Broadcasters Get Price Break on Streaming Audio

Pandora will have to pay more
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The Copyright Royalty Board has set new audio streaming rates and the National Association of Broadcasters is initially buoyed by the rates on first read.

"We are reviewing the CRB decision, but are pleased that streaming rates have begun to move in the right direction. Broadcasters want to expand into new distribution platforms; the challenge has been that rates are too high for thousands of local stations," National Association of Broadcasters spokesman Dennis Wharton said in a statement. "We hope today’s decision alleviates some of the rate burden and will enable more radio stations to stream music, which will benefit artists, songwriters and our millions of listeners."

According to a broadcast source speaking on background, radio stations have been paying 25 cents per 100 songs versus 14 cents that a "pure play" streaming service pays.

Now, iHeartMedia and local stations that simulcast, as well as Pandora and other "non-interactive" Web audio services, will pay 17 cents per 100 songs for commercial non-subscription service and 22 cents per 100 songs for subscription service in 2016, with adjustments per the Consumer Price Index through 2020.

The Consumer Technology Association praised the new rates.

"Today's decision strikes a necessary balance - one that leaves music makers with a raise, while opening endless opportunities to invest in the Internet radio ecosystem," said CTA president Gary Shapiro. "These investments will bring untold innovation and competition into the emerging online radio industry, leaving listeners with more options for discovery and artists with more opportunities to connect."

SoundExchange, which collects and distributes royalties to performers and copyright holders, was not pleased with the broadcaster price break.

"[I]t is deeply disappointing to see that broadcasters are being given another unfair advantage. In their terrestrial business they do not pay a dime for the recordings they use and now this $17B industry will receive an additional huge subsidy on the music they use in webcasting...We believe the rates set by the CRB do not reflect a market price for music and will erode the value of music in our economy. We will review the decision closely and consider all of our options."

"These rates aren't exactly a lump of coal," said Casey Rae, CEO of the Future of Music Coalition, which advocates for artists. "Over the past decade, we’ve seen billions of dollars in revenue generated by the explosive growth in webcasting. The new rates will allow artists and independent labels to participate in this success at a higher level. The fundamental value of popular Internet radio services comes from music creators, and we are glad this has been recognized in a healthy rate increase for non-subscription Internet radio services. Creators can feel good about how payout is structured under the statutory license, where revenue splits between artists and labels are fair and transparent, and payment to artists comes direct from SoundExchange."

But Rae suggested they weren't all candy canes and chocolate Santas, either.

"We are concerned that there does not appear to be a distinction in rates for small commercial webcasters. Digital music benefits from diversity, and services with more modest operations often help developing talent and niche genres find audiences while contributing to the overall revenue pool. If there isn't an option for new entrants to perform music from a broad range of artists, we may end up with a less diverse digital landscape."

Then there was that price break for broadcasters. "It also appears that by combining pureplay and commercial rates, incumbent broadcasters will receive a sizable reduction in royalty obligations for their digital transmissions," said Rae. "Commercial terrestrial radio already gets an unfair advantage due to the fact that they are not required to pay performers a dime for over-the-air broadcasts."

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