By Michelle Nichols
Thousands of U.S. Internet radio stations held a "Day of Silence" on
Tuesday to protest an increase in performance royalties paid to
musicians and record companies that they warn could kill the fledgling
industry.
Campaign organizer SaveNetRadio estimated about half of the 30,000
U.S. Webcasters were silent, partly silent or playing announcements
urging an estimated 50 million U.S. listeners to act against the hike
by calling lawmakers in Washington.
Under a Copyright Royalty Board ruling in March, Webcasters will pay a
performance royalty of $0.0008 for each listener of each song in 2006,
rising to $0.0019 in 2010. The first payment, backdated to January 1,
2006, is due on July 15.
The new ruling means the six biggest Internet radio stations --
Pandora, Yahoo, Live365, RealNetworks Inc, AOL and MTV Online -- will
pay 47 percent of their anticipated 2006 combined revenue of $37.5
million in performance royalties, said SaveNetRadio.
"The industry will be decimated by these new rates," said Jake Ward,
spokesman for the Washington-based group that seeks lower royalty
rates for Webcasters. "We're paying more than our fair share as is and
they want to give us a rate hike."
He said broadcast radio stations earn around $20 billion a year in
revenue and do not pay any performance royalties.
Broadcast stations pay royalties to composers and publishers but no
performance royalties thanks to a federal exemption granted under the
argument that the airplay helps to sell music.
Ward said satellite radio stations earn about $2 billion in revenues
annually and pay half of the performance royalty rate paid by Internet
stations.
SoundExchange -- a non-profit group representing more than 20,000
artists, 2,500 independent record labels and four major record
companies -- collects the royalties from Internet and satellite radio,
as well as digital cable.
"They want the music but they don't want to pay for it," said Richard
Ades, a spokesman for Washington-based SoundExchange, adding that
about half of Internet stations were not complying with laws on
reporting and paying royalties.
He said SoundExchange had offered in May to extend discounted rates
for Webcasters earning less than $1.25 million until 2010 whereby they
would pay royalties of 10 percent of revenues up to $250,000 and 12
percent above that.
The discounted rates were introduced in 2002 after a similar "Day of
Silence" protest by SaveNetRadio.
Ward said Tuesday's "Day of Silence" urges listeners to put pressure
on Congress to pass legislation to cut the royalty rate to 7.5 percent
of a company's annual revenue, bringing Internet radio in line with
the rate paid by satellite radio.
In a letter on http://www.pandora.com, the station's founder Tim
Westergren described the Copyright Royalty Board ruling as a
"disastrous turn of events that threatens the existence of Pandora and
all of Internet radio."
"Left unchanged by Congress, every day will be like today as Internet
radio sites start shutting down and the music dies," he said.
Copyright 2007 Reuters Limited.
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Michelle Nichols, Reuters (reuters@telecom-digest.org)