SX touts small webcaster deal that virtually no one accepted

Virtually no small commercial webcasters accepted the terms of a SoundExchange offer that expired yesterday — a deal that would cap revenue and listening and force the webcasters to remain very small businesses. [RAIN coverage of the offer is here.]

As expected (and reported in RAIN here), SoundExchange yesterday announced that of the hundreds of webcasting businesses not affliated with large companies like Yahoo! and AOL, just 24 small webcasters had accepted its offer. SoundExchange declined to name them in its press release.

Deal would create industry of “hobbyists” and
“big companies that subsidize their webcasting”
Attorney David Oxenford represents a group of Small Commercial Webcasters (SCW) (which includes our AccuRadio service) that soundly rejected the deal, and is continuing to negotiate with SoundExchange. Other high-profile small business webcasters, like SomaFM and RadioParadise, also dismiss the offer [see RAIN here].

Oxenford (pictured) told CNet, “If the only deal that SoundExchange offers to small webcasters is that which was just signed by the 24… they will do away with the independent webcaster who is serious about growing a business,” he told the news source.

“You’ll be left with an industry with essentially hobbyists and big companies that subsidize their webcasting with other lines of business — essentially crushing the hopes of those who saw the Internet as a way to build an independent radio business.”

SoundEx wants Congress to think
it’s making real deals

The deal will have webcasters pay SoundExchange 10% of their gross revenue up to $250,000, and 12% of gross revenue above that. Stations are limited to $1.25 million or less in annual revenues and 5,000,000 aggregate tuning hours (“ATH”) a month to remain eligible.

The fact is the vast majority of small commercial webcasters agree that the deal is not at all viable for healthy business. They argue that, under current market conditions, generating anywhere near $1.25 million in revenue would require an audience far larger than 5 million ATH per month. Yet, should a webcaster’s audience grow beyond that point, the service would be liable for the full CRB rates.

What’s more, the terms of this deal are only applicable for use of music of SoundExchange members (such as the major labels). Webcasters must still pay full CRB rates for use of music owned by nonaffiliated labels and artists.

The SoundExchange press release characterized the news as an “embrace” of the new terms by “significant numbers” of the small webcaster community; and again positioned SoundExchange’s offer as a response to Congress‘s urging to reach a settlement for small business webcasters. What’s more, the press release implied that small webcasters that haven’t accepted the deal are either (1) satisfied with the CRB-determined rates, or (2) covered by webcast aggregators that handle royalties.

Deal works only for very small webcasters
So who would sign this deal? Though SoundExchange didn’t name any business willing to accept its deal, RAIN has learned the identity of one. Michael Clark of ChristmasMusic247, a Live365 webcaster, posted a comment to Rusty Hodge’s (who runs SomaFM) blog.

He explained, “I play Christmas Music all year round… My estimated [royalty] bill from January 1, 2006 through March 2007 was $11,000. I estimated running up an additional $9,000 if I stayed webcasting through this Christmas season.

“In 2006 I had $1,200 in revenue; and estimated my revenue for 2007 was $3,000… I am an individual doing my station as a hobby/very small business… The reason I signed was to save myself more than $5,000,” Clark wrote.

“And yes, I’m now consigned to playing only SX-member music, or getting licenses from each independent artist I play. And that’s quite difficult… People need to contact their member of Congress and ask them to support and sponsor HR 2060 or S 1353, the Internet Radio Equality Act.”

One Response to “SX touts small webcaster deal that virtually no one accepted”

  1. Hi,
    Thanks for writing about this issue. One of the stations in my network plays Christmas music by country artists. Feel free to send any suggested CDs or tracks my way, and I’ll see what I can do to get it into my rotation. Mike

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