SoundExchange Proposal Would Decimate Internet Radio Industry (May 23, 2007)

WASHINGTON, D.C. In response to SoundExchange’s announcement today that it plans to offer those they designate as “small webcasters” an extension of current royalty rates through 2010, SaveNetRadio has released the following statement:

“The proposal made by SoundExchange today would throw “large webcasters” under the bus and end any “small” webcaster’s hopes of one day becoming big,” SaveNetRadio spokesperson Jake Ward said. “Under government-set revenue caps, webcasters will invest less, innovate less and promote less. Under this proposal, Internet radio would become a lousy long-term business, unable to compete effectively against big broadcast and big satellite radio – artists, webcasters, and listeners be damned.”

“Labeling webcasters small or large is a distinction without a difference,” continued Ward. “Two of the most prominent webcasters, Pandora.com and Live365 are models of industry success but would be bankrupted by the CRB and by the SoundExchange proposals. Pandora employs 100 people in an enterprise zone in Oakland, California, but its popularity would put it out of business. Similarly, Live365, an aggregate webcaster that provides a platform for more than 10,000 individual webcasters, has a staff of fewer than 40. Though clearly small as a business, Live365’s enormous importance and scope among webcasters would force them to shut down.”

By broadcast radio standards, even the largest webcasters (i.e., the Internet radio divisions of Yahoo! and AOL) are small broadcasters. (A few years ago, broadcast groups that didn't even make the list of the 40 largest radio companies -- Fisher, Service B'casting, Arso Radio, Curtis Media, Mid-West Family, Hubbard, etc. -- all had annual revenues of over $20 million, making them larger than the largest webcaster.)

The revenue caps SoundExchange is proposing are an extension of those put in place during the 2000-05 period which created an insurmountable barrier to growth for small webcasters. This revenue cap has had the perverse and unintended consequence of forcing thousands of webcasters to stay small if they want to stay alive, thereby weakening the industry – the very opposite of Congress’ intention.

Under the "willing buyer / willing seller" standard set by the Digital Millennium Copyright Act, the distinction between “large” and “small” is irrelevant. Indeed, it is that standard, combined with the judges interpretation, that led to this unexpected consequence of a royalty rate increase on March 2nd. A standard that would set a royalty rate more than 300% of a webcaster’s revenue was not what Congress had in mind, and it must be adjusted if the industry is going to survive.

SaveNetRadio is a national coalition comprised of hundreds of thousands of webcasters, artists, listeners and labels from throughout the country committed to preserving the future of Internet radio.

Legislation currently before Congress, H.R. 2060 and S. 1353 - the Internet Radio Equality Act - would vacate the Copyright Royalty Board’s decision and set a 2006-2010 royalty rate at the same level currently paid by satellite radio services (7.5% of revenue.) The bill would also change the royalty rate-setting standard used in royalty arbitrations, so that the standard applied to webcasters would align with that applied to satellite radio.

For more information on the SaveNetRadio coalition visit www.savenetradio.org

Letters From Congress re: SoundExchange Unfair Rates (May 24, 2007)

Thank you for contacting me about the Copyright Royalty Board (CRB) and its recent determination of music royalty rates. I appreciate hearing from you.

As you know, the CRB issued its decision on new rates for commercial and noncommercial webcasters on March 9, 2007. Under the Small Webcasters Settlement Act of 2002 (P.L. 107-321), Congress allowed qualifying small webcasters to decide to pay royalties as a percentage of their revenue rather than on a "per song, per listener" basis. This solution was temporary, however, and the former rate structure expired in December, 2005. Under the CRB's new rules, webcast ers may no longer elect to pay percentage royalties and must pay per song, per user rates established by the CRB.

I share your concern about the ability of small webcas ters to afford higher royalties . Recently, Senators Ron Wyden (D-Oregon) and Sam Brownback (R-Kansas) introduced the "Internet Radio Equality Act" (S. 1353). This bill would overturn the CRB's March decision and apply royalty rate-setting standards from the satellite radio industry to commercial Internet radio broadcasters. Please be assured I will keep your views in mind should the Senate consider this legislation . Thank you again for contacting me.

From Representative Steven R. Rothman:

Thank you for contacting me in support of Internet Radio.

I am glad to learn of your point of view and I assure you that by sharing with me your thoughts and opinions, you are helping to shape the policies that impact our region, state, and nation. I respect your commitment to making your voice heard. Please know that I will keep your thoughts very much in mind should the House of Representatives consider legislation that will impact your access to Internet Radio.

As your Representative in the United States Congress, it is a privilege and an honor to serve you and to act as your voice in Washington. Please feel free to contact me again with any other issue or matter that concerns you. You may also want to visit my website at www.house.gov/rothman where you can find out how I have voted on legislation, learn which bills I have introduced and cosponsored, and keep current with my latest policy statements.