By March 8, 2007

Internet radio needs your help!

I got an email message from SomaFM‘s General Manager, Rusty Hodge. Rusty is trying to oppose a new bill that will drastically increase the fees paid to the RIAA for Internet radio broadcasts. Sites like SomaFM used to pay a percentage of their income to the RIAA — in Soma’s case, 10% of their annual revenue. The proposed fee structure change will charge on a per-song, per-listener basis. The estimated cost in royalties alone for SomaFM is $628,000. I estimate they paid less than $16,000 last year under the old system. Worse yet, the fees get more and more until 2010, when it would cost SomaFM an estimated $1,000,000+ just in royalties, assuming that their listener base does not increase. This is almost ten times what SomaFM takes in a year in revenue.

Why would the RIAA up the royalties by so much? I can only assume it’s to fund their increasing extortion campaign against alleged illegal MP3 downloaders, and just plain greed.

We may not be able to do anything, but do what you can. Rusty sent out a link to an online petition asking Congress to stop the new royalty policy, and keep the existing percentage policy. Please review the petition and sign it if you agree with retaining the old percentage-based policy. The old system is a good compromise that allows small, independent organizations like SomaFM and FriskyRadio to legally operate and spread music that may not be available in smaller markets. If these stations go away, there will be no way to hear the type of music they play in my area, even over XM or Sirius.

My friend Bushputin, with whom I used to work in Oregon, now works for Internet radio wunderkind Pandora. I told him about this entry, and he asked his company what they were doing. He pointed me to Save Net Radio, which has a link to the aforementioned petition, as well as a resource for writing your Congressperson.

I have included Rusty Hodge’s original email below:

You may have heard, but once again internet radio is facing huge additional royalties for broadcasting music. These royalties are in addition to the ones that we pay to ASCAP and BMI, and are a royalty that is only paid by internet broadcasters. Over-the-air (AM/FM) broadcasters are explicitly exempt from this royalty; it only applies to internet broadcasters and subscription music services.

In the past, we paid royalties based on a percentage of our revenues, in our case 10% of our revenue. But the new royalties don’t allow that percentage of revenue factor, and instead charge us for each song we play times the number of people listening. This works out to about $8 per average concurrent listener per month. In 2006, we averaged over 6000 average concurrent listeners per month, and the royalties we will have to pay for 2006 is about $628,000, over 4 times the amount of money we brought in.

And these rates go up drastically each year, until 2010, where they are 2.5 times their initial rate: by then we will have to pay over $1 million dollars a year in royalties if we want to stay on the air.

So you can see that this puts us in an impossible position. And to make it even worse, the rates are retroactive to 2006.

It doesn’t seem fair that a small radio service like SomaFM has to pay all these additional royalties, when over-the-air stations who reach much larger audiences are exempted from paying them.

If you are in the USA, we would appreciate it if you could sign this online petition which will be presented to members of Congress.

It’s important for us to let Congress know that independent internet radio is about to be forced out of business.

We need to keep our existing “percentage of revenue” royalty rate structure, or better yet, have Congress extend the exemption to internet radio stations as well as terrestrial (over-the-air) stations.

Thanks for all of your support for SomaFM in the past. We will do what we need to do to keep SomaFM on the air and broadcasting. We love you!

Rusty Hodge,
General Manager and Program Director

1 Comment on "Internet radio needs your help!"

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  1. Pandora blogged about this a couple of days ago, too:

    Includes links to Congressional Directory by Zip Code and other stuff.