that either I or my neighbor or anyone must pay Soundexchange or any third party for hosting my song? Where is this law? We need to be specific about what laws need to be eliminated. So please cite the law.

Anonymous Coward says:

Re: Re: Re: Death Sentence For Webcasters

he only hosts songs by unsigned neighbors

As I understand it, if a station *only* plays unsigned artists then they are not required to pay fees to SoundExchange. If, however, they play even one other song then then they must pay fees for *all* songs, whether by unsigned artists or not. So your neighbor would not have to pay.

Where is this law?

SoundExchange is designated by the Librarian of Congress as the sole organization authorized to collect royalties paid by services making ephemeral phonorecords or digital audio transmissions of sound recordings, or both, under the statutory licenses set forth in 17 U.S.C. § 112 and 17 U.S.C. § 114.

Anonymous Coward says:

Re: Re: Re:2 Death Sentence For Webcasters

“As I understand it, if a station *only* plays unsigned artists then they are not required to pay fees to SoundExchange. If, however, they play even one other song then then they must pay fees for *all* songs, whether by unsigned artists or not. So your neighbor would not have to pay.”

I just don’t see the law that imposes this. You point to the United States Code sections 112 and 114 but your links don’t work. Here is one.

http://www.bitlaw.com/source/17usc/112.html

and the other

http://www.bitlaw.com/source/17usc/114.html

I just don’t see where it says that they would have to pay soundexchange for ALL music played if just one song from a signed artist is played. Perhaps the law is somewhere else?

Also note this

“License agreements voluntarily negotiated at any time between 1 or more copyright owners of sound recordings and 1 or more transmitting organizations entitled to obtain a statutory license under this subsection shall be given effect in lieu of any decision by the Librarian of Congress or determination by the Copyright Royalty Judges. “

17 USC 112

The United States Code is supposed to override/supersede anything that the Library of Congress decides (does this always work?).

Josie (profile) says:

Disgusted

I was totally writing an article about this last night. The very idea that the new numbers are good news is ridiculous! Sure, it’s less than the 70% cut Pandora was forced to pay before, but come on! Just because payola does not work in online radio, does not mean that web-casters needs to be eliminated. I’ve been listening to Pandora for almost four years now, and if it was erased I would be devastated. It is one of the few pleasures in life, being able to work, study, or look for work with these stations in the background. I’ve actually started buying CDs again because of it. Before Pandora, the last CD I bought for full price was Madonna’s Ray of Light, and I was in middle school. I just can’t stand it. It just isn’t fair that they are allowed to have all this power when so many mistakes have happened because of it.

coldbrew says:

Pandola? Copyleft?

Masnick: Perhaps you’ve unintentionally uncovered Pandora’s plan which could allow them to generate enough revenue to be profitable in spite of the ridiculous royalties? 😉

Maybe Creative Commons or EFF could help out unsigned artists in the way SoundExchange works for the labels? I don’t know enough about the ecosystem or specifics, but it would be in the interest of webcasters and independent artists to eliminate this monopoly (perhaps by releasing their works under copyleft licenses).

Anonymous Coward says:

Re: Re: Pandola? Copyleft?

This assumes the creator of the song owns the copyright and didn’t opt out (even though he is unsigned). It’s like with books, copyright is opt out and the creator of a book owns the copyright automatically unless he ops out (even if he is “unsigned”). If the owner of a song opts out of copyright, likewise, SoundExchange would be unable to collect on his behalf.

Nick says:

Indeed… it’s pretty crappy. I was providing streaming hosting to two radio station groups for a total of about 300 listener slots for I think something like 8 or 10 radio stations.

That revenue is now completely gone, because they can’t afford to pay the licensing fees to whatever bullshit organization wants to charge them. I’m just glad I got my new laptop paid off before they canceled!

Reed (profile) says:

Say goodbye to the little guy

It is clear that once again corporate lobbying has done what it is supposed to. Eliminate diversity and push everyone into their ever growing pocket book.

How is it fair to put the interests of a single organization so far above the interests of the masses?

I would like to feel outrage, but after watching this same old corporate story my whole life I am getting pretty numb. One thing I have decided is that the corporatization and consolidation of American Business was pushed through on a highway of lies.

I remember the rhetoric when I was a kid and there were still a huge amount of family businesses around. Corporations billed themselves as providing better quality, superior services, and great employment. Twenty years I see now that is was just a lip-service so they could grab as much cash as possible and destroy forever choice as we knew it.

Tell me how we are better off nowadays with a McDonald’s and Walmart on every corner? We have less choice than ever before, crap-ass pay, and products that can only be described as inferior. The money no longer stays in our communities and is instead shipped to banks in other states.

American Business is now a sad precession of people’s time and energy into the abyss of big business backed by government regulation and corporate law. IP law is just another tool in the box of corporate tricks to force the little guy to roll over. The describes clearly what is now the Web Casters fate.

Peter Nissando says:

Thats fine with me, I'll just torrent my music now instead thanks Mr RIAA

Nah, that’s ok. If that is the way the RIAA want to play then I’ll simply stop listening to online radio and just download the albums directly off public torrents and they will get nothing. They can then explain the dramatic drop in web radio listeners and inevitably the drop in online revenue to the artists who are going to miss out. The RIAA are not real smart, just very angry and with a large team of lawyers ready to do their dirty work. Really, does anyone except these lawyers like them? Artists despise them.

Vectorius says:

A creative commons license just for the RIAA

I would like to release some symphonic music I have composed, but I would like to craft a variant of the creative commons licence under which SoundExchange, the RIAA and their legal representatives would be subject to a $10,000,000 fine to either listen to my music or to enforce my rights under the copyright act. If this could be crafted with sufficient care, and if sufficiently many musicians were to release music under this license, it could conceivable criminalize the RIAA and its lawyers.

Anonymous Coward says:

Re: A creative commons license just for the RIAA

Then do it. The license can say something like the following (and put it at the beginning of the song or something or even make a youtube video where you say the license, the name of the song, play some music from the song, and display a 256 bit hashsum of the song to verify to others what song is released under the license. Tell everyone on youtube your public key and you can sign licenses along with hashsums of the songs you release in a text file)

Anyone is free to listen to or redistribute my music provided that they do not restrict others from freely redistributing my music or in any way try to charge for the redistribution of my music by others. Any attempt to do so could lead to a lawsuit where you will owe the license holder of this song up to $10,000 as permitted by law. This music may also be freely played on the radio (including, but not limited to, terrestrial radio, XM radio, and Internet radio) and in restaurants and anyone who attempts to collect money for playing this music on my behalf will be subject to $10,000 fines. This license must be redistributed with my music and anyone is free to make derivatives of my music but those derivatives must be released under the same license.

Vectorius says:

Re: Re: A creative commons license just for the RIAA

That’s good advice, though I’d like something stronger, if possible, in which a $10,000,000 fine is stipulated in case SoundExchange or the RIAA attempts to enforce copyright laws on my behalf, rather than the possibility that they might be subject to litigation.

Specifically, the license I would like should impose a $10,000,000 fine on SoundExchange in case it attempts to collect royalties on my behalf paid by services making ephemeral phonorecords or digital audio transmissions of sound recordings, or both, under the statutory licenses set forth in 17 U.S.C. 112 and 17 U.S.C. 114 or if it attempts to distribute the collected royalties to me pursuant to 17 U.S.C. 114(g)(2).

Glenn says:

The sound of silence...

In the mid- to late-’80s I started buying CDs. Over the next few years I bought hundreds. But when the RIAA started suing everyone and their brother over a decade ago, I simply stopped. I stopped paying attention to the music industry and its “product” altogether. I’ve never downloaded anything either. By treating their customers & fans like enemies, that’s what they’ve created. People now hate–literally hate–the music industry (even many of the artists). They have nothing I need; and they’ll never get another penny out of me. Music won’t die, but the music industry as it is today will… and they did it to themselves. Good riddance.

Marcel de Jong (profile) says:

I will keep up my financial support for Soma.FM

I love that radio station, and would hate it, if they go under because of plain and simple greed and the shortsightedness from the labels.

And if anyone of those labels start crying about “Think of the poor artists.” I’d suggest they do the same, and sell off their cars and second and third houses, and give that money to those ‘poor’ artists.

BTW, MTV Cribs is really a nail in the coffin of that argument. “Poor” artists indeed.

PPNSteve (profile) says:

Death For Webcasters

Us very little guys are not even considered in all this madness… It seems all they seem to care about is profit and business models.. what about those of us that this webcasting we do isn’t for profit? its for fun, friends and so forth..
we have 0 chances of being legit as we’re not addressed in these new rates or hell even in soundexchange’s policies; we’re considered that same as big inet radio (live365, pandora) when we’re not ‘big’ or don’t earn anything nor charge a fee.

the whole thing is stupid and lame beyond madness.

Andrew L says:

Hold on everyone

After reading this post yesterday and getting pretty upset over this myself, I did quite a bit of reading around and have come to the conclusion that people may be misunderstanding the deal that was cut.

Ironically, I had to go SoundExchange’s own site to find this tidbit, which I didn’t see in any of the blog posts on this:

“Are all pureplay webcasters required to sign?

While this offer is available to all qualified commercial pureplay webcasters, they can opt not sign, and instead pay the prevailing CRB-set rates. Rates for 2011-2015 will be set in a pending proceeding.”

In other words, this particular deal – the $25,000 fee with the percentage royalty structure – seems to be an opt in sort of deal designed specifically for Pandora and other large companies that cannot, because of their huge volume, afford the traditional rate structure. It may not, therefore, be the end of the line for indie stations if I am understanding this correctly.

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