Wednesday, February 18, 2009

SoundExchange reaches web royalty deal with NAB, but not webcasters

SoundExchange collects royalties under the US Government's compulsory licensing of music for radio stations. How much to charge for a web stream, and whether royalties for performance rights are included along with SoundExchange's traditional publisher royalties has been a point of contention for about a decade.

From what I can find in the press (which leave some questions unanswered), the National Association of Broadcasters (NAB, which represents terrestrial radio stations) has agreed to $1.50 per song per thousand online listeners, ramping up to $2.50 per thousand by 2015. (No news what stations pay for their airways broadcast listeners.) That deal is for radio stations that simulcast their programming over the Internet. It's also for any online-only programming those broadcasters might also provide. That $1.50 rate will more than eat up any online advertising the stations can sell, which typically sells for less than $1.50 CPM (thousand impressions) these days - and that's assuming they can sell a display ad for every song, not a single ad for every 3-5 (or more) songs typical of terrestrial audio ads inserted into broadcasts.

So it looks like the deal with pure online broadcasters got hung up on the question of programming interactivity and what appears to be an irrational insistence by SoundExchange on a percentage of a company's revenue, rather than a simple per-song fee. Some also blame RealNetworks for screwing up a deal reached in November 2008 by at least twice seeming to agree to terms, then pulling out at the last minute. (Sounds like Rob is being Rob again.)

US law grants an automatic license to play music as long as the broadcaster follows certain rules. The main rule is the music can't be played "on demand": a listener can't push a button and hear a specific song. Online services like Pandora skirt the on demand rule by allowing listeners to program their own stations by listing some artists they like. The listener is not guaranteed what song will be played, but it's likely something she or he wanted to hear. SoundExchange deems this outside the compulsory license law and wants extra money for that interactivity. They seem to forget that I can change my car radio from a country station to a rock station to a Latino station to an urban rap station whenever I want. Though I'm not selecting the music or affecting what an individual station plays, I'm still interacting with what I'm listening to.

True on-demand streaming services like Rhapsody, Napster, Zune, and others must negotiate separately with recoding owners (labels) to play music as US compulsory license law was not written for on-demand performances.

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