Unless Internet radio fans get involved with trying to pass the Internet Radio Equality Act, webcasters will have to make retroactive royalty payments that are 300% higher than what they are paying now. The fees would be so high, small webcasters would be forced out of business.
Creamy Radio Goes Silent
Derek Grimme is the station manager of Creamy Radio in Tempe, Arizona. Fans listen online at CreamyRadio.com. Grimme says their payment due on July 15 is well over five figures and they won’t be able to grow Creamy Radio fast enough to keep up with the growing royalty rates over the coming years.
“These new royalties not only represent a massive retroactive payment and untenable rates due right now,” Grimme says, “They more than double over the coming three years, representing an elimination of future potential for this medium.”
Creamy Radio plays an eclectic selection of music ranging from the mainstream to the unknown. They play indie artists and even local bands, so their product is completely different from anything a listener would ever be subjected to on the FM dial of terrestrial radio. It is this kind of programming that makes the medium good for the artists whose music it plays.
A Bill to Make Even the IRS Blush
But the bills Creamy would face next month are astronomical. They are also set to grow exponentially over the coming years unless the silence of June 26 accomplishes its mission. The way the royalty hike for webcasters has been designed makes it look like price gouging.
“For this particular royalty, there was a percentage of total revenue system which scaled from 10% to 12% with $250,000 in total revenue being the break point to the higher percentage,” says Grimme. “Incidentally, Satellite radio -- the only other type of radio to pay this particular royalty -- pays between 3% and 7% of total revenue. The new methodology applies a 'per performance' royalty, with a performance being defined as 'one song, one listener.' Hence if one song is played and 100 people are listening, 100 performances. This new performance royalty scales from $.0008 in 2006 to $.0019 in 2010. This may not seem like much, but it adds up when you start talking about 1,000,000 plus performances per year, for example.”
A Show of Solidarity
It is the hope of Creamy and other online stations of all sizes (even the majors like Live365.com, Accuradio.com, and Pandora.com) to inspire fans to take action. In a show of solidarity, even some terrestrial radio stations broadcasting online went dark June 26. As traditional broadcasters, they are already in a royalty payment arrangement and are not subjected to the online royalty rate hike. The object of the day of silence is to ask for change. That change will come with support of the Internet Radio Equality Act.
