The Copyright Royalty Board (CRB) has recently released a revised fee schedule for internet radio. Left unchanged, these rates will end internet radio, period. The RIAA has effectively convinced this federal committee to establish rates that make online radio a non-viable business.
For most operators, this rate looks as if it would be >150-200% of total revenues
the AOL Radio Network [statistics] suggests that AOL played about 2.1 billion songs that month. At the CRB’s royalty rate ($0.0008 per play), I’m guessing that would create a royalty obligation to SoundExchange for the month of November of about $1.65 million. Annualized, that’s about $20 million for 2006.
Here at RAIN, we’re guessing that Pandora has an audience approaching that size. (Pandora founder Tim Westergren claims that Pandora now accounts for 1.5% of all Internet traffic.) Such a royalty obligation might exceed the total proceeds of all their recent rounds of venture capital plus all their sales revenues to date.
Wall Street Journal article…the subtitle says it all: “Are Labels Undermining Themselves?”
(Pandora, a combination streaming-audio service and recommendation engine, could be particularly hard hit by the new rules: As a multichannel operator, the service would have to pay $500 per channel that has a certain number of listener hours. Pandora has 6 million users, each of whom can have up to 100 channels. You can see why the company is worried.)
I quote that particular part because it highlights just how clueless both the recording industry and politicians are about how “new” technologies work.
This stuff drives me CRAZY. And if Integration Research was still around and viable, it would be scrambling to get some grassroots action going on this issue. As it is, there’s just little ol’ me sitting here getting all pissed off.
The frustrating part is not that an established, bloated industry is scared of new technology. That is understandable. It’s that they do the dumbest thing possible in response to that OVER and OVER. This is the second time this issue has come up in the last decade. It is like they know what they should do but feel like they can’t change their mind now that they’ve argued for so long!