Online Radio Stations Strike Royalties Deal With Music Labels

WASHINGTON — The future of Internet radio appears more secure after a handful of online stations reached an agreement Tuesday to head off a potentially crippling increase in copyright royalty rates.

The deal is the product of two years of negotiations between webcasters and copyright holders. In March 2007, a ruling by the federal Copyright Royalty Board dramatically raised the rates that Internet radio stations must pay artists and recording labels _ leading many online radio stations to warn that the new rates would put them out of business by eating up as much as 70 percent of revenue.

At least one popular online radio service _ Pandora Media of Oakland, Calif., which derives much of its revenue from advertising _ said the new agreement will help ensure its survival.

"For us, it's hard to overstate how significant this is," said Pandora founder Tim Westergren. "It was either this or an ugly alternative."

The revenue-sharing deal announced Tuesday is between SoundExchange, a nonprofit that collects royalties for recording copyright owners from digital radio services, and three smaller webcasters: radioIO, Digitally Imported and AccuRadio.

Westergren said Pandora plans to sign on to the new royalty terms too. And Jonathan Potter, executive director of the Digital Media Association, which represents webcasters and other online media companies, predicted some of the association's other members will also join the deal.

Under the agreement, large commercial webcasters will pay copyright owners up to 25 percent of their revenue or a "per-performance" rate that is below the rates set by the Copyright Royalty Board. Smaller webcasters will pay either a percent of revenue or a percent of expenses.

In a statement, SoundExchange executive director John Simson said the deal will give webcasters a chance to "flesh out various business models" and give artists and other copyright holders the opportunity to "share in the success their recordings generate."

Lawmakers also praised the agreement. Congress has already passed legislation making any deal reached between webcasters and SoundExchange legally binding. Because Internet radio companies operate under a government license, these deals need congressional authorization.

Already this year, SoundExchange struck new online royalty agreements with the National Association of Broadcasters and the Corporation for Public Broadcasting.

Traditional AM and FM broadcasters are exempt from copyright royalty rates for over-the-air radio play, because that airplay is thought to provide free promotion for artists and labels. But the broadcasters are subject to the new rates for any songs streamed over radio station Web sites.

Comments

[EnuffsEnuffAlready]

Would have been nice to see Last-FM in the top graphic. It's miles ahead of some of those shown.

[Palemoon]

Funny, I bet if online and satellite radio filed a lawsuit, they could get all of this overturned. After all, it's already been legally decided that am/fm radio, as pointed out in the article, is tatamount to free publicity for the artists and the label.

Funny how even today, labels still buy off disk jockeys in order to get their artists music played because they know it sucks so much they'd never be heard in the first place.

My local station is Q106. Think it's a Cumulus owned corporate station now. Back in the old days, they were willing to take a chance and play anything that was considered good. Nowdays, they are told what to play by the Corps.

And it's not like I'm going to hear real rock n roll like Epica, Tarja, Nightwish, Lacuna Coil, etc. All we get is the same crap, shoved onto the airwaves 24/7 without anything ever new coming along, unless it comes in the form of a big payoff by Sony, BMG, EMI, WMG, Universal, etc, etc. And even then, it's still what THEY want us to hear, and not what WE wanted to hear.

RIAA needs to be outlawed for the fascist entity that it is.

[700rpm]

"RIAA needs to be outlawed for the fascist entity that it is."

Amen, brother.

[David2]

Amen. Unfortunately they have the money and they have bought the legislators that control this.

AND our court system up to and including the Supreme Court has a maddening track record of outright dismissing such lawsuits by simply saying "the government approved it therefore it's okay".

[nylibgrrl]

Yes, I don't see what the difference is between a netcast and terrestrial broadcasting in terms of publicity and promotion, generally. But obviously since independent and small-label artists stand to benefit more from the 'net than major-label acts, the Big Boys can't have that. Heaven forbid anyone else should get a piece of the pie.

[RevBookburn]

It's free promotion for a song to be played on net radio as well. This deal may not hurt the big giants, but it's a rip-off adn threat to smaller and independent net radio streams. Screw these deals and those who make them. Rev. Bookburn - Radio Volta

[denisjh]

Am I following this correctly? The internet stations could not make a profit (which is their goal the same as it is for other radio stations) because they had to pay 70% of the money they earned into licensing the content they used? 30% profit was not enough for them? OK, call it 10% profit (they have to cover their servers, salaries, stock options, club memberships etc.) So greedy stations and greedy producers cut a deal. How is that any different or better than the worst media giant?
I'd jump at a del where I take somebody else's creative work, sell it to somebody else (the advertiser and lsitener) and keep 30%. That's like printing money.

[cruzy]

No, you aren't following correctly. To begin with, you are confusing revenue with profit. Revenue means the gross amount you take in, it doesn't mean your profit after expenses. So, paying over 70% of your revenue doesn't mean you get to keep "30% profit." But, I think you seem to realize this already, as you make a concession that there are expenses for broadcasters. However, you then proceed to pull figures out of the air (or your ass) and make the unsupported claim that broadcasters take in a 10% profit. Based on what financial figures which you've seen? Also, even assuming they do make a 10% profit, what is your comparative benchmark that this profit level is a "greedy" amount? Moreover, selling others' "creative work" is no different than selling any other product made by someone else. Car dealerships don't make the cars they sell, nor do clothing stores make the clothing they sell. I fail to see why "creative work" is any more or less valuable than any other product contracted out for resale. Finally, why complain about a deal that the copyright holders agreed to? Apparently, they find this to be a profitable arrangement for them. It's a free market, and people are free to sell their products for whatever price they wish to. If you find the internet broadcasting business to be such a wonderfully profitable business, then buy all means start up your own station---after all, as you claim "it's like printing money."

[cdembrey]

There are very few LARGE internet radio stations. Most are one step above a hobby, where the owner could make more money working for someone else. Radio Paradise http://www.radioparadise.com/ is a husband and wife, listener supported, operation ... no advertising.

Many of these stations have very few listeners, but they do fill a niche -- metal, trance, techno, jazz, blues, folk, classical and reggae that you won't find on your local dial.

[Tazru]

As usual, another pantload from corporate music.

Another place where cutting the fat would help the Artists that produce the music to begin with. Administrative and Management costs are too high in almost every aspect of our lives, much of the activity does not add any value to the products, therefore should not be receiving the monies they currently divert from the Artists. How did the paper-shufflers con enough of us into thinking we needed so many of them, and they were so valuable?

Every time in the last 20 years a service was set up for Artists to directly access the Listener it has been destroyed by one of the Big Corporations(CBS). I'm not that interested in Pop Music, so every time a take-over occurs I have to start looking again for the next independent venture.

[cdembrey]

I am listening to Daft Punk on French Kiss FM. When was the last time you heard Daft Punk on your local radio station. Does RAII represent the French label that Daft Punk records for??? Do they represent German, Polish, Dutch, etc labels??? Internet Radio is World Wide!!!

[doctordawg]

Oh, great. Furck the musicians out of their due one more furcking time to "save" internet radio and the DJs who go home to their own bed every night.

Go ddamm it, we CREATE the thing your are trafficking. Now YOU need time to experiment with business models while we go furcking BROKE. The music will be "free" when musicians and songwriters can get free food, free medical insurance, free mortgages, free clothes, let alone free strings and guitars.

And all the pencil pushers and lawyers said "amen".

[blindjester]

I agree with some of what you say, but almost all the music I own I found by listening to radio or Sirius or Pandora. Then I go down to Zia and buy it.

The snippets on Amazon and elsewhere are useful, but where do you hear about the music before you go look it up?

The artists need to get paid more for their work, but putting internet radio out of business would not help them in any way. Getting a piece of internet radio seems like a good solution.

[cruzy]

I don't think anyone is demanding "free" music (except for goofy people who don't understand that products take time and money to create). However, no one forces you to cede control of the production and distribution of your music. In this era of the Internet and ultra cheap CD manufacturing, it is quite feasible even for an unknown musician to entirely manage the production and distribution of his or her music. If you think you aren't getting a good deal with the sort of licensing arrangements you criticize, then manage your own production and distribution. For example, why not start your own Internet radio station? Play your own music, and perhaps the music of other musicians you know who wish to participate. Get people listening to your music, build a fan base, get advertisers, etc.

Finally, "pencil pushers" and lawyers are also selling a product--their professional services. So, unless you are paying them to represent you, it's not their job to take care of your interests.

[700rpm]

OK, I can sort of get with your point, 'cause I am also a musician.

But how do we justify charging Weenie Juke http://loudcity.com/stations/weenie-juke-radio/tune_inn) royalties or rights to music that was recorded before 1930? This is where it gets sideways: we are paying the people who own the rights to music, not to the artists themselves, who got basically nothing for their efforts. They made the music because they loved the music, and hoped they might get something for it, but they and their recording companies (if they had one) are long, long gone. This music should be in the public domain, except for greedy lawyers and corporations who futzed the copyright laws from 27 years to 97 years (or something in that range). Thank the Disney Corporation for that; they wanted to protect the money stream Mickey Mouse generates for them. Really! And thats how the copyright laws got twisted.

[ckesegi]

Dude. KEXP here in Seattle (and Ohio's WOXY) get's some of it's money from local sponsors, but largely from listeners during fund drives 3 times a year.

Hardly the multimillion dollar juggernauts like ClearChannel or Cumulus or what have you that can afford to pay the artists, who are never independent, their due royalties.

Independent stations are the backbone of the underground music community. Do you want to see them die, and have absolutely no exposure?

Suit yourself.

[slobone]

Yeah, the same thing happened when radio was invented and people could hear music for free. Record sales plummeted and musicians starved. Right?

[AvalonMike]

Only performers and the original authors should be entitled to fees. The others, including the RIAA, are just carpetbagging thieves.

[700rpm]

Truth.

[rayonfog]

This is a ridiculous statement. So how do these authors and performers promote their product?

I've been in the music business for 20+ years, first on the creative side as a producer/engineer, now on the distribution side as an owner/operator of a background music service. So you propose that I should just fold up shop and let the "performers and original authors" take care of getting their music played in the hundreds of thousands of restaurants, hotels and retail establishments throughout this country? Sure, they've got the time and expertise to do that when they aren't creating. While they are at it, they can handle installation to! Absurd.

As it stands, I pay $25,000 per year in licensing fees, $10k of which goes to SoundExchange, which is their minimum statutory fee, regardless of my revenue. And I'm a SMALL company servicing only a couple dozen establishments. Imagine what PlayNetwork pays! This deal absolutely had to be made, for the survival of BOTH the creators and the distributors. Without distributors like us, the creation of music is little more than a hobby.

[hegdehog]

The RIAA is an advocate for the artist. Jesus--at least learn a little before you start shooting your mouth off. Artists' rights are represented by the RIAA. That's what they do.

[mediamarv]

Now, speaking as a former dj and music director, way back in time, RIAA had no problem at all with the record labels giving out free copies (dj copies stamped on them) to us, as many as we wanted sometimes in order to influence our on air choices. Basically we were bribed (got lots of lunches too) and then we took the dj copies to the used record stores where we sold them. So, anyone not wanting to pay full price (which was price gauging even then) would just buy the promo copy and unfortunately the artist would lose out on the 10-15 cents that was the artist's share. All that was fine with the RIAA- the price of doing business.
Music over the internet is exactly the same as broadcast: it's entertainment that enables us to get a copy of music that we like. It's all promo for selling "product" which is how the RIAA lawyer get paid. RIAA is not trying to get the artists more money, they are only trying to keep up their cash flow.
They are too dense and behind the curve to realize that the internet (and internet radio) is one of the biggest marketing devices ever invented. But all they see is the potential of losing all that money they have been makingfrom outrageous CD prices all these years..
Whew! Didn't mean to go on a rant but I really get annoyed when my favorite form of music listening is threatened.

[You]

As I recall, one of the issues that divided radio from internet streaming was the way royalties were calculated: radios just play, but computers copy. So the internet royalty was based on one copy for each listener.

Cassette tapes started the whole thing and the RIAA is finally gonna get their copying surcharge. Or not, it seems, fortunately.

[hegdehog]

You call that a bribe? You're a pretty cheap date. And I doubt you were a DJ in any major market, because if you had been, you'd know who the RIAA are and what they do and you'd understand how promos and pluggers work.

[imusintheevening]

One could make the argument that recordings are nothing more than advertisements for the performer and in that vain performing artists benefit from the advertisements by performing for money. Royalties are excessive and have done harm to some performers.

A good question is how much of this money goes to industry parasites.

[NewPublius]

One could make that argument but they would be wrong. Many artists don't perform live and the only way they get paid is by the royalties. This is especially true of songwriters who do not perform their material.

Not every musician can afford the promotional help that Internet Radio provides.

Musicians love to share their music, they just need to get paid. Prince learned this a long time ago and now he self-produces and distributes all his own stuff.

[blueknight41]

all it basicly does just puts the little guy who shares music out in the cold FO RIAA

[fairness4all]

It was the last paragraph that surprised me:

"Traditional AM and FM broadcasters are exempt from copyright royalty rates for over-the-air radio play, because that airplay is thought to provide free promotion for artists and labels. But the broadcasters are subject to the new rates for any songs streamed over radio station Web sites."

Aren't the "traditional AM and FM broadcasters" making enough cash to pay royalties? Why do they get a pass? Could someone explain that?

[olderdem]

The explanation is easy. Many in congress and the senate receive huge donations from the"traditional" terrestrial radio companies. So yes, they are making enough cash to pay royalties, but it less expensive to just pay your local congressman.

Same with healthcare. Cheaper to payoff your congressman than to reduce costs.

[jsgaetano]

It's mainly because big-donor conservatives own the traditional media outlets.

There was a pretty revealing chart that comes up every so often. Essentially, EVERY media outlet (print, TV, radio, cable) in the US is owned by one of three companies, either directly or as a subsidiary.

[RobinSeattle]

Terrestrial radio pays no royalties. So why should internet radio? Both basically provide free advertising for musical acts. This is all just part of the RIAA's jihad against the internet.

Terrestrial radio is over and has been for at least 20 years. Why is anyone still listening to it?

And my favorite internet radio outlet is Live365.com (listening to it right now, in fact).

[VegetableMan]

can someone please explain this to me:

"Traditional AM and FM broadcasters are exempt from copyright royalty rates for over-the-air radio play, because that airplay is thought to provide free promotion for artists and labels. But the broadcasters are subject to the new rates for any songs streamed over radio station Web sites."

why is a song played on an internet radio station any less of a promotional device for an artist or label than the same song being played on am or fm?

[buckfushlv]

not defending traditional radio,but they do have to pay fees to ASCAP,BMI and CECAM.
even bars, nightclubs disco's as well have to secure lic.from these shakedown artists for the last
65 years.

nothing new just a varation on a theme

[cdembrey]

The main difference is that many artists who never get played on AM/FM get played on internet stations like Radio Paradise, TechnoBaseFM, Groove Salad, Frenck Kiss, etc, etc.

If you don't like Top 40 radio, the internet has many alternatives. Here are some lists of stations http://dir.xiph.org/index.php and http://www.shoutcast.com/ Check them out and see what you are missing!

[RobinSeattle]

Thanks for that. I hadn't heard of http://dir.xiph.org/index.php

I'll check it out.

Internet radio is definitely where it's at.

[fairness4all]

Thanks for the links.

Now I'm reminded of one of my favorite quotes by Steve Martin (I think) who said "I like BOTH kinds of music - Country AND Western!"

[fairness4all]

Great minds think alike. I was curious about the same practice but didn't see your post until I refreshed. The other question I have is: why is free promotion a reason for an exemption? Aren't the tradtional stations getting free material?

[Griffon]

Another free music archive is freemusicarchive.orgg) curated by, among others, WFMU and KEXP.