If you try to “tune in” to many Internet radio stations and online music services today, and hear nothing, here’s why: protesting against an impending royalty rate increase that, if implemented, would lead to many services having to shut down, webcasters across the US are holding a national Day of Silence.
Organised by the Save Net Radio Coalition, thousands of US-based webcasters have turned off the music and gone silent in a unified effort to draw attention to the 300% royalty hike.
From the Save Net Radio Coalition’s website:
At the request of the Recording Industry Association of America, the CRB ignored the fact that Internet radio royalties were already double what satellite radio pays, and multiplied the royalties even further. The 2005 royalty rate was 7/100 of a penny per song streamed; the 2010 rate will be 19/100 of a penny per song streamed. And for small webcasters that were able to calculate royalties as a percentage of revenue in 2005 – that option was quashed by the CRB, so small webcasters’ royalties will grow exponentially!
Before this ruling was handed down, the vast majority of webcasters were barely making ends meet as Internet radio advertising revenue is just beginning to develop. Without a doubt most Internet radio services will go bankrupt and cease webcasting if this royalty rate is not reversed by the Congress, and webcasters’ demise will mean a great loss of creative and diverse radio. Surviving webcasters will need sweetheart licenses that major record labels will be only too happy to offer, so long as the webcaster permits the major label to control the programming and playlist.
As well as smaller webcasters, many big name stations and music services have joined the protest, including Yahoo!, Live365, Rhapsody, MTV Online, and Pandora.
Notably missing in action is Last.fm which was recently acquired by CBS. Writing on the company’s blog, co-founder and CEO, Felix Miller, gave a number of reasons for not taking part. First, Last.fm is a UK-based company, and so has had to deal with similar royalty decisions for some time, which Miller says are even harsher than those proposed in the US. Secondly, handing over a proportion of revenue to the recording industry has been a commercial reality since the company was formed, and Last.fm has worked hard to build a business model that can survive these charges — a model successful enough to warrant the CBS acquisition. But, perhaps most importantly, the company didn’t want to punish its listeners for its own problems, argues Miller.
If a commercial challenge comes up, we have to deal with it. We have always done that, as many people who have been using Last.fm for a while can attest to…
Since Last.fm started we’ve engaged in negotiations with the music industry, leading to our recently reaching an agreement with several major record labels for the use of music on our service. As a legal and responsible provider of music, we’re continuing discussions with record labels and music publishers. At the same time, we’re negotiating with royalty collection societies to make sure we can get rates that make sense to us.
The only solution to this dilemma is commercial; make a commercial argument and see it through.
Josh Catone, over at our sister blog, Read/WriteWeb, has more.