College and high school radio stations that broadcast music online are closely watching as events unfold that could decide whether they must pay costly new royalty fees.
Internet radio broadcasters got a reprieve in their struggle against higher music royalties as the deadline for paying fees under the new system was postponed by two months, to July 15, but many officials still fear that paying those royalties will cause some internet radio stations to close.
The Copyright Royalty Board (CRB) came up with the new fee structure in March after webcasters, which include several small companies but also major internet companies such as Yahoo Inc., Microsoft’s MSN site, commercial radio stations, and AOL, a unit of Time Warner Inc., failed to reach agreement with the owners of music copyrights on a new royalty system once a previous set of agreements expired in 2005.
Noncommercial webcasters, such as college and high school radio stations, would have to pay a minimum $500 royalty payment per year. For commercial stations, however, the impact will be even greater: The CRB’s rate hikes of .08 cents per song, per listener, for commercial radio stations are retroactive to 2006, and then would climb every year until 2010, reaching .19 cents per song, per listener. For large radio webcasters, those fees can reach into the hundreds of thousands of dollars.
The new royalties apply only to digital broadcasts of music and are paid to the artists and record labels. Satellite radio broadcasts, because they also are digital, are subject to similar royalties, though at a lesser rate. These new royalties come in addition to other fees already paid to the publishers and composers of music, which also are paid by traditional radio stations. Those analog stations don’t pay the digital broadcast fee, however, because airplay is considered to be a form of promotion for record sales.
SoundExchange, a group that collects and distributes digital music royalties on behalf of copyright holders, has said it wants to see the internet radio business thrive, and it disputes claims from the broadcasters that the new fees are onerous.
However, John Blackledge, an industry analyst at JPMorgan, said in a recent report that the newly issued royalties could “potentially shutter smaller internet radio companies” and hurt the profitability of larger operators as well.
Stephen Croes, dean of Berklee College’s music technology department, described the impact the new fees could have on school radio stations in a broadcast of Future Tense, an online daily podcast.
“We’re not [a] business, and I think that makes the difference for us, and makes us distinct from some of the other entities that are having to face this grim situation,” Croes said.
Berklee recently established the Berklee Internet Radio Network (BIRN), the school’s first-ever radio station. Users will be able to take advantage of four free, 24-hour radio channels.
“These are very tricky times for anyone who is looking at the future of internet radio, and we are keeping ourselves informed about developments and hopeful that we will be able to keep this broadcast going,” Croes continued.
Small broadcasters have received relief from Congress in the past, benefiting from a law passed five years ago that gave them a break on royalty rates. The legislation allowed them to pay about 12 percent of their revenues instead of having to calculate per-song, per-hour rates like larger companies had to.
In early May, dozens of internet radio webcasters met with congressional staffers to lobby for the Internet Radio Equality Act, introduced by U.S. Reps. Jay Inslee, D-Wash., and Don Manzullo, R-Ill.
“This titanic rate increase is simply untenable for many internet radio broadcasters,” said Inslee, a member of the House Energy and Commerce Subcommittee on Telecommunications and the Internet. The legislation would provide royalty parity for internet radio providers and would vacate the CRB’s March 2 decision.
SaveNetRadio, a coalition of artists, labels, listeners, and webcasters, “believes strongly in compensating artists, but internet radio…will not survive under the new royalties,” said the group’s web site.