Radio Hit Fm

US royalty controversy

In October 1998, the US Congress passed the Digital Millennium Copyright Act (DMCA). One result of the DMCA is that performance royalties are to be paid for satellite radio and Internet radio broadcasts in addition to publishing royalties. In contrast, traditional radio broadcasters pay only publishing royalties and no performance royalties.

A rancorous dispute ensued over how performance royalties should be assessed for Internet broadcasters. Some observers said that royalty rates that were being proposed were overly burdensome and intended to disadvantage independent Internet-only stations—that “while Internet giants like AOL may be able to afford the new rates, many smaller Internet radio stations will have to shut down.”The Digital Media Association (DiMA) said that even large companies, like Yahoo! Music, might fail due to the proposed rates. Some observers said that some U.S.-based Internet broadcasts might be moved to foreign jurisdictions where US royalties do not apply.

Many of these critics organized SaveNetRadio.org, “a coalition of listeners, artists, labels and webcasters”that opposed the proposed royalty rates. To focus attention on the consequences of the impending rate hike, many US Internet broadcasters participated in a “Day of Silence” on June 26, 2007. On that day, they shut off their audio streams or streamed ambient sound, sometimes interspersed with brief public service announcements. Notable participants included Rhapsody, Live365, MTV, Pandora, and SHOUTcast. Some others that did not participate, like Last.fm, stated that they did not want to punish their listeners.

SoundExchange, representing supporters of the increase in royalty rates, pointed out the fact that the rates were flat from 1998 through 2005 (see above), without even being increased to reflect cost-of-living increases. They also point to the fact that CBS recently purchased Last.FM for 280 million dollars,and if internet radio is to build businesses from the product of recordings, the performers and owners of those recordings should receive fair compensation. Opponents[who?] argued that the purchase price paid for Last.FM reflected that it was primarily a social network service that included a radio service.

On May 1, 2007, SoundExchange came to an agreement with certain large webcasters regarding the minimum fees that were modified by the determination of the Copyright Royalty Board. While the CRB decision imposed a $500 per station or channel minimum fee for all webcasters, certain webcasters represented through DiMA negotiated a $50,000 “cap” on those fees with SoundExchange.However, DiMA and SoundExchange continue to negotiate over the per song, per listener fees.

SoundExchange has also offered alternative rates and terms to certain eligible small webcasters, that allows them to calculate their royalties as a percentage of their revenue or expenses, instead of at a per performance rate.To be eligible, a webcaster had to have revenues of less than $1.25 million dollars a year and stream less than 5 million “listener hours” a month (or an average of 6830 concurrent listeners).These restrictions would disqualify independent webcasters like AccuRadio, DI.FM, Club977 and others from participating in the offer, and therefore many small commercial webcasters continue to negotiate a settlement with SoundExchange.

An August 16, 2008 Washington Post article reported that although Pandora was “one of the nation’s most popular Web radio services, with about 1 million listeners daily…the burgeoning company may be on the verge of collapse” due to the structuring of performance royalty payment for webcasters. “Traditional radio, by contrast, pays no such fee. Satellite radio pays a fee but at a less onerous rate, at least by some measures.” The article indicated that “other Web radio outfits” may be “doom[ed]” for the same reasons.

On September 30, 2008, the United States Congress passed “a bill that would put into effect any changes to the royalty rate to which [record labels and web casters] agree while lawmakers are out of session.”Although royalty rates are expected to decrease, many webcasters nevertheless predict difficulties generating sufficient revenue to cover their royalty payments.

In January 2009, the US Copyright Royalty Board announced that “it will apply royalties to streaming net services based on revenue.”