Smooth Jazz Chicago prepares to shut down in small webcaster fallout

smooth jazz chicago bigSmooth Jazz Chicago, a RAIN Pureplay of the Day recipient, announced that it will end its three-year Internet radio business on December 31. Rick O’Dell, who founded the station after a smooth jazz terrestrial station switched formats, leaving Chicago without a smooth jazz outlet, put a personal open letter on his website explaining that new royalty regulations which start on January 1 are unaffordable.

“Rates will be going up significantly for us effective January 1, 2016.  Sadly, it’s not an increase I can absorb.”

Smooth Jazz Chicago is one of the first declared small webcasters to pull the plug on its station, and on its hope that special rates for a defined set of small webcasters would be continued into the new year. On December 31 the Webcaster Settlement Act of 2009 will expire, removing an opt-in royalty calculation for low-revenue webcasters which results in relatively low payments to labels for use of recordings. That agreement was negotiated by SoundExchange, sanctioned by Congress to cut special deals alongside of the Copyright Royalty Board proceeding which sets commercial webcast royalty rates. (See here and here for detailed explanations, updates, and dozens of reactions from webcasters.)

In an email to RAIN News, Rick O’Dell broadened the significance of his exit from webcasting. “To fans of smooth jazz, this might seem like a smooth jazz issue, but it isn’t. It’s an issue of creative independence and individual artistic expression being given a level playing field against large and mass appeal corporate interests. If a significant number of small, independent webcasters end up shutting down as a result of the royalty rate hike, there will be fewer choices for listeners.”

“The web is where specialty programming should be allowed to thrive and not have to overcome larger hurdles than anyone else,” he said.

While many webcasters complain that the Copyright Royalty Board (CRB) failed them in its every-five-years function of setting webcast rates, the CRB has nothing directly to do with it. Special deals must be negotiated by SoundExchange and its label clients. Small webcasters did not participate in the CRB process, a two-year legal exercise that is costly to enter. Frustrated individual station owners say that participation is impossibly costly, and therefore they are effectively prevented from advocating for special rates. RAIN News does not know of any organized group advocacy that approached the Washington process which was dominated by polarized arguments belonging to market-leader Pandora, behemoth iHeartMedia, and label advocate SoundExchange.

Some small webcasters have declared an intent to push into the new year to see whether SoundExchange is motivated to create a new low-revenue carve-out for small webcasters. There is some amount of revenue at stake as many pureplays turn off their streams, or create non-U.S. businesses by geo-fencing, as some have speculated. And in Rick O’Dell’s view, there is more than just business loss at stake.

“Sadly, in the end, it always seems like the listeners are the ones who have to pay the price,” he told us.


Brad Hill