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Alleged “myth” |
RIAA “fact” |
Clarification |
| The webcasting industry is made up of independent, non-commercial small businesses. |
20 large, highly profitable corporations such as Yahoo! and Real Networks dominate the webcasting business and pay 95% of all royalties to artists and musicians.
Small webcasters pay only 2% of all royalties. |
First off, come on! This alleged “myth” has never been argued by anyone!
The truth is that the webcasting industry is comprised of several different types of webcasters: (A) Barely profitable divisions of large companies (like AOL, CCU, Entercom, etc.). (B) Midsized independent commercial businesses, typically venture capital-funded like Live365 and Pandora (ranging from slightly profitable to unprofitable). (C) Commercial small businesses (also largely unprofitable). (D) Non-commercial entities (e.g., public radio stations that stream). And (E) Hobbyists (most of whom rely on one of those category-B midsize independent commercial businesses for their tech needs).
It’s absolutely a falsehood to say that 20 profitable corporations pay 95% of all royalties. A significant percentage of the 20 largest webcasters (including, for example, Pandora) are unprofitable independent companies. |
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The Internet Radio Equality Act (IREA) would rescue small webcasters. |
* The bill does not provide targeted relief to small webcasters.
* Rather, it would result in a $100 million windfall over 5 years to large corporations, money that would otherwise go to artists and musicians whose music is building their businesses. |
The IREA rescues small webcasters and other classes of webcasters as well.
The $100 million figure is totally illusory: If webcasters can’t afford to stay in business, they will shut down (or they will be shut down by their parent companies), and there will be no $100 million to distribute to anyone.
And it’s just a blatant lie to say that $100 million, if it existed, would “otherwise go to artists and musicians.“ Actually, half of it would go to record labels, not musicians! SoundExchange likes to obscure this fact, but they seldom lie so blatantly about it. |
| Small webcasters will have their payments raised by 300%-1200%. |
An offer was made to small webcasters to provide a 0% increase in royalties for another 5 years, and to reduce rates for non-commercial webcasters by 40-90% that never increases over the term.
Consequently, small webcasters will get to pay the same rate with no increase for 12 years. |
This "offer" was made with unspecified conditions attached. While negotiations are underway between the parties, there is no guarantee they will be completed by July 15th.
Even if webcasters do pay the same rate for 12 years (and what's wrong with that, if it's a fair rate?), as long the rate is expressed as a percentage of revenues (and assuming the advertising market improves), record companies and musicians will be receiving INCREASING royalty revenues every year! |
The royalty rates are outrageously high.
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The rates are calculated in hundredths of a cent, and are nearly identical to the rates in the UK and the rest of Europe.
The average payment under the new rate is 65 cents per listener per month —far less than what most charge for subscriptions or cover through advertising. |
Internet radio barely exists in the UK and the rest of Europe because royalty rates are so high. And these rates are massively higher than UK and European terrestrial broadcasters pay.
The rates ARE "outrageously high"! Note these comparisons: Composers' royalties tend to be about 4% of revenues. Satellite radio pays labels and musicians somewhere between 3% and 7% of revenues. Yet depending on which class of webcaster we're talking about, and even ignoring the "$500-per-channel" issue, the CRB rate works out to 50% to 300% of revenues.
By the way, iIt's another absolute lie that the 65 cents per listener per month figure is "far less" than what most webcasters can generate from advertising. For many webcasters today, it's more than 100% of the total revenues that can be generated per listener!! |
| The new rates mean Internet radio will “die” and webcasters will go out of business. |
The top 20 webcasters who pay 95% of all royalties will hardly going out of business—they already pay nearly identical rates in the EU.
For 2006, the rate is only 4% more than 2005. The 20 largest webcasters would owe only an additional $850,000 for 2006 under the new rates. |
First, what does the EU have to do with this? As noted above, there is barely any Internet radio industry in the EU as a result of these royalty rates. Many of the top 20 webcasters will be going out of business -- the indepedents will be bankrupted, and the operators that are divisions of larger companies will be shut down by their owners.
True, the CRB rates do not include a huge increase for large webcasters between 2005 and 2006. But the "fact" at left fails to look at 2007-10! Note the next three years of increases in the CRB average about 40% per year! |
Webcasting is a struggling business that needs financial nurturing.
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Webcasting has grown dramatically since 1998 while royalty rates have stayed the same.
In 1998 Arbitron said that 6% of Americans listened to Internet radio.
In January 2007 Arbitron said that 20% or 49 million Americans listened to Internet radio. |
True, webcasting has grown -- but royalty revenues collected by SoundExchange have grown proportionally. In fact, thanks to the contribution of stations paying under the SWSA terms, royalty collections have grown at an even faster rate tham listener growth!
The audience figures at left do not contradict the fact that it is still a struggling business. The problem is that advertisers have not yet embraced this new medium. |
| Public Radio and College Radio stations will shut down. |
The rate for College Radio remained the same for 99.9% of their stations: $500 per year. A marketplace offer was made that will reduce that rate for many to $250 per year.
* The rate for 95% of NPR stations will also be only $500 per year. |
If the offer made by SoundExchange to noncomms has no secret or untoward conditions, it does seem to allow most such stations to continue -- although many college stations say they can't comply with the reporting requirements atttached. |
The CRB royalty rate increase means big hit artists and major record companies are getting rich off small webcasters.
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* 65% of total royalties goes to artists and independent labels
* The average earned by each artist from webcasting royalties in 2006 was $360.
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Let's assume that all facts in the previous two columns are true. What's not made clear is that of the 65% of total revenues that go to "artists and independent labels," the majority of that money almost certainly goes to hit artists from major labels!
When you take out the money that goes to big hit artists, it's almost certain that the average non-hit-artis's take in 2006 was far, far less than $360. Those smaller artists would be better served by the exposure and airplay that a thriving Internet radio medium can offer them! |
Internet radio is free promotion, and helps record companies sell CD’s.
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* CD sales have plummeted 35% in the last 6 years while Internet radio listenership has skyrocketed.
* Internet radio listening isn’t promoting sales of CD’s – it’s substituting its services for retail sales of CD’s.
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! That's totally deceptive! There is no causal link between the data points of CD sales declining and Internet radio listenership growing.
And the second bullet point is an absolute lie: There's no evidence at all suggesting that Internet radio is substituting its services for CD sales. (In fact, it's quite the opposite: For consumers' explanations of the true relationship between Internet radio listening and increased CD sales, click here: http://www.ipetitions.com/petition/saveinternetradio/signatures.html) |
| The CRB decision was hasty and unjustified. |
* The CRB held an 18 month review, listened to dozens of live witness testimony, reviewed tens of thousands of documents, and looked at proprietary financial business information before coming to a decision.
* This proceeding was the forum created by Congress and demanded by webcasters after the 1st arbitration proceeding in 2002.
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No one has ever accused the CRB decision of being hasty! That myth is a straw man.
The root of this entire problem is the standard set by the DMCA -- i.e., "willing buyer / willing seller." As long as that's the standard, it doesn't matter if the proceeding is held by a CARP (2002) or a CRB (2007) -- you're still not going to see a decision that balances the interests of copyright owners, copyright users, and the general public. |
Artists, musicians and record companies want to squash small webcasters.
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* Artists, musicians and record companies recognize that a thriving marketplace for webcasting benefits everyone.
* They have repeatedly worked with small webcasters to ensure a stable business environment, and have offered a 0% increase for small webcasters for the next 5 years.
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Yes, SoundExchange has offered to negotiate a 0% increase for small webcasters -- but (A) with unspecified conditions attached, (B) in a structure that will keep small webcasters small.
Note, though, that SoundExchange said above that small webcasters only pay 2% of royalties collected. The other 98% of the industry is still at risk -- and it DOES appear that SoundExchange wants to squash them. |
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