By Hans Morgenstern
By Joseph Hess
By Peter Gilstrap
By Julia Burch
By Jeremy Essig
By Nathan Smith
By Julie Seabaugh
By Julie Seabaugh
Early last month, the recording and Internet -radio industries finally agreed on how the latter will compensate the former for streaming music via the Web. The resolution was a long time coming. Former RFT writer Randall Roberts wrote about the conflict in 2006 when he profiled Jim and Wanda Atkinson, Internet-radio pioneers and proud proprietors of south St. Louis-based 3WK Internet Radio. (That story is published here: "You Play, They Pay.")
Here's some background: Since the dawn of the radio age, U.S. broadcasters have paid royalties to songwriters. Unlike the rest of the industrialized world, however, American AM and FM stations do not compensate record labels or the performers themselves. That fact has been a bone of contention for decades and a topic of recent debate as Congress mulls it over. (For more, you can visit www.musicfirstcoalition.org, the Internet base of operations of a network of artists intent upon making terrestrial radio pony up.)
Though the U.S. government hasn't yet settled the AM/FM question, when Congress passed the landmark Digital Millennium Copyright Act of 1998 (DMCA), it stipulated that Web streamers and satellite stations must pay songwriters and artists and their labels. When the dust cleared, a preliminary setup was established. The price was steep, especially so for bit players like 3WK with annual revenues of less than $1.25 million — "small webcasters" in Congressional parlance — who feared the required payments would force them out of business.
Now, after much rancorous debate, the July settlement nails down a structure, with new stipulations for mega-streamers such as Pandora and a small fry such as 3WK.
It seemed like a good time to check back in with 3WK's Wanda Atkinson via — how else? — e-mail to get her take on the settlement and the future of Internet radio.
RFT: What rate will you now be paying in royalties, and how will the new rate compare with what you've been paying up till now?
Wanda Atkinson: The full final settlement hasn't been posted yet, but it looks very similar to what we've been paying. Except it's gone from 10 percent of revenue to 12 percent. Don't know what the minimums are for small webcasters yet (right now it's $2,000 per year). Also can't figure out why satellite radio pays 6 percent — although theirs is a dying business model right now — and it looks like terrestrial radio will be a much less rate than 12 percent. Screwed again. Sigh...
What impact do you think the settlement will have on the viability of 3WK and stations like yours?
Depends on what the minimums are. We can handle 12 percent of revenue. But we're monetizing our streams pretty well. Don't know that other small webcasters (who haven't been paying up to now) can handle the expense. The market has already lost many, many radio stations to the ongoing copyright problems.
What do you think of the settlement?
Think it pretty much sucks. As I said above, satellite is paying much less, and it looks like when terrestrial radio finally has to pay, it will be much less also. I am not happy that one company, AccuRadio, was basically in charge of the final decision. But since we were not actively involved this time in negotiations (and had no wish to be involved), I don't know what [AccuRadio founder] Kurt Hanson was up against when negotiating. This might have been the best solution at this time. Hopefully we can revisit it when terrestrial radio, if finally hit with this copyright, ends up paying a much smaller percent.
So, it's inevitable that AM and FM stations will have to pay, but inevitable that they'll negotiate a cheaper deal?
Terrestrial radio has never paid this particular sound-recording royalty. They've always insisted that their airplay amounted to advertising for the artists and thus they didn't have to pay a royalty to play their music. Terrestrial radio that simulcasts their streams on the Internet do have to pay this. But not AM/FM radio. They pay [only] songwriter copyrights.
Congress is right now discussing making terrestrial radio pay the sound-recording royalty, and most experts expect they will pass a bill in the next couple of years making radio pay. However, with the hugely powerful [National Association of Broadcasters] negotiating this — unlike the minimally effective collection of small webcasters who negotiated our original deal — we expect that terrestrial radio will pay a much smaller percentage than we must. If they do, we can probably collectively bring up the much higher rate we pay and get it remanded.
I really don't want to discuss our revenue, other than that we fit the "small webcaster" definition of under $1.25 million in gross revenue. Way under.
Business has gotten much more competitive as advertisers realize they can access a very powerful demographic through Internet radio, especially since it's so much easier to listen via hand-held and car devices now. Remember, when we started twelve years ago — and really up to last year — the only way you could listen to Internet radio was on your computer. For twelve years we said, "Just wait until you can listen in your car, and everything will change." Well, change it did and not to small webcasters' benefit. The big guys with lots of money have officially moved in, and with big ad and marketing budgets, and big tech budgets, they have completely overwhelmed small webcasters. Where there once were hundreds of Internet radio stations to listen to, there are now maybe dozens. And most of those still around are catering to a more generic audience with more generic music in order to get more listeners.