I’ve taken the liberty of copying this message that was posted on Myrhaf’s blog about the danger now posed to the fledgling Internet Radio sector, by the entrenched FM stations and the RIAA.
Thanks so much for your help in getting the word out about this.
The royalty rates put out by the Library of Congress are beyond irrational – they are downright insane.
The royalties I am talking here about are the ones that Internet
stations have to pay to SoundExchange in order to play copyright CDs
What is really disgusting is that AM/FM stations
are actually exempt from having to pay those royalties for their over
the air broadcasts. As a result of the payola scandals of the 1950s,
they don’t have to pay a single dime. Only Internet radio stations have
to pay them.
The old rates which the new ones replace were
already outrageous and were MANY times higher than the royalties that
stations paid for composers royalties to ASCAP/BMI and SESAC combined. The new rates are, in fact, significantly in excess of 125% percent
of revenue of even the most commercially successful Internet radio
stations. And, on top of that, the rates are scheduled to increase
every year through 2010 by as much as 34% per year. The 2010 rates will
be a whopping 149% over what the already expensive old rates were.
If these rates are allowed to stand, the vast majority of Internet radio stations will be bankrupt.
Internet radio operators do not have a problem having to pay royalties.
What would be a rational royalty scheme would be something along the
lines of that which is currently used by ASCAP/BMI and SESAC for
composers royalties which are calculated on a percentage of revenue
that a station takes in. Those royalties are not cheap – but they are
not so high as to drive broadcasters into bankruptcy.
rates for SoundExchange are simply not viable – there is no way that an
Internet radio station can successfully charge enough money for
advertising to pay for the new SoundExchange royalties – and that is
not even taking into account the ASCAP/BMI/SESAC royalties, bandwidth
and other operational expenses stations have.
Why would the
Library of Congress come out with such economically impossible royalty
rates? Well, as a certain philosopher once said, don’t bother to
examine a folly, ask yourself what it accomplishes.
take on it is that Friday’s decision by the Library of Congress is
nothing more than an outright attempt on the part of lobbyists for the
RIAA (major record labels’ trade association) and perhaps even the FM
radio industry to use political pull to eliminate the competition from
Internet radio that will make both industries technologically obsolete.
The last ounce of relevance the RIAA has in today’s
technological world is the advantage that major labels have in
promoting their artists by means of airplay on large FM stations which
is essential to turning a song into a hit. Most FM stations won’t even
talk to independent labels or artists who produce their own recordings
– for the most part, they are only interested in the artists
represented by the major labels.
If Internet radio somehow
survives and becomes available in cars in the very near future, people
will have tens of thousands of stations to choose from and most FM
music stations will be toast. And when it comes to the economics of
promoting music to tens of thousands of small Internet radio operators,
the RIAA has no significant advantage over artists who self promote. My
very strong guess is that there are some at the RIAA who regard
Internet radio as a far greater threat to the long term viability of
the major record labels than even illegal downloading.
course, FM operators are terrified of Internet radio as well. Once
Internet radio is available in cars (which some say is only a year or
two away) and people have thousands of stations from around the
world to choose from, who on earth is still going to be listening to
the lowest common denominator type swill currently being spewed out by
FM stations? It currently costs several million dollars to buy a
successful FM station in even a small market. Stations in a large
markets such as Fort Worth/Dallas have sold for hundreds of millions of
dollars. Once wireless Internet and Internet radio becomes affordable
and commonplace – well, those hundred million dollar investments will
be technological dinosaurs overnight.
Sadly, a lot of my fellow
Internet broadcasters are trying to fight this by giving the matter an
anti-capitalistic spin and blaming it all on “corporate greed.” In
fact, this whole mess is nothing more than what one gets under a mixed
economy where the rates that everyone must pay are set by a
quasi-governmental body and where political pull means everything.
LOT is at stake here for anyone who enjoys good music from whatever
genre – especially if one’s musical tastes fall outside of the lowest
common denominator mainstream.
Before Internet radio came along,
there simply was no place where large numbers of people could tune in
and be exposed to unusual genres of music such as that which I play
over Radio Dismuke, a station that is strictly devoted to popular music
from the 1925 – 1935 decade. Today, there are Internet radio stations
that play any kind of music imaginable – and 1920s and 1930s music now
has a great many young enthusiasts, some of them of high school age,
who would have otherwise never have discovered it had it not been for
Internet radio. I hear from such people all the time.
everybody who is reading this, regardless of what genre of music you
enjoy, to PLEASE, tell as many people as possible about what is going
on and what is at stake. Tell your friends – especially those friends
who are passionate about music. Talk about this issue in discussion
boards you participate in. If you blog, please mention it in your blog
postings. If you know someone who blogs, ask them to spread the word in
the same manner as I sent a brief message to Myrhaf. Webcasting is a
very new industry and very few operators have yet to turn any profit on
it – so they simply do not have the resources to hire the lawyers and
lobbyists to compete with the RIAA which is still vastly wealthy by
virtue of its continued economic momentum from the days when it was
actually economically and technologically relevant. The only way that
the Library of Congress is going to listen is if enough people become
irate enough and speak out.
At some point, I am probably going
to endorse some course of activism for people who are concerned about
this. For now, I am waiting to get further details on what is going to
happen and to make a determination about which of the various efforts
that people will be undertaking I think will be the most effective.
have set up a “Save Internet Radio” section on my Message Board which
contains the postings that Myrhaf linked to. I will continue to update
that section as more information becomes available. You can access the
board at http://RadioDismuke.com/forum.
Eventually, I will probably have links up there to places that will be
far more authoritative and up-to-date than my board will be – but for
now it is a good place to check for updates and to refer people to for
Thanks in advance to all who help spread the word about what is happening.
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