Radio: SoundExchange - Men of Steal

I’m not in love with it but this shotgun wedding of the RIAA and webcasters makes more sense than the prior proposals.

I’d said it right from the beginning. Royalty payments should be based primarily on a percentage of an Internet radio station’s earnings.

If politics is the art of compromise - and considering the players involved, chances are that this is the best deal that could be done for webcasters. At least some webcasters can afford this. It won't do much for future Internet radio start-ups. Those that'll benefit are the existing for-profit webcasters. I don't see a problem with that since they've been fighting this fight for years.

For that shark tank known as the RIAA, it’s not the haul they were hoping to pull off – but it’s still a helluva steal.

Do you want to know how Internet-only radio stations will break to the masses?

When it creates its first air personality.

You want to know how Internet radio will become vital to the labels and artist management?

When it breaks it first million-selling artist without terrestrial radio's support.

In the interim, webcasters with skin in the game will pay the freight and wait.

Let’s get straight to it. The deal with SoundExchange deal defines and establishes three separate classes of what they call pure-play webcasters.

Those are Large, Small, and the ones that have “bundled, syndicated or subscription services.”

Large webscasters are defined as Internet radio stations making over $1.25 million in annual revenues. They’ll be on the hook for either 25 percent of total revenues or a gradually increasing per-performance rate – whichever is higher. The minimum payment to SoundExchange is $25,000.

Small webcasters are Internet radio stations with revenues under $1.25 million – who also have fewer than 8 to 10 million listeners per month. They’re on the hook for a percentage of total revenues based on a sliding scale of 12 percent of the first $250,000 and 14 percent over that - or 7 percent of expenses, whichever amount is highest.

Bundled, Syndicated or Subscription Services will be obligated to pony up the same ludicrous rates the NAB, while under the bass-ackwards leadership of David “Fumbles” Rehr, negotiated in February. Though the rates are a few cents lower than what the Copyright Royalty Board requested, SoundExchange walks with a percentage of the total amount of terrestrial radio station revenues – not just what may be earned on-line.

All of the above classes must keep detailed records of every song played and when – and must adhere to the rules of the Digital Millennium Copyright Act.

SoundExchange offers a two-fold microcaster such-a-deal.

Internet radio stations that generate no revenue and have few listeners, which make up the overwhelming majority of webcasters, will have to shell out $600 – and will be exempt from keeping records.

For small Internet radio stations with listeners but revenues under $50,000 – you’ll be hit with a minimum $2,000 annual cost of doing business.

Beyond that, it gets complicated and you can bet that only the lawyers will get rich. Click here for the breakdown, takedown, and shakedown.

It could have been worse, it could have been better.

Pandora rushed out their update the moment the deal was done. Heavy users will have to pay-to-listen if they go over a certain allotted time.

So SoundExchange, the collection agency wing of the fee-aholics at the RIAA, which represents labels with notorious reputations for gypping artists out of their owed royalties, will do the collecting and allegedly pass fifty percent, minus administrative costs, to the artists.

We'll see. Like Bob Dylan said, "Money doesn't talk, it swears."

Does it matter what really happened? Not really. Somewhere along the way the RIAA realized they weren't going to sell their pay-for-play schemes to webcasters - and that their original proposed fees would've put the very stations that would expose the most new music out of business. That's when compromise was reached.

Don't fool yourself into believing this is a win for webscasters. What we have here is not the result of democracy but of a kleptocracy.