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:: New Retroactive Fees Could Silence Many Small Webcasters

By: Randall Krause (randall at smallwebcaster dot org)
Saturday, March 3, 2007 5:00:00 PM

  

The new compulsory license fees for U.S. Webcasters were announced on Friday, March 2. As expected, all arguments put forth by Webcasters were rejected outright by the Copyright Royalty Board.

A panel of industry representatives including DiMA had requested lower royalty rates -- on par with those owed under statute to the songwriter and music publisher societies such as BMI and ASCAP. In addition, they emphasized that higher royalties would not only impose an unrealistic barrier to entry for new Webcasters but that the economic consequences could prove harmful if not fatal for the still nascent Webcaster industry. However, the copyright royalty judges disagreed with each of these assertions and, in a 100-page long ruling, opted instead for significantly higher rates as recommended by SoundExchange.

Unlike the Small Webcaster Settlement Act of 2002 which provided reasonable license fees for eligible small commercial Webcasters based on a percentage of revenue, the new rate schedule set forth by the Copyright Royalty Board did not take into account any provisions of the Small Webcaster Settlement Act (which expired December 31, 2005). All Webcasters -- with only limited consideration for commercial status and operational scale -- must now pay exorbitant fees based on every individual performance of music. Even worse, these rates apply retroactive to January 1, 2006.

To gain some perspective on this issue, below is the newly mandated fee structure which applies to all non-interactive Webcasters:

Annual Minimum License Fee [1]:
$500 per channel (2006-2010)

Performance License Fee [2]:
$0.0008 per-performance (2006)
$0.0011 per-performance (2007)
$0.0014 per-performance (2008)
$0.0018 per-performance (2009)
$0.0019 per-performance (2010)

[1] There exists no definition of what constitutes a "channel" or "station"
[2] The ephemeral license fee is included in the performance license fee

Note that the scope of this latest decision is strictly limited to Internet transmissions, and would conveniently exclude all other digital mediums such as satellite radio, HD radio, and cable which pay separate royalties.

For an average small-commercial Webcaster, the 0.08 cent per-performance fee alone equates to well over 110% of gross revenues. That is, even before deducting all other operating expenses, including fees owed to ASCAP, BMI, and SESAC, a typical station would pay upwards of $450 per month to SoundExchange alone. That is almost a triple-fold increase overnight! Then, factor in the $500 per-channel minimums for such multi-channel services as SomaFM, Live365, and Mercora and it clearly becomes too burdensom for even the most "efficient" Webcasters to absorb these outrageous fees.

In essence, no Webcaster can possible stay afloat more than a few weeks (if not mere days) following the Copyright Royalty Board decision. In the worst case scenario, should this ruling be allowed to stand without appeal, it will sound the death knell for a significant portion of the online radio community. Hundreds if not thousands of your favourite music streams will suddenly disappear completely from the Internet airwaves.

Randall Krause
Executive Director
Small Webcaster Community Initiative
randall@smallwebcaster.org



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