Why the New Royalty Rates Hurt Artists

Last night, I circulated the following letter among my clients and friends in the recording artist community. I was prompted to write this because of a recent development in the public outcry regarding the royalty rates announced by the Copyright Royalty Board for streaming Internet radio broadcasts.

It is my firm belief, shared by almost everyone not on the CRB or working for SoundExchange, that the new rates will severely cripple Internet radio by leaving it in the hands of a small group of well-heeled players. In other words, it will look, and sound, exactly like terrestrial radio. All those great places to hear new and unusual music, and even “niche” genres like soul, jazz, blues and folk, are in jeopardy of closing down, or moving their operations outside the U.S., where the artists won’t get paid for the use of their recordings.

That is one reason why I believe the new rates hurt artists.

John Simson, the Executive Director of SoundExchange, doesn’t agree with me. Last week, SoundExchange issued a press release quoting three artists who believe that the new high rates are in their best interests. That’s fine. They are entitled to their opinions. Unfortunately, Simson has used these three to repeatedly claim that “artists across the country” support the CRB decision.

This letter is intended as the antidote to Simson’s fevered imagination about how artists feel about Internet radio and the new rates. While I was drafting the letter, David Byrne of the Talking Heads issued his personal rebuttal to the new rates. The group letter just makes his solo into a chorus.

I figure I will have enough artists sign on by the end of the week to start spreading this around the Internet. I’ll keep you posted.

Fred

* * *

We are recording artists.

Among us, we have quite a number of gold and platinum records and almost too many awards to count. Some of us have been recording for nearly 50 years. Many of us are recording today, but you wouldn’t know it from AM or FM radio. At best, you might hear one or two of our old songs every once in a while on some Oldies station. You never hear our new stuff.

So we LOVE Internet radio. There are Internet stations that play our older stuff, which is great. Even better, there are Internet stations that play our new songs, and people who have heard them tell us we sound better than ever. Those stations are often run by fans who love the music as much as we do. They aren’t in it to make money; they want to share what they love, and they are even willing to pay royalties out of their own pocket to webcast our music.

Now, many of those Internet stations that we love are in danger of being turned off forever.

In March, the Copyright Royalty Board (CRB) of the Library of Congress announced a set of new royalty rates for Internet radio stations. Instead of giving these stations an option to pay a percentage of what they made from advertising, or setting up a single amount for non-commercial and hobbyist stations to pay, the CRB established high rates that will drive all but the biggest stations off the ‘Net.

 

We think that what’s going to be left will sound like regular AM and FM radio. That means you won’t be hearing us much on the Internet (which means, anywhere at all) unless these rates are changed.

SoundExchange, the organization that collects those royalties and pays them out to us, is saying it thinks there are too many Internet stations, and that maybe the ones that can’t make money should be “weeded out” for the good of the artists. We don’t understand how having fewer stations playing music can be good for artists. The more stations there are, the more music, and more artists, will be heard. That’s just logical. It’s also what really is good for the artists.

The idea of “weeding out” stations that don’t make enough money to pay the royalties is just ridiculous. A station that has to sell advertising to make enough to pay the royalties is going to have to increase its audience so that it can charge more for commercials. That means it’s going to have play music thousands of people will tune into more of the time. That means it will sound like regular radio. Another regular radio channel not only won’t do us any good, it will do us harm.

Don’t get us wrong.  We like to be paid for our music. Internet stations should pay a reasonable fee for playing our music. Big commercial stations should pay what a big commercial station can afford, small commercial stations should pay what they can afford, and college, non-commercial, and hobbyist stations should pay a reasonable fee, too. That’s a fair solution: They get to play our music. We get heard, and we get paid. Those stations keep broadcasting, which means they keep paying the fees, and we keep getting paid. That sounds like everyone wins.

These fees should all go through SoundExchange, too, because if they do, we get our share.  That’s the law. Under the new system, the label can take the Internet license fees directly, and they don’t have to pay the artists anything. Our experience is that if they don’t have to pay us, they won’t.

We already have heard about some radio services negotiating directly with the labels, and that isn’t good news for artists.  SoundExchange has quoted some artists who are defending the high royalty rates, but we suspect those artists don’t know the whole story.

In 2002, the Library of Congress announced royalty rates that threatened to kill Internet radio before it began. It literally took an act of Congress to replace those rates with something more reasonable and logical.  The result was a structure that allowed Internet radio to grow and prosper, and that got many of us paid the first royalty checks we’d seen in a long, long time.

So it is time you let your voice be heard. Call, write, and email your Senators and Congressperson. Links to find their addresses can be found below. Let them know you think the new CRB royalty rates will be a disaster for Internet radio, for its audiences and for the artists.

Join us. Together we can save Internet radio now for all of us, now and for future generations of webcasters, audiences, and artists.

CALL, WRITE AND EMAIL YOUR SENATORS AND REPRESENTATIVE:

 

FRED WILHELMS is a lawyer who represents musicians and songwriters. He can be reached at: fred.wilhelms@gmail.com

 

 

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