Thursday, July 9, 2009

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.

41 comments:

Anonymous said...

You explained it well. I differ with your opinion on it being fair. If it prevents future for-profit internet radio stations from participating due to the heavy start up costs all this agreement will do is block future webscasters from getting into competition. I think it stinks.

Anonymous said...

Is $600 an annual cost? If it is, it seems like a small price to pay when you consider that the equipment, hardware and server costs many times that. Of course it is a cost that must be paid, but it seems like it could be far worse.

Anonymous said...

i agree with JG that it is the best deal that could be done under the circumstances. It is actually good considering that webcasters were forced to do it on their own and without the support of terrestrial radio as you had suggested. As a result terrestrial radio will really get screwed over while webcasters may have a fighting chance. I am pleased that even smaller indie casters will have an opportunity to participate. I think it is a good deal. JG is nt selling this one out believe me. This is something that will work for the majority of us.

Anonymous said...

i have to agree. at least we know where we stand. it is much much better than the crb wanted. i think the riaa initially wanted some control with webcasters to get content added and some of those that did early deals no doubt have to do some pay for play with the labels. i think that most people turned them down cold and the labels realized with the internet's increased mobility it would be wise to settle this thing and move on. i agree with your earlier assessment that internet radio is where fm was in the late sixties and early 70's. good blog, john

Anonymous said...

Internet radio is already the new FM if you include Pandora which has more listeners than any one radio station.

Anonymous said...

25% off the top of revenue seems awful high for anything, especially artist royalties. Don't they benefit from airplay? Who negotiated this one? Loan sharks?

Anonymous said...

John You did leave out something that you had mentioned earlier. It would give internet radio a real boost to have some former well known terrestrial radio personalities, too. Just like Scott Muni going to WNEW-FM, B. Mitchell Reed to KMET, etc. That will add instant cred and bring more over to streaming audio from FM and AM.

Anonymous said...

Of course Pandora has more listeners than any one radio station. Pandora can be heard around the globe. A radio station can be heard in one single market. Hardly a fair analysis. A fair analysis would be adding up all terrestrial radio users around the globe and my guess is that it would make Pandora look like an AM daytimer in Poughkeepsie. Don't get me wrong -- Pandora is great. But let's make sure we're attempting to measure things equally.

Anonymous said...

It stinks but nowhere near as bad as the CRB version.

We will have to live with it.

I look forward to fast growth on this sector.

I pity terrestrial once i.r. gets it stuff together.

Maybe I don't agree with you on this one but keep up the good work on your blog.

Anonymous said...

The RIAA is the biggest klepto of them all. Its labels have stolen blindly from its artists for years. Unless you can afford the expense of an audit and be prepared to be blacklisted (no promotional support, no stock) the average artist on a major label is s.o.l. I have had personal experience with this. I do not expect most of the artists to ever see a penny and SoundExchange and the RIAA will devise a method where their administrative costs will always override a large share of royalties. I expect certain artists will get compensated and most will not.

Anonymous said...

I remember when you suggested that the NAB and internet radio only stations work together to keep SoundExchange/RIAA from their huge fees and the NAB ignored them. That is how I discovered your blog. I read the story in Kurt Hanson's RAIN which linked to your site. Then I read how the NAB ended up negotiating a worse deal than the one originally offered. Now internet radio gets an 'ok' deal but better than terrestrial radio. It shows that the terrestrial radio chains cannot do anything right. Even internet radio with its limited resources and lack of lobbying was able to secure a better deal by being direct and presenting the facts while David Rehr talked tough and made threats. Congratulations, internet radio. It may not be the perfect deal but it is good enough to grow this into something big without the fear of being put out of business by high fees.

Anonymous said...

internet radio will put satellite radio out of business. there is so much more variety and worldwide choice. satellite cannot compare to formats available on line. once you can get internet radio in cars goodbye, sirius xm.

Anonymous said...

I know this is probably the wrong place for this although its all related. at the conclave you have to wonder if Fred Jacobs will 'reveal' some new research study on internet radio and its attributes now that he is off the HD Digital Radio Alliance payroll. Have ya noticed how he hasn't been talking up HD Radio at all. What a shill. When you see him ask him who is clients are and ask him what his relationship is with Universal Music Group. Caught ya Fred.

HD Radio Farce said...

Anonymous said... "I know this is probably the wrong place for this although its all related. at the conclave you have to wonder if Fred Jacobs will 'reveal' some new research study on internet radio and its attributes now that he is off the HD Digital Radio Alliance payroll. Have ya noticed how he hasn't been talking up HD Radio at all. What a shill. When you see him ask him who is clients are and ask him what his relationship is with Universal Music Group. Caught ya Fred."

LMFAO! Anytime is a good time to bring up HD Radio! Same goes for Paragon Media Strategies - haven't heard from those HD-shills in a long time. Some of Fred's latest posts seem like he has actually turned against HD Radio. Same goes for that huge HD shill Glenn Fleishman - here is his latest post about iBiquity having to build its own portable HD radios, with those power-hog HD chipsets:

"iBiquity Forced to Build Own Portable Player"

http://tinyurl.com/mal6qh

LOL!

Anonymous said...

Not so fast John. Read this over carefully. There are quite a few loopholes here and it still is a higher rate than satellite radio for one.

Anonymous said...

One reason terra radio can't negotiate this good of a deal is because with each passing day terra radio becomes less appealing to music producers.

Already cutting edge artists will openly say they do not want their music on radio. Now granted, that's just posturing. But there's a grain of truth there. Airplay on Terra radio, for musicians looking to break in and establish their bonafides, will soon be a detrement.

Anonymous said...

There is a lot of truth to that previous post. Among many artists there is a growing feeling that being played and promoted on terrestrial radio at this stage is best avoided. There is a stigma attached to what is being played/promoted on radio. Ask any young person why radio stations play certain songs and not others and you will be told: payola. Even if it no longer exists (and I am not convinced of that) the years that radio did engage in pay for play has permanently tainted radio's image.

Anonymous said...

I'm totally neutral about this but someone explain to me why it's a bad thing for Jacobs to work for HD? I mean if HD came to one of you and said they'd like to hire you or do some projects with you would you turn the $$ down? I get the fact HD is a waste of time and space (a momentous one) but any of you who read this and work for, say, Cumulus or Clear Channel how are you any different taking a paycheck from one of these companies?

Anonymous said...

There is a difference. There is even a difference between an endorsement and being a shill. A person endorsing a product is being a paid spokesperson to do so. No one volunteers to be a spokesperson for a commercial product. They are claiming their support of HD radio and encouraging their clients to back it is in the best interest of their clients when in fact they are getting paid to promote the product to their clients. Should their clients be double charged? In Jacobs case and others supporting HD radio they are not being qualified as spokespeople for the product. They are promoting the product on their own websites and to their clients without revealing that they are paid spokespeople. Those are shills. They are attempting to create the illusion they personally believe in the product when in fact they are being paid to do so.

Anonymous said...

I see where your "Men of Steal" piece is constantly bombarded by Chinese character messages which lead unsuspecting people to file-stealing sites. That RIAA. They don't like to be questioned. This should be a caution for anyone tempted to click one of these Chinese character sites that get placed here. Don't.

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