Here We Go Again: Internet Radio Says “No, Really, Screw You” To SoundExchange

Aug 23rd, 2007 // 5 Comments

radio.jpgYesterday’s deal between royalty-collection company SoundExchange and small Internet radio broadcasters has been met with scorn from a few prominent Webcasters, who say that a quirk in the deal means that they’ll still have to pay out more money than they can afford:

Smaller providers said the higher royalties would be too big a financial burden. Under the latest SoundExchange offer, qualified Webcasters — those earning $1.25 million or less in annual gross revenue and with a certain size audience — could pay royalty fees of 10 or 12 percent of annual revenue. …

Rusty Hodge, who operates a small Internet radio station called SomaFM in San Francisco, said he also won’t take the offer because the revenue and audience criteria are too small “by any type of radio standards.”

Instead, he said SoundExchange should follow the U.S. Small Business Administration’s standard for a small broadcasting company, defined as earning $6 million or less in annual revenue.

SoundExchange’s offer also only covers recordings of its members, which represents more than 20,000 recording artists and 3,500 record labels, including all the major recording companies.

Hodge said his station and many others play mostly independent artists, who are not represented by the group and would still be owed royalties at the new higher rates.

While it’s obvious that the Webcasters shouldn’t make a bad deal just for the sake of making a deal at all, we have to wonder two things (aside from “can’t these people sit down and talk without reporters around?”). First, what independent artists would benefit from the higher royalty rates? Sure, 3,500 labels does sound like a lot in the abstract, but when you factor in CDBaby-distributed labels and the like, that number will probably at least double. Second, how would the “$6 million or less in revenue” figure cited by Hodge break down between radio stations that have both terrestrial and digital broadcast signals? Because if, say, Z100.com can claim that, online, it makes less than $6 million (would you look at all those house ads?) and should therefore be considered a “small broadcaster,” there’s obviously something faulty with the math. Either way, there’s no way this is going to be resolved soon.

Some Internet radio broadcasters reject discounted royalty rate offer [AP via LAT]

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  1. okiedoke

    Sound Exchange collects money … but …

    They pay (allegedly) only to artists who registered before a cutoff date, but collect from recordings of all artists. They won’t pay on a song until revenue exceeds $10, and they keep the rest.

    These are thieves, pure and simple. All webcasters should refuse to sign any deal … and just keep on webcasting. Sending a check to these lockstep attorneys and their thugs is validating so many issues that have led to the demise of the music industry and loss of public respect.

    I think class action, rights of free trade, and RICO issues all are within reason.

    And I’ve yet to hear of a single artist who has recieved any kind of payment from these jerks. But few ever saw checks from their record labels either.

    Fuck ‘em with a Dick Armey.

  2. binaryan

    Your facts are entirely wrong, friend. SoundExchange pays tens of thousands of artists each year. How do I know? My friends have gotten checks from them. I SEND my musician friends to SoundExchange, because many of them don’t even know this royalty exists.

    As far as Maura’s questions, first, every independent artist benefits financially from the higher royalty rates. That’s the whole point of the statutory license. If an internet radio station plays a recording, they pay SoundExchange for it. Every artist, indie or major, can and should claim THEIR MONEY from SoundExchange.

    Second, simulcasters aren’t allowed to count only their online business – they have to account for their overall revenue.

    I recently attended the Future of Music Coalition’s Technology & IP Day, where all these issues and more were discussed. Sure, it’s not going to be settled quickly, but OKIEDOKIE, ignorant rants like yours aren’t helping the process move any faster.

  3. okiedoke

    I humbly stand somewhat corrected and apoligize for the passion.

    First, and most importantly, I’m delighted to hear they actually are paying your artist friends.

    Were my other points that wrong, however? Only artisits that knew about it and registered would get paid? That SE keeps revenue below the threshold?

    Good business communications requires an understanding between stakeholders and their constiuents that commerce is engendered by mutual interests and best practices. For the long, long term.

    Webcasting represents an exciting opportunity for artists and listeners who no longer are being served well by major terrestrials. It is in the interest of Sound Exchange and the musicians and the listeners to make a go of this.

    As long as the gross disparity exists between what radio stations and webcasters pay for playing the same song, and their charge per listener is so out of proportion, I can only conclude that Sound Exchange is working very hard to shut down this fledgling industry.

    That’s probably not their intention, but artists wil benefit … in the long term … by being played more often by more ‘casters.

    The reporting burdens alone are odious, costly and prohibitive. A webaster must pay per listener, even if that listener lands on the site for mere seconds by accident.

    I was at the Jupiter gatherings in Barcelona and New York when things started to spark, way back when, and have followed the issues pretty closely since. Sound Exchange is not very well skilled at PR.

    But again, I respect your point and am utterly delighted and thankful that your artist friends are getting paid. But you had to tell them about the deal. Had you not sent them to Sound Exchange, they wouldn’t have seen a dime. Right?

  4. binaryan

    I most definitely agree with your points regarding SoundExchange’s horrid PR, equitable rates for terrestrial radio, and the necessity for both artists and labels to grow the webcasting industry. I suspect that the short-term financial benefits of higher rates may undermine artists in the long run, if those rates are so prohibitive as to put webcasters out of business. However, that’s an argument that I’m sure neither of us has the information to properly address.

    A few more corrections though: artists do have to claim their money from SX, just as they do from BMI, ASCAP or SESAC. This doesn’t seem particularly unfair to me. There is no industry-wide database of artist contact information. The burden shouldn’t lay on SoundExchange to track down every single artist played on the radio. The budget required to make that kind of outreach might just dry up the very royalties being used to fund it (SX is a non-profit).

    The next issue you raised was of the $10 threshold. I believe if an artist is signed up, SX holds their royalties until they exceed the threshold. I think you are getting confused with the “undistributed funds release” that was getting hyped up in the press about six months ago. Not positive on that one.

    By the way, SX is funding a coalition (along with Future of Music, and a number of other industry organizations, big & small) to get a performance right for terrestrial radio, which we don’t have in America. [www.musicfirstcoalition.org] It’s facile to paint SX as all bad. I have my doubts, but I’m pretty convinced this rates issue is going to work out. We all want our pandora & last.fm. I just think the INSANE amounts of ridiculous bad sentiment being flung in every direction is the wrong way for everyone to get what they want. This is business, dudes. Can we all act like adults here?

  5. okiedoke

    Thanks for the dialogue. Final observations:

    Funding the coalition may bring up some issues regarding what activities nonprofits legally can conduct.

    That performance right for terrestrial radio regards one of my biggest fears: I can think it will lead to the widespread ending of music broadcast and the pervasive drift toward all-talk radio simply because of economic pressures.

    As the music-centric management thinkers have been ejected from labels and broadcast corporations, listeners and artists have suffered greatly.

    By and large, I believe artists, listeners and webcasters share the same interest: they love music.

    Nonprofit or not, I have this genetic suspicion that Sound Exchange has a slightly less altruistic agenda.

    I desperately want every artist to have a career that pays fairly. But when a nonprofit college radio station or small webcaster is prevented from promoting and supporting long tail marginal music, who really benefits?

    Finally, I just can’t validate Sound Exchange collecting tens if not hundreds of millions of dollars and hanging on to the money because it’s too much work to find the rights holders. That’s the fundamental flaw in the business model, and it really makes me question that nonprofit status. Over the next few decades, it will become billions. For every one of your fortunate musician friends who got a modest check, how many hundreds of others will not?

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