Final Verdict on Web Royalties Reached


handshakeWell, this week has seen the end of the battle over webcasting royalties, at least for the next five years or so. In a complicated agreement, web broadcasters and the recording industry have set the terms on how Internet radio is to be charged for broadcasting music over the web.

Tim Westergren, whose Pandora Internet Radio service has been at the forefront of this conflict, made the following statement on his blog:

For more than two years now I have been eagerly anticipating the day when I could finally write these words: the royalty crisis is over!

Webcasters, artists, and record labels have reached a resolution to the calamitous Internet radio royalty ruling of 2007. Pandora is finally on safe ground with a long-term agreement for survivable royalty rates. This ensures that Pandora will continue streaming music for many years to come!

I am sure that this is a great relief to Westergren and to fans of streaming radio. Stability on this matter is a change of pace that should make everyone involved breathe a little easier.

It is not all wine and roses, however. The agreed to rates, while less expensive than the original proposition, are still steep. Westergren himself indicated the effect this will have later in the same blog post when he informs users that their listening time will be capped at 40 hours per month. After that, there will be a fee of 99 cents for a month of unlimited listening.

In addition, the rates paid by satellite broadcasters are only 6.5% of gross revenue, rising to 8% in three years. By matter of contrast, webcasters making more than  $1.25 million yearly will be subject to fees of either 25% of those revenues or approximately 1/10 of a cent  per performance, whichever is greater. Those webcasters making less than that and with fewer than 8 to 10 million listener-hours a month of broadcasts pay either 12% of the first $250,000 and 14% of everything on top of that or they can pay their expenses 7%. A bit of a disparity, eh?

It still seems to be counter-intuitive to me that the promotional services rendered by providing free airplay, whether it be over the air or over the Internet, continue to be sidelined in the record label’s quest to increase their revenue streams. Many, if not most, of those revenue streams would not exist without the fan base built up through radio play.

Photo courtesy of lumaxart, used under its Creative Commons license


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