05:08 AM

SaveNetRadio rejects SoundExchange offer on royalties

I wrote a piece about the oppressive net radio royalty rates for the Metro newspapers (check out Sound Salvation) only to get scooped yesterday by SoundExchange's offer to help out small webcasters. (That's the problem with print - you lock the issue down, send it off to the printers and wait for the drops; a weekly is days behind the news cycle.)

(Photo of Bill and Michelle Goldsmith of RadioParadise.com)

The background if you're only dimly following these things:

The new royalty structure--which was proposed by SoundExchange, the organization that collects performance royalties and distributes them to record labels and artists for a roughly 15 percent take off the top--would raise per-stream performance royalties from .07 cents per stream in 2005 to .19 cents in 2010, tripling the monies that larger webcasters pay. More importantly for small webcasters, the new rules do away with an option to pay a percentage of gross revenue. That effectively increases the rate small webcasters pay by a stunning 1,200 percent.

So yesterday SoundExchange made this offer: Retroactive to Jan. 1, 2006 and continuing only through 2010, SoundExchange would allow small webcasters to pay a proportion of their revenues as royalties, rather than charging a royalty per song per listener. That Draconian scheme would still apply to "non-small webcasters." The rate for smallcasters is 10% for revenue up to $250,000 and 12% abover that amount, up to a ceiling.

Today, SaveNetRadio dismissed the offer as a scheme that would hasten the death of net radio (read the press release.)

“The proposal made by SoundExchange today would throw “large webcasters”
under the bus and end any “small” webcaster’s hopes of one day becoming big,”
SaveNetRadio spokesperson Jake Ward said. “Under government-set revenue caps,
webcasters will invest less, innovate less and promote less. Under this proposal, Internet
radio would become a lousy long-term business, unable to compete effectively against
big broadcast and big satellite radio – artists, webcasters, and listeners be damned.”

“Labeling webcasters small or large is a distinction without a difference,”
continued Ward. “Two of the most prominent webcasters, Pandora.com and Live365 are
models of industry success but would be bankrupted by the CRB and by the
SoundExchange proposals. Pandora employs 100 people in an enterprise zone in
Oakland, California, but its popularity would put it out of business. Similarly, Live365,
an aggregate webcaster that provides a platform for more than 10,000 individual
webcasters, has a staff of fewer than 40. Though clearly small as a business, Live365’s
enormous importance and scope among webcasters would force them to shut down.”

SoundExchange concedes that the offer was made in response to the rising support for Congressional legislation to overturn the new rates. Lawmakers have received a flood of constituent communication about the issue. Does it make a comment about our society that people are calling congresspeople about net radio but not Darfur? Maybe, but I argue that people have legitimate grounds for being concerned about leisure-oriented apps like net radio.

Why, one might wonder, are the grassroots ringing their senators' and representatives' phones over something as seemingly trivial as online music, when the war in Iraq continues to rage, when the genocide in Darfur shows no sign of ending, when climate change threatens to turn San Francisco into a sandy little island? It's not, it turns out, trivial at all; it has to do with the culture and texture of our lives.

"I think people want control," says Laurie Joulie of the Roots Music Association. "I think they see in all facets of their lives that corporations have had too much control over what they watch on TV, what they hear on the radio, the politics of the country.

"And I think they just want to take control back."