The scuffle over webcasting royalties is a topic I’ve followed but not posted much about.

Glenn Coolfer

Ditto!
The link above takes you too some current news. If you’d like some back ground continue reading.
How important is the topic:

editorial note: This issue will affect the very future of distributing and promoting music on the internet, and if allowed to pass, will put many small broadcasters out of business.

I don’t know where I took that from and can’t be bothered to search it out [likely a usual suspect], but it sums up the impact nicely.

The issue, from the multitude of news reports:

The U.S. Copyright Royalty Board on Friday* set new royalty rates for webcasters operating non-interactive radio stations, which will increase annually through 2010 and require Web radio stations to pay for each song streamed to each user.

*As noted on the Wired report, which is generally accepted in public relations circles as the best day of the week to release controversial news

That’s key right there. Unlike terrestrial radio which simply pays a royalty for each song played [which itself isn't even true as they calculate their's based on who's played during specific periods], internet stations will now be required to pay for the songs based on the actual number of listeners. So instead of paying X cents for playing a Stones song, they now have to pay (X cents * the number of listeners for EVERY song).

The retroactive rate for 2006 was set at $0.0008 per song per user, with rates increasing annually to $.0011 (2007); $.0014 (2008); $.0018 (2009); and $.0019 (2010). The rates set by the CRB are in line with those suggested by SoundExchange, an entity set up by record labels to collect and distribute digital royalties.

Two things from the above paragraph:
First, those rates, doesn’t seem like much does it, but here’s math:

The Radio and Internet Newsletter (RAIN) estimated the rate for an average station that plays 16 songs per hour at 1.28 cents per listener hour, while such a station might generate total revenues of 1.0 to 1.2 cents per listener hour, when estimated ad revenue is factored.

Second; that bold part about SoundExchange.
An RIAA affliated organization [says enough right there].
From their press release, two great comments

Artists have earned the right to be fairly compensated for the performance of their work by webcasters who benefit—financially or otherwise—from their talents. Without these royalty payments, these artists would, in many cases, be unable to continue contributing to the music world.

UNBELIEVABLE!! I have never heard one single artist on any website, news report, blog or anything else say they would stop making music if they did not start getting paid for webcasts and certainly not in such a manner as has been proposed specifically.

The Copyright Royalty Board has issued a fair and reasonable decision

Again from SoundExchange’s press release. Of course they would find it fair and reasonable since the board simply ok’d THEIR PROPOSAL. Wired’s Listening Post wondered about this in a post titled Why Would the Copyright Royalty Board Choose SoundExchange’s Webcast-Killing Proposal?:

Hmmm… why would the judges decline to divulge the reason(s) behind their selection of the major labels’ webcast-killing proposal over an alternate that would have enabled more diverse, decentralized programming (while still compensating copyright owners)? Hopefully that will surface during the appeal, but for now, one conspiracy theory’s as good as the next.

In the same post two arguments for an appeal are mentioned as well:

1) There is “no underlying justification” for the $500 per station royalties put forward by the bill, which would cause Live365 to owe about $5 million, due immediately. (SoundExchange claims it needs $500 a year per station from webcasters — no matter how few hours it streams per year or how few people hear it — to cover their administrative costs.)

2) In their 115-page decision, the judges offered “less than 30 pages of analysis, and, in fact, there was no analysis of why the judges picked the [SoundExchange-proposed] system that they picked. They merely said ‘we like this proposal better.’ There was no analysis of why this proposal was more in tune with the regulatory, legal standards… which is pretty shocking.”

In an era of increased media consolidation the importance of internet broadcasting can not be overstated. – Hypebot

A comment from the first Wired Blog post mentioned [many worth reading]:

yeah, if i was a prominent webcaster, i would moove my business to canada……. its awesome how the US (ie tax dollars) always screws itself outa tax dollars…. those rates are OUTRAGOUS! i could understand the per song rates…. but not per listener…. thats friggin insane say that a webcaster has 2000 listeners on average per hour per day….thats $25.60 in taxes an hour! times that by 24 is $614.40 a day… thats $224,256.00 a year… and then they have to pay regular income taxes, then property taxes, hosting fees, theres NO way they actually MAKE money

Posted by: Nealson Lewison | Mar 4, 2007 5:31:20 PM

Coolfer posted a Digital Royalty Primer/Recap that indicates the Copyright Royalty Board announced it would rehear on the decision.

Hopefully this post’s title proves to be proven wrong then.

Is the RIAA Pulling a Scam on the Music Industry?
http://www.dailykos.com/story/2007/4/24/141326/870

Congressmen Introduce Bill to Save Internet Radio

http://blog.wired.com/music/2007/04/congressmen_int.html

SoundExchange Responds To Proposed Internet Royalty Bill
http://www.fmqb.com/article.asp?id=397996

Internet radio crisis: Newsweek’s coverage
http://www.boingboing.net/2007/04/30/internet_radio_crisi.html

Webcasting Non-RIAA Music In Protest May Only Make The RIAA Wealthier
http://techdirt.com/articles/20070430/013922.shtml

SoundExchange Claims SaveNetRadio.org Is a Front for Yahoo, AOL
http://blog.wired.com/music/2007/05/soundexchange_c.html

SAVE INTERNET RADIO
http://www.savenetradio.org/

Thanks to huskermould for pointing out some great links on this in the past.