Internet radio royalty rates decided (Verdict: it ain't good news)
It wasn't only the royalty rates for XM and Sirius that expired in 2006, the Copyright Royalty Board has announced its decision on Internet radio royalty rates as well. And the decision could spell doom for most webcasters, and be a sign of bad things to come for XM/Sirius' own negotiations.
The Copyright Royalty Board has basically adopted the proposal as presented by SoundExchange (a digital music fee collection body created by the RIAA). This is the same board that will rule on satellite radio royalties.
The ruling is on a "per play" basis - so Internet radio stations will have to pay the cost of one song to one listener - effective retroactively for 2006. There's also an additional fee of $500 per channel per year - but there's no clear definition of what a "channel" is (which could mean big problems for a service like Pandora which creates custom playlists for listeners).
The rates to be paid are:
2006 - $.0008 per performance
2007 - $.0011 per performance
2008 - $.0014 per performance
2009 - $.0018 per performance
2010 - $.0019 per performance
Note the rapid increase from 2006 to 2009. RAIN estimates that the royalty rate decision (for the performance alone, not even including composers' royalties!) is in the in the ballpark of 100% or more of total revenues.
The ramifications of this decision are astounding:
- Internet radio as we know it will likely disappear (at least for those based in the US). Pandora and Live365 will be driven out of business, and Yahoo! and AOL Radio will be constrained severely.
- Smaller terrestrial radio stations will probably abandon online streaming as they'll be paying more for online streaming then they will for regular broadcasts (and for far less of an incoming revenue stream). This applies just the same for HD2 streaming.
- While there's no word on how this affects XM and Sirius' own online streaming, the decision by the CRB does show how they're leaning in decisions with SoundExchange, since they accepted the proposal at face value (despite the arguments put up by webcasters).
- The death of Internet radio, and the damage done to HD Radio, could affect federal regulator's decision for the merger and the definition of the relevant market.