Tuesday, July 21, 2009

How to Be a Small Pureplay Webcaster

Until recently the only person who got paid when a song was played on the radio was the person who wrote the song. Now we have a fresh new "performance right in sound recordings." I've noticed that this "performance right" has been mischaracterized in some places as a royalty for the person or band singing and playing. It's not; it's a royalty for the person or company that owns the master sound recording. Ownership of sound recordings will probably start to emerge as a thorny issue in the next few years, but for the moment we can assume that the entity next to the (p) --not the (c)-- on the compact disc or liner notes is the owner, and it's usually the record label.

The Copyright Royalty Board set minimum rates for webcasters in 2005, and webcasters--particularly smaller ones--protested loudly; saying that pay-per-play rates would put them out of business. The courts were unsympathetic ("The [Copyright] Judges are not required to preserve the business of every participant in a market"), but Congress stepped in and told webcasters and content owners that they were free to work out their own rates if they weren't happy with the Copyright Board's.

They did, and the Copyright Office just posted the industry-wide agreement. The terms mark a big distinction between the largest players on the webcasting landscape (revenues over $1.25 million per year) and the smaller "pureplay webcasters" that Congress was worried about. The terms for the big players are complex, and they certainly have people more qualified than I am to explain them, but for you mom-and-pop internet radio stations, it looks to me that you'll have to think about the following. (Capitalized terms are defined in the agreement.)

1. Track the total number of "Aggregate Tuning Hours;" e.g., 1 hour with 10 listeners = 10 ATH.

2. Track your Gross Revenues.

3. Track your Expenses.

4. See which amount is greater: 12% of your Gross Revenues, or 7% of your Expenses.

5. Pay the greater amount to SoundExchange, quarterly.

That's a very bare-bones summary, and the percentages go up as your revenues climb, but I think this shows the basic flow of records and payments. Note that you won't be qualified for the mom-and-pop rates if you:

1. Earn over than $1.25 million in gross revenue; if it looks like you will in any given year, be prepared to pay much higher "Commercial Webcaster" rates for the full year;

2. Exceed 8 million ATH;

3. Get yourself bought out by a big player. Not only will you lose the favorable rates going forward, but you'll also have to pay retroactive Commercial Webcaster amounts for the previous four years.

These are just my first impressions from looking at these terms; if you think I've gotten anything wrong, please post your protest.

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