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CRB ruling goes to Federal Register; appeal window opens for disputing webcast rates

copyright royalty board canvasThe Copyright Royalty Board (CRB) ruling of new webcast royalty rates to labels (also handily known as Determination of Royalty Rates and Terms for Ephemeral Recording and Webcasting Digital Performance of Sound Recordings [Web IV], and available for your reading pleasure here), was published in the Federal Register yesterday, per process schedule.

The publication opens a one-month appeal window. During this time, participants in Web IV (which is what the whole two-year rate-setting process is called) may file litigation which contests the ruling. Appeals (if any) will be heard in the US Court of Appeals in Washington DC, according to broadcast law attorney David Oxenford.

SoundExchange

There is unhappiness with the CRB’s new rates, which were announced in December and took effect January 1. SoundExchange, one of the major litigating participants, which represented music labels and which is charged with collecting label royalties from webcasters, is the likeliest entity to consider an appeal. Back in December, hours after the rate announcement, SoundExchange expressed disappointment and promised to consider options:

“Music has tremendous value and is the core foundation of the webcasting industry. It’s only fair that artists and record labels receive a market price when their music is used. We believe the rates set by the CRB do not reflect a market price for music and will erode the value of music in our economy. We will review the decision closely and consider all of our options.” –SoundExchange, December 2015

That was a reaction based on the CRB’s rate of 17 cents per 100 track plays for Pandora’s non-subscription internet radio streams, and other services in the same model. SoundExchange had litigated in favor of a much higher rate.

Additionally, SoundExchange was upset at the rate reduction for traditional radio webcasts, which had been paying 23 cents per 100 plays, and were given a reduction to the 17-cent rate. About that, SoundExchange stated: “Additionally it is deeply disappointing to see that broadcasters are being given another unfair advantage. In their terrestrial business they do not pay a dime for the recordings they use and now this $17B industry will receive an additional huge subsidy on the music they use in webcasting.”

Small Webcasters

Nobody is less happy with webcaster royalties in 2016 than small webcasters. This business group, defined as earning less than 1.25-million dollars per year, enjoyed discounted rates that were established in 2009, in a specially created law which expired on December 31, 2015.

Boom — their rates shot upward by multiples of the previous cost, depending on listening hours and number of tracks delivered to individual listeners. We have heard anecdotal reports of 14x cost increases. Today we received a copy of the annual fundraising appeal sent by Radio Paradise, a highly successful, veteran small webcaster. In it, founder Bill Goldsmith states that his station’s royalty cost rose 300% on January 1. Many hobby webcasters pulled the plug on their stations. Internet radio platform Liveh365, host to many such stations, itself went out of business in March.

For small webcasters hoping for a remedy, the appeal window will not provide it. Appeals are for Web IV participants only — that means companies which undertook the expense and effort to litigate for royalty rate outcomes. No advocacy group for small webcasters existed, or, at least, at sufficient scale to afford the expensive participation process.

As David Oxenford succinctly explains about the appeals court: “It is focused on what was argued at trial, rather than what was not.”

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Brad Hill

11 Comments

  1. The music broadcast industry makes money from music it does not own and so is vulnerable to the demands of those that do own music. You do not find very many businesses that would attempt to be profitable with that sort of limitation.

    The fiction that music is not really property has grown weaker with time. The day is coming, even in the United States, when the owners of the music will get what they want.

    It is even possible that there will be a new broadcasting model that is run by the music owners for the music owners.

    The opportunity to have it otherwise is galloping out of the barn. 

    There is hope however; one only has to learn to read, write, perform, record and publish music.

  2. I can only say if I as a broadcaster do not play your songs, you don’t get
    heard and exposed as an artist. You can’t have it both ways.
    You complain when I don’t play your music and then complain when you want
    me to pay for your exposure.

  3. Thanks for the comment Ralph. You point out correctly, that my interest in broadcast revenue is as an artist. And as an artist I hope you understand I don’t want exposure if it doesn’t generate a living for me.

    I am sorry to have to say that your offer of exposure can’t compete with my desire to take a rather large share of the money you would make by monetizing the broadcast of my music.

    I hope that doesn’t seem unreasonable. And I know… if that’s what I want, maybe I should start my own radio station.

    hmmmm… wait a minute…

  4. If you are a small hobby station and are caught in this money grab that sound exchange has created you basically have seen your costs rise when in most cases EVERY hobby broadcaster loses money every month and is not based on any revenue or minimal revenue. How were we supposed to be heard when the cost of litigation is based on the mega music sourcing like spotify or Pandora. To destroy a business such as small webcasters who really do cause additional revenue by playing music that gets bought and not have a system based on revenue generated is absolutely ludicrous. I do not mind paying a fee as i did before that was still painful but to do this is not only unfair but I believe hurts the artists more then helps them.

    You see most do it for their love of music and are not trying to take money away from the artists at all. We promote their MUSIC with love not dollars. I understand free market economies of scale but to completely wipe out this segment because we cannot appeal or have this negotiated is reckless and short sighted.

    If by some amazing chance we make any money to share that would be equitable or a base fee as it was before but to lump us in with large stations is not only unfair but cause people to usurp the system as they cannot afford the ridiculous pricing we are asked to pay.

    There has to be someone who stands up for the small broadcasters that love internet radio which has been a growing segment of the broadcasting market. WE DO NOT MAKE ANY MONEY period. We have no voice and that sadly is about to kill all of us when we do it for fun or love of music. UNFAIR!

  5. Thanks for those comments James. We are much in agreement actually.
    In this complex business of getting music to the listener, I am not at all being made happy by the elimination of the small broadcaster nor do I expect to get rich from them. But, big guys can and should pay big dollars.

    I personally benefit from the work being done by Sound Exchange but am against the elimination of a graduated system based on revenue generated. In fact it should have been expanded.

  6. As a broadcaster (both in FM for other stations and the web), and as someone who works with artists and producers, I have no issue paying fees at all. BUT, I do believe strongly that licencing rates should be in proportion to the broadcasters audience, and revenue.

    Luckily here in the U.K PRS and PPL operate such licencing tariffs, and have done for many years. But it is such a shame that the U.S doesn’t, and in doing so robs both artists, and small webcasters of the chance to earn revenue.

    Real webcasters don’t want a free ride, but they do want a fair one.

  7. I’m not sure I understand why SoundExchange doesn’t simply charge a percentage based on revenue of the webcaster… why two standards, that is, audience size and revenue or expenses. I guess they feel we’ll cheat… which tells me they are in a really negative and defensive mindset.

    Here’s the question: If SE/CRB and the music industry’s objective is to get a share of webcaster revenue from playing their music.. then be honest. Why not be realistic and fair by charging a reasonable percentage of revenue since a share of revenue is what they are complaining about that they do not get? If the webcaster isn’t making any money off the music.. how can they charge?

    As it is now, tens of thousands of webcasters don’t make any money. Our network, for example, has been on the air for ten years with zero income so far. our audience is growing, but we have yet to earn a dime. In the meantime, the system set up is destroying any momentum which will eventually pay them. That’s plain stupid.

    They need to revisit the Royalty concept including patents and other legal licenses. Often there is an upfront fee for the use of patented technology.. plus a percentage of revenue. But NOT a percentage that is so high that it requires the business to shut down. That’s greed run a muck.

    They should only charge a minimum fee (like before), and a percentage of revenue, similar to ASCAP, BMI and SESAC has done for decades with terrestrial radio. All this dancing around with bureaucratic thinking, rules and a complicated system is a waste of everyone’s time and money. The way they approach this whole thing smells like the IRS code and inside the beltway thinking.

    If you can’t write it on the back of a napkin… throw it out and start over. Keep it simple, keep it fair, keep it mutually beneficial… otherwise, everyone loses.

    The revenue SE/CRB is generating is only temporary if they end up destroying the industry. You only need to look at Washington DC’s thinking about how to regulate business and you quickly realize why so many small businesses can’t make it today.

  8. Rich, no need to project negativity and defensiveness on to Sound Exchange. I think the audience size and revenue data could bring about a fair arrangement and yes, more needs to be done.

    The licensing tariffs legislation in the UK which Matt mentions in his post might offer a model for change in the United States; if there ever was genuine political interest in equitable redistribution that is.

    The recent CRB changes will not destroy the industry because the industry is global. The US is certainly a very large player but it has perhaps has the furthest to go with it’s regulations. It will also need to overcome a long history of refusing to recognize cultural product as property.

    There is strong possibility that the global corporations, Spotify, Pandora, Google, et al, will succeed in moving their monopolistic business model into other large markets around the world. They are having success in America; let us hope it stays there until the courage to regulate fairly sees the light of day.

  9. Of course !
    Why would small webcasters be considered ?
    We only paid royalty fees for 15 years while the corporate thieves known as terrestrial radio paid nothing !
    And the Music Mafia CRB and their panel of 3 judges who were not elected by their peers but appointed by the money grubbing thieves sit right beside them laughing at all the little guys closing their doors one after the other.
    This country is pathetic !
    It has become a greed breeding ground ! and all the fatcats want is more and more and more till you bleed to death !
    Im sick of it !
    All the artists who are whining and moaning and groaning like the spoiled Brat Taylor Swift !, Just Shut up !
    If it wasnt for small webcasters playing your music and making your whiny little butt popular , you wouldnt have half the fans you have !
    Small webcasters are responsible for alot more popularity that these artists have than people realize ! Let’s get one thing straight . . . . . .Internet radio isnt going away ! Get used to it ! There are still thousands of broadcasters like me that arent afraid of the corporate bullies and bigmouths who are happy to take what you have and give nothing in return !
    We are here to stay and we WILL fight !
    This small battle may have been won by the GREED driven thugs but the WAR has just begun Pal !

  10. As program director for Radio Olympia, a small (“tiny” may be more accurate) hometown Net radio station, I’d like to reiterate that I’ve never met a Net radio producer who didn’t believe that creators should get a fair chunk of any revenues we make. (Like most Net radio stations, mine has yet to make a dime. Ours is a developing medium, or it was before Big Music squashed it.)

    I think we need to recognize that what we’re talking about here is really “independent radio”, in precisely the same sense that we say “independent artist”. We work hard for little or no money, out of passion and vision and at great personal expense. Radio Olympia proudly plays artists who are all but unknown to the general public, but are making fantastic music. We trumpet them on our website, rotate them as equals between the Beatles and Queen, and our listeners, few though they may be at this point, are loyal to us because of it.

    The supposed quarrel between artists and small webcasters was pumped up by somebody who doesn’t want to see either of us prosper. We’re the same tribe. It’s desperately important that we all recognise that and form common cause.

    Someone above made the point that the issue here isn’t the “death of Net radio”. It’s whether Americans will have any piece of it, or remain mired in a mid-20th century paradigm that doesn’t work for anyone anymore.

    At Radio Olympia we monitor about 80 other stations; it’s our main source of music tips. Most of those stations are already outside of the US, and since January, several of the other US stations we did have have gone 404.

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