The March 2, 2007 Copyright Royalty Board ruling was devastating to most internet radio webcasters except small non-commercial webcasters that have only one channel and stream fewer than 159,400 hours per month. Most non-commercial internet radio stations stream fewer than the monthly limit before they would have to pay the commercial rate. The CRB ruling left these small non-commercial webcasters in a fairly good condition.
On the other hand, the proposed Internet Radio Equality Act does not leave small non-commercial internet radio webcasters in as good a condition as the overall harsher CRB ruling. Simply put, the royalty rates are higher for non-commercial webcasters under the proposed IREA legislation.
Every group could cherry-pick the rules they want just as the DiMA group (large internet radio webcasters) has done in having their lobbyists write the copy of IREA for pliable congressmen to submit as a bill. Will this enlightened self interest be fair? Will slanted legal provisions establish a firm and reasonable copyright royalty rate basis that can last from rate period to rate period? Will the legislation actually take every party to this process into adequate consideration? I don’t think so. In fact, winner take all legislation will be just as devastating to some webcasters as the CRB ruling.
There may be some people thinking the proposed IREA legislation was intended to be the opposite end of the bargaining spectrum offered up to be moderated as the bill is marked up and as the House and Senate versions reach compromise, but I suspect the backers of the Internet Radio Equality Act truly intend to remain fixed on the letter of the proposed bill as they believe they have a readily defensible position even in the extremeness of the CRB ruling reversal.
I personally think several ideas need to be put on the table and discussed as the Internet Radio Equality Act works its way through Congress. First, Internet radio is not broadcast radio or satellite radio. The mediums are different. Broadcast radio is decades old with legislative copyright history and satellite radio is subscription based with a much smaller audience. The copyright royalty rates should not be the same. There is no equality between these different digital transmission methods.
The Internet Radio Equality Act should seek to achieve equality among internet radio webcasters. The CRB did have the concept right when they suggested the copyright royalty rate is about the product. The royalty rate should be the same for all internet radio broadcasts. Having said it should be the same for all must be followed with the rate should be very low.
Second, no one has suggested the royalty fees for 2006 be left as paid. It makes no sense to penalize webcasters or performers for late action of the Copyright Royalty Board. There should be no retro-adjustment.
Third, minimum annual fees are designed to allow SoundExchange a reasonable operating revenue early in the year. Therefore, I think the first channel should have a $500 minimum annual fee, the second channel a $250 minimum annual fee and any number of channels above 2 should have a maximum minimum annual fee of $1000 total. This is appropriate if the rate basis allows for aggregate reporting.
The only way this relatively low minimum fee schedule could possibly work is if the rate basis was simple to calculate, report and administer. SoundExchange should not have to have a large administrative staff to collect statutory royalty payments.
Fourth, the only rate basis that makes sense and could be fair to all webcasters is the Actual Tuning Hour (ATH) method. All streaming media systems create use logs and simple software can convert these log files into ATH reports. Ignorance of streaming media reporting systems already in place for use should not be an excuse for the adoption of flat fees or a percentage of revenue rate method.
Fifth, the percentage of revenue method of calculating copyright royalty fees is unfair to artists and record labels because many webcasters have little to no revenue and yet they stream millions and millions of hours of music on their webcasts. These music lovers or simply poor business people should not be discriminated in favor of other webcasters. If the same low copyright fee was applied to all internet radio webcasters, even these internet radio stations could be contributing to the welfare of the music industry fairly.
Sixth, a proposed rate schedule for the years 2007 through 2010 would look as follows:
Rates per ATH Years 2007 – 2010
Year Rate $500 $750 $1000
2007 .00028 1,785,714 2,678,571 3,571,428 Annual ATH
2008 .00031 1,612,903 2,419,514 3,225,806 @Minimum
2009 .00033 1,515,151 2,272,727 3,030,302 “ “
2010 .00035 1,428,571 2,142,867 2,857,142 “ “
The above illustrated rates may appear low, but low rates are required in order to both recognize the fact that internet radio play does help sell the music while allowing small webcasters to stay under the minimum annual fee for the same number of hours proposed by the CRB ruling for small non-commercial internet radio webcasters. Then, the same rate is extended to all webcasters no matter how many hours they may broadcast each month.
The above rates applied to all webcasters will generate what the CRB was trying to accomplish… a reasonable copyright fee for every hour of digital music streamed over the internet. Very small webcasters will pay only the same minimum fee and large webcasters will pay based upon the actual usage of the performer and record label product.
In short, we need common sense to apply to the copyright royalty rate setting process. We need a rate structure that can easily be changed as the medium grows. We need a rate structure that is easy to report and that does not require a large bureaucracy to administer. We need a copyright royalty rate system where every webcaster pays the same rate for each hour of music streamed to its various audiences.
Finally, as long as men use their own self-enlightened definition of reasonable and fair we will continue to have this battle every 5 years. Only the equality of a flat per ATH royalty rate can generate fairness to all webcasters and music producers.
Small webcasters have no trade association fighting for their interests, but if the least of all webcasters can know and understand fairness to all, then the big guys can drop their malice towards their counterparts on the other side of the internet radio business. Nobody wins in the long run when only one side wins today.
The Internet Radio Equality Act should be about finding a long-term solution to what is best for internet radio and not about winning a short-term financial windfall on the backs of either webcasters or performers. We need each other and the more internet radio there is in its full glory, the more every stakeholder will gain…especially the internet radio audience we all so highly desire to have as our own.