Internet Radio, R.I.P.

shotinfoot1.jpgThe music industry held the gun while the Copyright Royalty Board pulled the trigger today, as a decision to effectively triple the rate paid by Internet radio stations for retransmission of recorded works sounded the death knell for a budding business model. Via RAIN:

The Copyright Royalty Board (CRB) has announced its decision on Internet radio royalty rates, rejecting all of the arguments made by Webcasters and instead adopting the “per play” rate proposal put forth by SoundExchange.

RAIN has learned the rates that the Board has decided on, effective retroactively through the beginning of 2006. They are as follows:

2006 – $.0008 per play
2007 – $.0011 per play
2008 – $.0014 per play
2009 – $.0018 per play
2010 – $.0019 per play

RAIN ANALYSIS: In 2006, a well-run Internet radio station might have been able to sell two radio spots an hour at a $3 net CPM (cost-per-thousand), which would add up to .6 cents per listener-hour. Even adding in ancillary revenues from occasional video gateway ads, banner ads on the website, and so forth, total revenues per listener-hour would only be in the 1.0 to 1.2 cents per listener-hour range.

That math suggests that the royalty rate decision — for the performance alone, not even including composers’ royalties! — is in the in the ballpark of 100% or more of total revenues. (KH)

The industry’s rationale, which was adopted completely by the CRB, was as follows (via broadcastlawblog):

Essentially, SoundExchange argued that Internet Radio confers little promotional benefit to most performers, and that there was a large risk of “stream ripping” which would result in lessened sales of CDs and legal downloads. Moreover, the Recording Industry argued that the economics of webcasting are improving and that this higher royalty should be able to be paid by an “efficient” webcaster. In their proposal, no distinction is made between large or small webcasters, or between commercial and noncommercial entities.

It’s times like these that reveal the industry to be a passel of Luddites who can’t accept a future they don’t write word for word. If the record biz really believes that the risk of recording outweighs the promotional value of of Internet broadcasts (which can find listeners rather than the other way around), they deserve to die. Good riddance.