Extinction-Level Event For Small Commercial U.S. Webcasters?

Right before the holidays, and with little fanfare, the U.S. Copyright Royalty Board released its revised rate-structure for the music royalties streaming audio services must pay. Not surprisingly, large “pure-play” services like Pandora, Spotify, and Apple Music saw their rates per-song/per-listener increase (though they say they can weather the increased cost), while terrestrial AM/FM radio broadcasters actually caught a break. No change for noncommercial webcasters, who play a flat yearly fee up until they hit a certain song/listener threshold (which the vast majority never do).
However, the CRB rates do not include special carve-outs for small, indepdendent, commercial webcasters, who (since 2008-9) typically pay a percentage of their revenue to satisfy the royalty gods. In the past, these deals have been negotiated between this constituency and SoundExchange, the music industry’s streaming royalty-clearinghouse in charge of collecting and disbursing royalty payments, and then codified into the CRB’s rate structure.
Now, small commercial webcasters must pay the same per-song/per-listener rates as the streaming giants, and this has spurred talk of an extinction-level event for a whole swath of the industry. Raising the loudest alarm is Live365, an aggregator of streams for thousands of independent webcasters, many of whom have been able to eke out a living under the percentage-royalty rate regime of the past several years. Many of the most successful independent streamers focus nearly exclusively on niche content wholly ignored by the terrestrial broadcast industry or considered too specific for the pureplays’ algorithmic playlist-building.
Live365’s business model has always been a bit tenuous, in effect offering two tiers of service: a free/low-cost one which inserted advertisements and promos into webcast streams, and a “pro”-level service which comes with a subscription fee and allows webcasters a bit more flexibility over third-party content on their streams. Now, the CRB’s rate-change — and the lack of a sustainable royalty-model for indie commercial streamers — has the company on the rocks. Last week, after losing a majority of its key investors, Live365 abruptly laid off most of its staff, closed down its offices, and is openly appealing for public investment.
According to CEO N. Mark Lam, “These stations are the hard work of real human beings who use Live365 to share their vision with the world. . . .It would be a great loss for this to all go away.” This will also affect many noncommercial webcasters, such as my campus’ own student radio station, who use Live365 as an easy, outsourced conduit to the larger world of streaming media. Other independent commercial webcasters have also announced their closure or are evaluating their options.
The world has not yet ended. There are several potential options to stave off the worst-case scenario, though all involve some effort.
The first would be for small indie webcasters to negotiate a new rate structure with SoundExchange along the percentage-based royalty lines that have been in place for the last near-decade. Problem is, these indies don’t have their own trade organization or lobbying arm to undertake such an effort (they weren’t players in the discussions that led up to the new CRB rate structure).
In effect, this may come down to the charity of the music industry via SoundExchange, and it’s not clear whether it would rather have all of nothing than a part of something. There is precedent for Congress and the courts to get involved, but it’s an election year and the do-nothingest Congress in history is expected to continue its inaction on all fronts.
Secondly, indies might attempt to move their streams to providers located outside the United States, where royalty rate-structures for streaming may be saner. This would also involve a pivot to placing a primacy on non-U.S. audiences, which in many respects could be self-defeating.
Finally, there’s always the pirate route! After twenty years, the music industry hasn’t been able to stamp out file-sharing, especially the kind that involves the distribution of copyrighted material such as music. The internet’s too decentralized and potential entry-points for such material too numerous that even with a bevy of helpers policing the packets, file-sharing is in many respects as vibrant as ever.
Many are pushed into piracy when they have no recourse to act within the law — witness the explosion of unlicensed FM stations in the United States over the last decade, as open spectrum (defined by the FCC) disappears and the costs of entry into licensed broadcasting rise far beyond the means of most.
The next few weeks should tell the tale. It would be a shame if the streaming space contracted significantly over what is, in relative terms to the pureplays and broadcasters, chicken feed.

One thought on “Extinction-Level Event For Small Commercial U.S. Webcasters?”

  1. Webcasters need to sign this petition :
    The Copyright Royalty Board has handed down a decision after meeting behind closed doors with Pandora and coming to an agreement in reference to royalty rate increases ( http://www.loc.gov/crb/web-iv/amended-web-iv-terms.pdf ) that literally cripples any small webcaster anywhere in the United States of America !
    In this agreement it states that the rate is $0.17 per 100 songs , per listener , raising rates so high that it makes it unaffordable by any broadcaster anywhere.
    While this bill HR1733 is good to force terrestrial radio to finally pay royalties which they had never done since the beginning of internet broadcasting, the original ” Small Webcaster Settlement Act ” ( SWSA ) has been eliminated making no provision whatsoever for hobbyist broadcasters who have no revenue to pay the outlandish fee’s that would be incurred upon them by the elimination of this agreement.
    It also creates a monopoly which according to US law has been deemed illegal in the United States of America , allowing only major corporations like Pandora and iHeart Radio to control what is being heard on the internet.
    For years, small webcasters have been paying royalty fee’s when terrestrial was not! And as a thank you for all the years of trying to do what was right , to be lawful and pay royalties that artists worldwide have worked so hard for and deserve, the Copyright Royalty Board has decided only the wealthy should be allowed to broadcast, thus ending small broadcasters tiny businesses all over the USA.
    Finally, this bill does not only affect the small broadcaster , but affects many businesses that small webcasters have supported as well thus eliminating literally MILLIONS of dollars of spending in business such as :
    * Streaming Servers
    * Chatrooms and servers
    * Messengers
    * Communities and servers
    * Games
    * Webhosting and servers
    * Banner Hosting services and many other services !
    For years small broadcasters have been paying licensing fee’s to stay legal on the internet, paying dues in appreciation for the hobby they so love. They have all had a dream of one day climbing that ladder to make a name for themselves, to achieve success. Some didn’t have that dream, they just wanted to enjoy what they loved to do. Now that dream has been stomped on, spat on, and kicked to the curb by the very people we entrust to treat us fairly. It’s shameful , unjust and should be considered criminal because of the results of this decision being made.
    It should not be allowed.

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