Independent voices will be silenced by big corporations---listeners will have fewer choices, the artists won’t get any more money for the creativity, and the corporations will gain more money and control if the record label’s royalty increase is allowed to stand. Please help stop it.

Save Independent Internet Radio from Being Silenced

For the past four years I have Webcast World Fusion Radio (http://WorldFusionRadio.com), bringing unique artists in the emerging genre of world fusion music to thousands of listeners world wide. I have paid thousands of dollars in royalties to artists, several times more than I have made in revenue. Unfortunately, it’s not enough money for the big corporate music labels who want to more than triple the royalties paid to them (though not to artists). Unless something is done, I and hundreds of other independent Webcasters will by May 14, 2007 have to shut down the radio stations we have spent years building.

The Recording Industry Association of America (RIAA) wants to tax me and hundreds of other independent Webcasters out of business. The Copyright Royalty Board (CRB) has rubber stamped a royalty hike demanded by SoundExchange, a subsidiary of the (RIAA). SoundExchange and the RIAA seem determined to destroy independent Internet radio and will do so unless there is an immediate public outcry big enough to reach Congress and persuade them to pass legislation to stop the royalty increase and save Internet radio.

To explain what all this means and how you can help, first I will explain what independent Webcasters do, and then what the royalties really are and the effect they will have.

What Webcasters Do
Everyone who runs an Internet radio station is an unpaid marketing rep for the record labels. We promote their music 24 hours a day, seven days a week. We promote their music to new listeners who go out and buy that music. We buy the music first before we play it because we seldom get the free CDs that the labels give to broadcast FM radio. So we make money for the record labels and the artists.

Not only do Webcasters increase music sales, we also pay to play music. Webcasters must pay ASCAP, BMI, SESAC (who distribute those royalties to artists), and SoundExchange (yes we already pay them royalties) for the reasonable and fair songwriting and publishing royalties that artists deserve. I have found that artists are appreciative of what we do as Webcasters and understand the importance and value of Internet radio. It is only the corporate label bureaucrats who don’t appreciate Webcasters. Which brings us to SoundExchange.

What SoundExchange Does
SoundExchange is a corporation set up by the RIAA (the major record labels: EMI Music Group, SONY BMG Music Entertainment, Universal Music Group and Warner Music Group) to collect a new royalty on music recordings created by the Republican Congress in 1998. That new royalty is above and beyond the royalties long paid to songwriters and musicians. The new royalties are for the "sound recording copyright" of the song, i.e., the actual recording that is the CD track or MP3. This royalty must be paid by anyone who plays a song through a digital medium, usually the Internet.

The specific "sound recording copyright" is usually not owned by the songwriter or the artist, it is owned by the record label so the actual artists and performers usually do not share in this money. SoundExchange does not reveal to whom they distribute the royalty payments but many artists report not receiving a penny of it (http://www.boycott-riaa.com/facts/truth).

The royalty is specifically directed at Internet radio and is effectively an anti-competitive tax on Internet radio. It is NOT charged to broadcast FM radio (http://soundexchange.com/faq.html#a6). Satellite and cable radio corporations worked out a deal with SoundExchange to pay a substantially lower rate than charged to Internet radio.

All Webcasters, independent ones like World Fusion Radio and corporate ones like Yahoo and AOL, have dutifully paid the new royalties to SoundExchange, making millions of dollars of pure profit for the record labels. We have played by the rules and SoundExchange doesn’t dispute that. However, SoundExchange wants more money. SoundExchange falsely claims that Internet radio stations made $500 million in advertising last year. That claim is beyond ridiculous and has been proven to be inflated four to five times higher than actual revenues for the industry (http://webcastersunite.net/). Almost all of that revenue is earned by corporate Internet radio sites such as Yahoo and AOL from advertising and sales revenue they receive from the major record labels.

What the Royalty Increase Will Do

The RIAA knows that the royalty fees will kill all independent Webcasters. They know that if the CRB ruling is not reversed the number of Internet radio stations will go from several hundred to several dozen or even fewer.

How Draconian are the fees? Well, for starters, SoundExchange wants every single Webcaster to pay a retroactive $500 fee per channel for royalties for 2006. This is an additional fee for Webcasters who obeyed the existing royalty rules and already paid what they were asked to pay. So they will be paying royalties twice for 2006.

Then, starting on May 15, 2007, the rates shoot up astronomically! Under the old royalties, an Internet radio station paid about $500 a year in royalties (to all sources: BMI, ASCAP, SEASAC, SoundExchange) through LoudCity or $600 a year through Live365. Under the new royalty system, a Webcaster that broadcasts 15 songs an hour to 500 listeners would pay SoundExchange $72,270 a year (http://www.live365.com/choice/sxreply.live), in addition to the other costs for artists royalties (remember, the SoundExchange royalties aren’t for the artists), hosting, bandwidth, and other costs. SoundExchange claims that an increase in fees from $500 to $72,000 a year is "fair value."

Fair value?!? Independent Webcasters usually earn less than $1,000 a year because their only sources of revenue are free-will donations from listeners and maybe pay-per-click ads. Most independent Webcasters pay more than that in streaming costs and of course royalties.

How is it "fair value" to pay more than you earn? No industry in the world could survive with that formula. At World Fusion Radio, I already pay 187 percent of my revenue in royalties to artists and labels and I do better financially than most Webcasters. Like most Webcasters I do it for the love of music, not for profit. Yet SoundExchange wants to raise our royalties 600-1200 percent.

An Internet Radio station will owe SoundExchange $155/listener/year just for licensing in 2007 and that amount will increase to $267/listener/year by 2010. (http://www.savenetradio.org/blog.html) Independent Webcasters will not be able to pass a fee that high onto their listeners. Independent Internet radio will die.

So why is the RIAA doing this? Control. The major labels have enjoyed an undercover relationship with radio for decades as the two colluded on who got played and who didn't. (Can you say "payola?") The RIAA can not control independent Webcasters. We decide what we play (that’s why you love us). Independent artists can come to us and promote their music on our stations, circumventing the record labels entirely. I believe that is the RIAA’s biggest fear.

What You Can Do
On May 15, 2007, hundreds of Internet radio stations will fall silent, unless there is an immediate and unmistakable public outcry to force Congress to change the unfair SoundExchange royalty increase.

Please go to http://www.savenetradio.org/... and take action. Share this letter with your friends and urge them to also take action. SoundExchange says they want feedback from consumers, so write their Executive Director, John Simson at jsimson@soundexchange.com. Contact your favorite artists and labels and let them know how you feel.

Together we can save Internet radio; not just World Fusion Radio, but all of the many wonderful Internet radio stations out there.

In Solidarity,
Douglas Giles
World Fusion Radio

Originally posted to DJ ProFusion on Sun Apr 22, 2007 at 06:49 PM PDT.

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