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Right now, there is something of a war going on between the RIAA, SoundExchange, the CRB, and internet radio. It's a big, complicated issue, and I'm thinking it's probably pretty hard to tell what exactly is going on from a bystander's viewpoint, so I thought I'd try my hand at explaining what's going on.
The issue is that on March 2nd of this year, the CRB (that's the Copyright Royalty Board, which is a 3 judge panel put together by the Library of Congress) set down new royalty rates for internet radio. The new rates aren't just a little bit different – they are night and day from the old ones. Where the rates used to be a percentage of the gross revenue of each station (approximately 10-12%), the new rates were set with a per listener, per song, per stream fee model, plus an additional $500 per station fee. The number assigned actually looks tiny ($0.0008 per song, per person, for 2006, increasing yearly until it reaches $0.0019 per song per listener in 2010), but in reality, it means an incredible increase in rates. For my station, SomaFM, this means that for 2006, during which year our gross revenue was less than $200,000, and on which we already paid approximately $20,000 in royalties, they are telling us we now owe about $600,000. Or more than 3 times what we got in donations. Just to keep things in check, it's important to know that I do not, nor have I ever, gotten a salary from SomaFM for my work. Our donations go directly towards operating costs. (Bandwidth is expensive!)
So, naturally, we objected to these new royalty rates. We can't stay on the air if these rates are kept in place, simple as that. We filed an appeal, as did NPR (National Public Radio), Pandora, IBS (Intercollegiate Broadcasting System), and many, many others. On Monday, April 16th, the CRB flatly denied all parties' appeals for a rehearing. They gave a set of reasons why that almost exactly mirrored SoundExchange's reasons why they thought we shouldn't have a rehearing.
SoundExchange claims that the ruling and the rates are fair. They repeatedly tell us that "The decision is a reflection of the need for artists to be fairly compensated for the performance of their work by webcasters who benefit -- financially or otherwise -- from their talents." I want to know, just how is it that I benefit? I don't make any money running Indie Pop Rocks! I've been working hard on my station for nearly seven years, and Rusty's been working hard on SomaFM since 1999. All for free. All to promote music we think doesn't get heard, independent artists that we like, unsigned artists, little-known artists, and niche genres. The artists, labels, managers, and promoters all beg me to play their music on my station, because it gets them exposure. Their music wouldn't ever be heard on a traditional ClearChannel FM station. Moreover, we've been paying the RIAA's royalty fees for over five years! And we pay ASCAP and BMI, as we have always done. We want the artists to be compensated. We're not against paying royalties, far from it. We just need the royalties to be at a rate we can afford to operate under. I think it goes without saying that it won't benefit anyone involved to have us shut down.
Perhaps, now, you're asking, "Who is SoundExchange?" Good question. SoundExchange is an entity created by the RIAA to collect artist royalties on behalf of the RIAA, and then distribute them to the artists who've earned them.
Who is the RIAA? The Recording Industry Association of America is a trade group headed up by the four major labels (Universal Music Group, Sony BMG Music Entertainment, EMI Group, and Warner Music Group), representing the major labels, and claiming they represent all recording artists.
Together, SoundExchange and the RIAA do things like charge royalties on behalf of American major label recording artists. They are also allowed to collect on behalf of other artists, but there's a minimum amount that you, as an artist, have to make in order for them to be required to pay you. Oh, and they have to be able to find you. Apparently they have a really hard time doing that. And the company is anything but transparent. Why? Well, probably because they're allowed to pay all their internal operating costs, including lawyer's fees, before they pay the artists out of the monies they collected for the artists. Mind you, these are the people that have been suing grandmas, 13-year-olds, and college kids all these years for downloading music off the internet. They don't want the artists to know just how much money they've collected on their "behalf" that they've then spent on lawyers and Christmas bonuses, is my guess. The rate they've been suing college kids at in recent years would make you think their lawyers were free – oh, wait. To them, the lawyers are free! You, the artist, are paying for them! Now, doesn't that make you feel warm and fuzzy inside?
Meanwhile, the RIAA has made a sugary-sweet deal with satellite radio, who also fall under this ruling. They gave them a nice 7.5% of their gross revenue royalty rate. OK. Do you remember how at the beginning of this I told you that internet radio's old rates were 10-12%? And that was deemed too low by the CRB, who increased them so dramatically? But now 7.5% is totally reasonable for a large money-making business like satellite radio? I'm completely confused.
Were you wondering about traditional terrestrial (AM/FM) radio? Yeah, they don't have to pay any of these royalties. Why? Because of a law set in the 1930s that the RIAA can't touch. Yet.
OK, so back to the issue at hand. Obviously, almost all internet radio is going to have to shut down now because the CRB wouldn't give anyone a rehearing. The first payments are due May 15th, and they're retroactive to January of 2006, which means if the ruling holds, a lot of us are already in deep, deep debt to the RIAA. Many webcasters are shutting down early. Many others are thinking of May 15th as D-Day.
We (SomaFM) don't want to shut down, so instead, we joined a new coalition called SaveNetRadio (www.SaveNetRadio.org). Our coalition is made up of artists, labels, webcasters, and listeners who want to save internet radio. We managed to put a new piece of legislation together, a bill called the Internet Radio Equality Act (H.R. 2060), and it was introduced to Congress by Representatives Jay Inslee (D-WA) and Donald Mazullo (R-IL) this past Thursday, April 26th. In it, we're asking for a rate structure that is fair, so that we can stay on the air. Rusty Hodge (the General Manager for SomaFM) and I are heading to Washington, DC this week to meet with Congresspeople and try to gain support for the bill.
What we need right now
is for everyone who believes
internet radio should be treated fairly
to call their Congressperson
and ask them to support
the Internet Radio Equality Act. |
What we need more than anything right now is for everyone – musicians, artists, listeners, grandmas, college kids – who believes internet radio should be treated fairly by the RIAA, SoundExchange, and the CRB, to call, write, and/or fax their Congressperson(s), and ask them to support the Internet Radio Equality Act (H.R. 2060).
So, how can you find out who your Congressperson is, and get their phone number? Just enter your zip code into SaveNetRadio's handy Congressperson finder (in the grey box that says "CALL NOW"), and they will give you a page with your Congressperson's name, phone number, hours, and a list of "talking points" that you can refer to during your phone call.
I fear that if we don't get our bill passed, the RIAA will think it has a green light to go forth and do a lot more damage. Every voice that speaks up to help internet radio (and therefore, independent artists) counts!
Posted April 2007
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