Internet Radio’s Heavy Hitters May Be Holding Fund Drives Sometime Soon
The proposed increase in per-song royalties isn’t the only fee that is making Web broadcasters nervous about their revenue streams. As CNet notes, the larger broadcasters–including RealNetworks and Pandora–may have to shell out more than $1 billion because of the large array of channels they offer:
In letters distributed to various Capitol Hill offices on Thursday morning, the four companies’ CEOs argue that the music industry will also be forcing collection of more than $1 billion per year from three services alone–Yahoo, RealNetworks and Pandora–in the name of covering so-called administrative costs.
Here’s how they say they derived that figure: When the CRB decided earlier this year to change the rules for Internet broadcasters, it also decided to levy a $500 minimum annual fee per Internet radio “channel.” SoundExchange, the non-profit music industry entity that collects the royalty and other fees on behalf of record labels, says that minimum payment is supposed to cover administrative costs.
But since some of the larger Internet radio services potentially offer their listeners hundreds of thousands of unique “channels” (RealNetworks’ Rhapsody offered more than 400,000 in 2006 alone, according to a company spokesman), the companies view the ruling as forcing them to multiply that mandatory minimum payment accordingly (for Real, that would amount to $200 million).
Such an amount would far outpace the $20 million in total royalty fees collected by SoundExchange from the Internet radio industry last year, the CEOs note in their letter. And besides, it’s not even clear that those payments would go to artists, as royalty payments do, the companies argue.
“While we don’t imagine SoundExchange would keep this $1 billion all to itself, this lack of clarity is absurd,” RealNetworks spokesman Matt Graves told CNET News.com.
SoundExchange did not respond to requests for comment.
$1 billion for administrative costs? That’s a lot of Uniball Micros, isn’t it? Anyway, we eagerly await SoundExchange’s justification for this rate, although we suspect that it has something to do with a fundamental misunderstanding of the term “channel,” and what it means in the post-VHF world.
