Radio and Its New Royalty Payment

There's not much sense in moaning about new Copyright Royalty Board demands. They are what they be.

Read the document. I'll point to its foundation saying between 2016 and 2020, with slight exception, online stations will pay $1.70 every 1,000 times a song is played. Forget the "spin" stuff. Payment is calculated using "Aggregate Tuning Hours," which may be described as the number of people listening multiplied by the seconds that they listen.

Here's the definition of Aggregate Tuning Hours as given by the "Web-IV Determination" issued a couple of weeks ago: By way of example, if a service transmitted one hour of programming containing Performances to 10 listeners, the service's ATH would equal 10. If 3 minutes of that hour consisted of transmission of a directly licensed recording, the service's ATH would equal 9 hours and 30 minutes. As an additional example, if one listener listened to a service for 10 hours (and none of the recordings transmitted during that time was directly licensed), the service's ATH would equal 10.
This is the trigger that's going to shoot many small and medium online stations: Removal of the Small Webcaster Settlement Act (SWSA). It appeared in the previous agreement, giving a low dollar approach for low audience stations. It also carried requirements that revenue and audience levels be kept low. Here is a deeper explanation.

In the new plan, which started January 1 2016, all stations pay the same. Being the opposite of a SoundExchange proposal issued in 2009, this greatly affects small to mid-size players. Live365's announcement is your prelude.

Readings from the radio side go from "can't afford it" to "will drive us out of business." SoundExchange has a different view: "It's only 17-cents for every hundred plays."

It doesn't matter which side you're on since the "level playing field" has disappeared. Until online radio finds an ad pricing strategy outside of CPM (cost-per-thousand), only deep pocketed stations will be able to afford to play music online.

For artists, let's address one issue that I've not seen discussed: Not everyone deserves to be paid for their song. Positioned another way: Should an artist who is just starting out, and seeking exposure, receive the same payment as Lady Antebellum? New artists hold higher potential for listener tune out. An established act is a draw.

Will an artist place different value on their song if we reverse the question and ask how much would they pay to hear one song one time?

Terrestrial radio stations are no longer the lone source of exposure. Music is everywhere. Just as the creation of billions of advertising impressions brought CPM value down, a highly increased number of easily available songs drops the value of each. We live in a music glut with market driven pricing. Like a kernel of corn in a silo, music has become a commodity.

Sadly, the artist vying for attention is not in a position to demand anything.

To give a sense of the dollars each station is minimally committed to as of January 1, 2016 (and this is just performance royalty, excluding BMI, SESAC, ASCAP, streaming fees, site build, operational cost, etc.): 1.7 cents per hour for every ten listeners to hear a song times (on average) 14 songs per hour comes to 23.8 cents for music in each hour of play. Multiply that by 24 hours in a day and the cost comes to $5.71. Each week the station could owe $39.97 - or $2,078 for the year. Mind you this is for only 10 listeners, when advertisers pay less than $2 for 1,000 impressions.

To artists and stations, here's a footnote from page 19 of the 2005 CRB rates determination: "It must be emphasized that, in reaching a determination, the Copyright Royalty Judges cannot guarantee a profitable business to every market entrant."

The new CRB issued rates for performance royalties are in effect. The next ninety days will show if there is fight left in this battle or if small and medium stations leave. If it's the latter, artists will have fewer exposure points, and it will be more difficult to get a new song spun on the remaining stations.

2016 is starting as an interesting year.

Monday, January 4, 2016      eMail to a Friend

Today's artist introduction is to Country from Cutler Boyd.

Cutler Boyd
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