As published at Slashdot, in its "Your Rights Online" section:
New Royalty Rates Could Kill Internet Radio
FlatCatInASlatVat writes
"Kurt Hanson's Radio Internet Newsletter has an analysis of the new royalty rates for Internet Radio announced by the US Copyright Office. The decision is likely to put most internet radio stations out of business by making the cost of broadcasting much higher than revenues. From the article: 'The Copyright Royalty Board is rejecting all of the arguments made by Webcasters and instead adopting the "per play" rate proposal put forth by SoundExchange (a digital music fee collection body created by the RIAA)...[The] 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.'"
More discussion of how the RIAA is sacrificing profits in favor of keeping the power of being "official publishers"...
A group called "Save Net Radio" has a summary and action items to save net radio.
Update: "The End Of Internet Radio As We Know It diary has more links to action and orgs working to stop this crushing new rule regime.
Everyone knows the royalty chargers, record labels, are stupid about the economics of the "network effect". They've never lowered prices to increase volume and thereby increase profit faster. But they're very smart about power. These new rates continue to reinforce the exclusion of small operators, by making even smaller operators pay $500 a year, which is much more than most people will pay for a hobby: about doubling their Internet bill. It's over 2-5x what people pay for email, an essential service connecting them to hundreds or thousands, not handfuls, of people. So the royalty holders continue to hold the power as "official publishers". And the RAIN article we're discussing points out that commercial operators paying over $500 get hit even harder, losing at least 7% in revenues as overall loss. Little guys can't repeat the success of blogs competing with mass media journalists, because they have to stay really little. There is room for a "resyndication" revolution, "P2P server" software that restreams a few servers to a few more restreamers each, while streaming originated content to some more people in the network. But by the time that software is around, the royalty chargers will change the rules again, just like they did in the late 1990s, again in 2003, and again just now. They will continue to write the laws to kill any competition from the little guys who actually give the people what they want, and challenge their politically privileged power as official broadcasters.
Some tech/economics:
The old rate was $0.0007 per song per listener. At 128Kbps and 4min per song, 3.66MB, that's about $0.20 per GB. At the time, bandwidth cost about $0.25 per GB (with a monthly cap at about 1.2-1.5TB, about 344-430 thousand plays). Bandwidth now costs about $0.05 per GB (capped at about 2TB), but rates are going to $0.315, then $0.40 next year, $0.515 in 2009, $0.543 in 2010. By which time bandwidth will probably cost about $0.02 or less per GB, probably capped monthly at around 3-5TB or more (about 860-1430 thousand plays). Bandwidth was 25% more expensive when the rules were written, and will now become at worst about 3.7% the cost of the royalties.
Some DC lawyers have even more detailed analysis of how these new rules will disrupt all but the mass media corps. And a brief rate structure with small webcaster comments.
The problem with the old rate structure wasn't its "high rate", but rather its high minimum cost of $500 per year. At $0.0007 per listen, $500 buys about 714,000 plays. A year of 4-minute songs (one listener, continuously) is about 132,000 plays, so $500 would buy 5-6 continuous listeners. Since most people sleep at least 8h a day, that's at least 8 listeners. Of course we're talking more like 20-50 or more dedicated intermittent listeners for $500 at the per-play rate. So the old rate was clearly designed to make even small hobbyists or groups of friends tuning into each other cost as much as small commercial stations, which would have a few hundred regular listeners, even if a thousand or so occasional listeners. The old rules priced "noncommercial" out of the picture.
Now the new rates make $500 noncommercial cover a smaller group, but only by charging more per play. Next year, only 2-3 per-play continuous listeners (8-22+ intermittent) would cost $500 , but the monthly ATH (total hours) cap at 159,140h is 2,387,610 plays, while a month of continuous 4 minute songs is 10,980: 217 listeners simultaneous. So there is finally a noncommercial tier, but its costs will double, then nearly triple (or more, if they raise the rates again, which they surely will).
3 simul listeners need 375Kbps upload speeds; 217 need 27Mbps. Those speeds are now common and cheap at home broadband and cheap single-server hosting services respectively, costing $50-100 per month. Which means that legal noncommercial streaming will explode, though it's much more expensive now. Simple, cheap (free) software will make the fad spread like BitTorrent. So doubling, then 8-timing the rates inhibits growth that otherwise costs the royalty chargers nothing. If they just kept the $0.0007 per play rate, and dropped the minimum $500 charge, even if they kept the 159,00 monthly ATH cap, they'd still grow faster and make more money. And, as RAIN analyzed, small commercial webcasters will lose at least 8% more than they'll earn on their business. RETROACTIVELY.
So go petition the CRB for a re-hearing. Get rid of the $500 minimum: make it something like $20, or even $200. Keep these rates to at most $0.0007 per listen, or at most $0.0010, or even better something like $0.002-5, half a penny. It will make a lot more money for the royalty holders, spreading the opportunity to little guys. And thereby get the power of "broadcast" into the hands of many more people, not just the media corporations that are keeping all the power to themselves.
If anyone can find the no-doubt deliberately obscured address for sending the FCC comments insisting they save net radio, please post them here. Meanwhile, Save Net Radio has some links and action items.
Update: "The End Of Internet Radio As We Know It diary has more links to action and orgs working to stop this crushing new rule regime.