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NAB reaches webcasting deal with SoundExchange

February 16, 2009 |  3:39 pm

Soundexchange Two down, four or more to go. SoundExchange, the firm that collects royalties on behalf of labels and performing artists, announced a compromise today with the National Assn. of Broadcasters that settles a nearly 2-year-old dispute over royalties for online radio simulcasts. The deal comes one month after SoundExchange reached agreement with the Corporation for Public Broadcasting. Those pacts leave commercial webcasters, religious broadcasters, college radio and, possibly, hobbyists still seeking better terms than a Copyright Royalty Board decreed early in 2007. Unfortunately, the NAB deal isn't likely to break the logjam for the other webcasters -- simulcasts have much better economics than webcasts do, so NAB members can afford higher rates.

Many webcasters viewed the CRB's order as devastating because it would have more than doubled the royalty rate per song played online. The rate from 1998 to 2005 was 76 cents per 1,000 listeners for large commercial stations, and 20 cents for non-commercial ones. The CRB set a common per-song rate for both that rose from 80 cents per 1,000 listeners in 2006 to $1.90 in 2010. Combined with bandwidth costs and other expenses, those fees test the limits of what some webcasters can make selling advertisements. In response, SoundExchange argues that just as webcasters can't expect discounts from ISPs and utilities, they shouldn't demand "subsidies" from recording artists and record labels. Yet the rates apparently were high enough to prompt dramatic retreats by two of the most popular webcasters, AOL and Yahoo. Both turned over their radio streams to CBS, which was better positioned to market them to radio-friendly local advertisers.

Under the deal announced today, local radio stations will pay a per-song rate of $1.50 per thousand listeners in 2009 and 2010, compared with the CRB's $1.80 and $1.90, respectively. But the deal also calls for rates to rise to $2.50 by 2015. It's worth noting that commercial radio simulcasts (simultaneous online transmissions of over-the-air feeds) can be more lucrative than made-for-the-Internet webcasts because they cost little to produce and include far more commercials per hour. That's why it seems unlikely that the terms agreed to by the NAB will be appealing to other webcasters.

Congress had given each group of webcasters and SoundExchange until Sunday to negotiate deals whose terms would become available to every member of that group. With the deadline passed, it's not clear what will happen next. The courts will soon weigh in: A federal appeals panel in Washington is set to hear the webcasters' legal challenge to the CRB's ruling on March 19.

-- Jon Healey

Healey writes editorials for The Times' Opinion Manufacturing Division.

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