Broadcasters Want Flat Fee for Web Radio Royalties
A group of broadcasters have asked the Copyright Office to establish a flat annual fee for online radio that would be paid monthly, regardless of audience size. The royalty rate would be based on a station’s market position and BIA revenue rank. Bonneville, Clear Channel, Infinity, Susquehanna and the National Religious Bcstrs. Music License Committee (NRBMLC) recently submitted their joint proposal to the Copyright Royalty Board (CRB), which is considering revamping the current system. The digital media industry, music publishers, satellite radio companies and other players in the Web-based music space also filed proposals with the CRB.
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Under the broadcasters’ plan for the top 5 markets, large stations would pay $8,000 annually, midsized stations $6,500 and small stations $6,000. In markets 6- 10, stations would pay $3,000-$5,500 and in markets 11-25, $1,500-$3,500. For markets 26-50, stations would owe $1,000-$2,000 annually; 51-100, $750-$1,500; and 101- 200, $500-$1,000, according to the broadcasters’ CRB proposal.
Stations whose programming is at least 95% news, business, talk or sports would pay a lower annual fee. Top 10 market stations would pay $750 annually, markets 11-100, $500, and smaller markets $250. Stations with mixed formats -- more than 25% of their programming classified as news, business, talk or sports -- would also have a different fee structure. Stations that air 50-75% music would pay 65% of the music format fee, those with 25-50% music, 40% of the fee; and those with 25%, 15% of the music format fee.
The broadcasters also suggested that the minimum fee for partial-year streaming be $250, and online stations in their first 6 months of streaming would pay 1/2 the fees of established stations. All fees under the broadcasters’ plan would increase 4% a year.
Susquehanna Senior Vp Dan Halyburton described how simulcasting continues to lose money, in large measure due to sound recording performance fees. “Overall, our stations are currently on pace to lose even more money on their streaming operations in 2005 than they did in 2004,” he said: “We are unable to create a sustainable model for earning a profit from streaming under the current fee structure. Meanwhile, the record industry continues to reap all of the additional promotional opportunities offered by streaming at no additional cost or risk.” Susquehanna was one of the first radio broadcasters to start streaming in the late 1990s; at the time, Yahoo paid all royalty fees, Halyburton said.
Web streaming is secondary to Bonneville’s over-the- air broadcasting and it’s locally driven, the company’s San Francisco Radio Group Internet Dir. Roger Coryell told the CRB. His stations find it necessary to constrain their streaming audiences by imposing caps on streaming capacity to keep sound recording performance fees from becoming prohibitively expensive. Royalties paid to SoundExchange “are threatening to put an end to our entire streaming operation,” he said. Simulcasting programming online is an important way of connecting with listeners, but the benefits are still “intangible and speculative,” Coryell said. The costs, on the other hand, are “very real and immediate,” he added.
Infinity has also been unable to find a sustainable business model for its streaming music-formatted stations, Streaming Media Vp Matt Timothy said. The “golden rule” at Infinity is that the company won’t take up an activity unless it’s profitable. Infinity has 58 music stations that would stream online if the broadcasters’ joint fee proposal is adopted, he said. Clear Channel Technology Vp Brian Parsons added that many of his company’s stations can’t stream online without incurring significant economic losses. If the rate structure remains the same, some of Clear Channel’s stations that stream content to the Web will be forced to stop, he warned.
The current structure covering Oct. 28, 1998-Dec. 31, 2002 was adopted in July 2002, by a Copyright Arbitration Royalty Panel (CARP) proceeding, said Wiley Rein & Fielding attorney Bruce Joseph. The parties extended the fee through 2004 -- while the appeal of the CARP rate was pending and legislation to rationalize the process was making its way through Congress -- to avoid 2 years’ costs of fighting. The Copyright Royalty Distribution Act in 2004 extended the fee a year to set up the current schedule, he said.
The CRB will oversee a limited factual discovery process. Then the parties will have 15 days to reconsider their initial royalty proposals and submit any amended filings. This step is followed by a mandatory settlement negotiation period. If no settlement is reached, arbitration begins, including live witness testimony, cross-examination of witnesses and oral argument by attorneys.