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Trouble for Small US Webcasters

Triton-WBK-Leaderboard    Feb 1st is the deadline for the first payment to SoundExchange. The fee is $500 per station to start, and the rate of 0.0017 per song performance applies to everyone.  In about two weeks there will be many stations shutting down or blocking US listeners.

Previously, in lieu of the per song rates, one could calculate the fees like this – Fees are greater of 7 percent of expenses or 12 percent of their first $250,000 in gross revenue, and 14 percent of revenue above $250,000.

The new rates are causing stations to stop or change how people listen.

  • Live365 – small broadcaster platform.   Most staff have been let go. Will most likely not last much longer.
  • One of the earliest and best radio groups has been Digitally Imported. DI.fm and their related brands (Radiotunes , RockRadio.com, and JazzRadio.com) have moved to a premium service.
  • SomaFM – listener supported group. They have contemplated shutting off their US based listeners.

Some of the stations are fleeing to Radionomy, a Belgium VC backed broadcaster similar to Live365. A big difference is that they own Targetspot, an online ad network that specializes in audio adverts. Hopefully that sustains them and the stations they host.

Marvin Glass, Founder of StreamLicensing LLC, comments on the new rates.

“While .0017 per performance is a big win for larger webcasters and FCC-licensed broadcasters, it is totally devastating to microcasters. For example a very small webcaster, playing 12 songs per hour, with only 20 listeners tuned in each hour, would owe over $3,500 to SoundExchange alone. This same webcaster must still take care of its obligations to ASCAP, BMI and SESAC. Obtaining advertising for smaller stations is difficult and when obtained, it very rarely covers even 10% of the numbers we are talking about here. “

You would have to have a very good salesperson to bring in $3,500 based on a 20 listeners.

Public and College radio have paid to get a seat at the negotiation table. They have worked out their own deals with SoundExchange.   In the previous battles with the CRB, small independent stations rallied together, and more importantly had the support of Pandora. That helped carve out the Small Broadcaster exception.

iHeart, and Pandora have made multiple agreements with labels to set a baseline for a market rate. The CRB is tasked to set rates for a “Willing buyer / willing seller”. That may be a flawed argument considering that the willing buyers are massively debt ridden or market funded. Pandora is the market leader and still loses money.

While promotion of music is valuable to the labels (the main excuse for over the air radio not paying anything), SoundExchange is charged with collecting money for their clients.  The small broadcaster exception has probably brought in very little revenue compared to the larger growing players

Streaming radio is still growing in popularity, it just will not be growing from the bottom up anymore.