BY DANIEL MCSWAIN
The radio and recording industries are engaged in a growing public dispute over exactly how much a performance royalty would cost broadcasters.

In a "mock invoice" issued by the NAB, the broadcast group estimated that a performance royalty would cost stations between "10-35% of gross revenue" annually [previous RAIN coverage here].

The response from recording industry coalition musicFIRST has been varied. According to a report from Wired's Listening Post blog, musicFIRST called the NAB's estimate "grossly and purposefully overestimated", and points to the testimony provided by Registrar of Copyrights Marybeth Peters as an estimate of what a performance royalty rate might look like.

Speaking to Wired, a musicFIRST spokesperson also said that broadcasters currently pay about 3% of revenue for songwriter royalties, much less than the NAB's estimated performance royalty dues. The spokesperson originally claimed that Peters' testimony in a Judiciary subcommittee meeting [RAIN coverage here] suggested that a performance royalty be equivalent to the rate paid to songwriters, but stepped back from that position in a subsequent statement.

Inside Radio reports that recording industry plans for a broadcast performance royalty could resemble rates paid by broadcasters in Western Europe. According to the report, "stations in Europe pay from a high of 5.58% to a low of 2.35%. If those rates are applied to America’s $20 billion commercial radio industry, the high-low range would be $1.116 billion to $470 million."

NAB Executive VP Dennis Wharton (pictured) told Inside Radio: “Given the fact that free radio airplay of music has generated billions in revenue for the mostly foreign-owned record labels, it’s preposterous for the RIAA to suggest a performance tax, period. It matters not whether the money grab would be $7 billion, $2 billion or 470 million.”

All this, and before even a single piece of legislation to propose how those rates would be determined has been presented.

...

x The NAB's high percentage numbers might be correct if a performance royalty were to be determined by a CRB using a hypothetical "willing buyer/willing seller standard". Just look at what happened to Internet radio under that same standard. Given a U.S. population of around 300 million people and a broadcast radio AQH of about 48 million, and 85% of the AQH is music-based formats, the math goes like this: Given that radio broadcasts about 12 songs per hour, that works out to approximately 3,538,339,200,000 performances per year. Assuming the 2010 per play CRB rate for Internet radio of $0.00190, that works out to $6.72 billion dollars annually in a performance royalty, or about 33.6% of radio's $20 billion in annual revenues. -- DM x

RAIN is brought to you today by:
	There's huge, and growing, demand among consumers for Internet radio (at least during the 9AM-5PM workday), as shown by the rapid growth of our AccuRadio project. AccuRadio features a variety of popular music formats that you simply can't find on the broadcast dial: Swingin' Pop Standards, Brit Rock, Piano Jazz, Broadway and more at www.AccuRadio.com.

BY PAUL MALONEY
An Internet radio industry executive has published an open letter to the RIAA (Recording Industry Association of America), asking help to convince SoundExchange to adopt his flat-rate, "aggregate tuning hour (ATH)-" based music royalty scheme.

The text of the open letter from Paul Gathard, president of streaming services firm Barnabus Road Media, is reprinted at DailyTech.com here.

"The problem with the CRB ruling of last March is primarily that the copyright rate issued will dramatically be in excess of the gross revenue of 90% of all webcasters operating in the United States," he argues. His solution: a flat-rate, ATH-based royalty that is between 1.2% and 1.6% of the CRB-adopted rates (expressed as an ATH rate, assuming 16 songs per hour).

The proposed scheme would include a $500 annual minimum fee, and all webcasters (large commercial, small commercial, and even non-commercial) would pay the same flat rate.

For example, under the CRB rates, a webcaster would pay about 1.8-cents for one listener to hear a 16-song hour of music in 2007 (the 2007 CRB rate of $0.0011 per performance * 16 songs = $0.0176). Gathard would have the webcaster pay only $0.00028, or less than 3/100ths of a cent, for the same hour of music.

Gathard justifies this steep reduction by arguing that it will allow adequate revenue from large company webcasters, and yet not bankrupt the industry's smaller providers. Moreover, he suggests his proposal "recognize(s) some element of the beneficial music promotion and advertising" provided by Internet radio. And finally, the nature of a flat-rate would eliminate "loopholes" allowed by revenue-based models, and "will keep bad business models from escaping the righteous payment of royalties."

In fact, Gathard goes as far as to argue, "these rates will actually generate more revenue to RIAA members than the rates that surviving post-CRB webcasters would currently pay."

BY DANIEL MCSWAIN
Do interactive webcast services eliminate the need to buy new music?

That was the question raised in an article from Washington Post columnist Rob Pegoraro [RAIN coverage here], in which the author discussed the argument of web radio as a "substitutional" media, or one that replaces consumers' need to purchase products with widely available, free music resources.

Pegoraro posted a related question on his Washington Post blog: "Do you listen to sites like Pandora or Last.fm? If so, where does that listening fit into your broader music consumption? Are you spending less time listening to your own purchased music as a result, or do you listen to more music overall? How many CDs/downloads have you bought because you heard an artist's work at one of these sites?"

Below, we've re-printed selections from the comments section on the blog. You can read the entire comments section here.

Advertisement