Webcasters To SoundExchange: “What, Exactly, Is A ‘Small Webcaster’?”

May 22nd, 2007 // 2 Comments

radio.jpgToday SoundExchange, the organization that is responsible for collecting royalties from digital music outlets, proposed a change to the Copyright Royalty Board’s planned royalty hike for Internet radio stations, which is set to go into effect in July. In the new plan, smaller webcasters would pay royalties equal to 10% of all gross revenue up to $250,000, and 12% for all gross revenue above that amount, with no rate hikes until 2010–although what exact criteria define a “small webcaster” is still up in the air, which is part of the reason why SaveNetRadio, the ad hoc coalition of webcasters protesting the Copyright Royalty Board’s decision, said “no thanks” to SoundExchange’s offer:

The proposal made by SoundExchange today would throw “large webcasters” under the bus and end any “small” webcaster’s hopes of one day becoming big,” SaveNetRadio spokesperson Jake Ward said. “Under government-set revenue caps, webcasters will invest less, innovate less and promote less. Under this proposal, Internet radio would become a lousy long-term business, unable to compete effectively against big broadcast and big satellite radio – artists, webcasters, and listeners be damned.”

“Labeling webcasters small or large is a distinction without a difference,” continued Ward. “Two of the most prominent webcasters, Pandora.com and Live365 are models of industry success but would be bankrupted by the CRB and by the SoundExchange proposals. Pandora employs 100 people in an enterprise zone in Oakland, California, but its popularity would put it out of business. Similarly, Live365, an aggregate webcaster that provides a platform for more than 10,000 individual webcasters, has a staff of fewer than 40. Though clearly small as a business, Live365′s enormous importance and scope among webcasters would force them to shut down.”

By broadcast radio standards, even the largest webcasters (i.e., the Internet radio divisions of Yahoo! and AOL) are small broadcasters. …

The revenue caps SoundExchange is proposing are an extension of those put in place during the 2000-05 period which created an insurmountable barrier to growth for small webcasters. This revenue cap has had the perverse and unintended consequence of forcing thousands of webcasters to stay small if they want to stay alive, thereby weakening the industry – the very opposite of Congress’ intention.

No word on SoundExchange’s rebuttal yet; we did, however, find it curious that they were so coquettish about what a “small webcaster” would consist of (revenue? audience? clout with getting promos sent to them?), although maybe they were silent on that point because they hadn’t figured it out yet, and were waiting to see if SaveNetRadio would rise up and take their seemingly well-intentioned bait.

SaveNetRadio Rejects SoundExchange Offer To “Smaller Webcasters” [savenetradio.org; PDF]
Small Webcasters Get A Break In Royalties [Billboard.biz]

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  1. Spiny Norman

    I have to wonder if the record companies themselves operate at a 12% gross margin? I can’t think of very many businesses that can do that and sustain it over time. This is clearly a publicity bone tossed out to make SoundExchange look less like a villain while they work at their Quixotian task of killing off what they think is crushing CD sales.

    Note to record companies: Evolve or die!

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