KCRW, other stations could face bankruptcy
PICO BOULEVARD Recent news that radio stations like KCRW in Santa Monica might have to cough up more money for royalties to artists and record labels is anything but music to their ears.
The recent ruling of the Copyright Royalty Board last week to increase the royalties for music streamed online is expected to hurt Internet radio stations and terrestrial stations that also stream online, causing some stations to fear they will go bankrupt if the rate increases stand.
Retroactive to 2006, fees will increase starting at.08 cents per song streamed per listener. That fee will gradually increase every year to.11 cents in 2007;.14 cents in 2008;.18 cents in 2009; and.19 cents in 2010. That would be more than double the fees paid in 2006.
“We took the evidence from almost a year and heard all of the economists on what met congressional standards and placed it on the evidence we got,” said CRB Judge James Sledge. “We’ve issued the decision based on the evidence that meets the standard that congress gave us.”
Based on KCRW’s listenership, the fee increase would mean the station would pay from virtually nothing in 2005 to more than $350,000 in royalties in 2006 and 2007, said Anil Dewan, director of new media at KCRW.
KCRW gains most of its revenue from donations.
Even though a coalition of radio stations and webcasters are planning to appeal the decision of the CRB, which must be filed by March 15, KCRW — the leading National Public Radio affiliate in Southern California that prides itself on offering an unrivaled selection of underground music by unknown artists — is preparing for the change, calling on listeners to subscribe.
On Thursday, the station began running a new promo, announcing that KCRW will now have to pay a performance royalty for every person listening to a song that is streamed on the Internet.
“That is true whether you support the station or not,” General Manager Ruth Seymour says in the announcement.
The promotion then proceeds by asking listeners to subscribe and pay a membership fee.
The station offers free streaming in three different channels — KCRW Live (talk), KCRW Music and KCRW News. No-fee listening is in line with KCRW’s mission as a public broadcaster, Dewan said.
By asking regular listeners to subscribe, it will help the station offset the impact of the fee increases.
“The implementation of a fee (increase) is a problem for us,” Dewan said. “It’s not something we believe in.”
Nor is it something that Paul Maloney, editor of the Radio and Internet Newsletter, believes. The man behind newly formed Save the Streams, which aims to protect web-based broadcasting, and AccuRadio believes the decision will hurt small and independent radio stations across the country.
“If this is allowed to stand, this will bankrupt everyone who is not a major media company already like AOL or Yahoo,” said Maloney, who is the vice president of programming for Chicago-based AccuRadio. “Anyone who is a company that derives revenue solely or the vast majority from webcasting music will go bankrupt.”
AccuRadio included, he said. A small group of webcasters, including AccuRadio is planning to appeal the decision. If the appeal is denied, the group will try to negotiate independent deals with SoundExchange, the organization that represents the recording companies and artists and collects and administers royalties.
“It’s possible that we could negotiate a deal with them that would allow us to stay in business whether it’s a percentage of a revenue deal...or some way to keep this from killing us,” Maloney said.
When the Copyright Arbitration Royalty Panel, the ruling body that preceded the Copyright Royalty Board, decided in 2002 to increase rates through 2005, small stations like AccuRadio were able to negotiate a deal that allowed them to pay smaller royalties that were the equivalent of 12 percent of their annual revenue. “(In 2002) when these rates were originally set, small webcasters claimed they would go out of business and they haven’t,” said Willem Dicke, spokesman for SoundExchange. “They’ve thrived and many new webcasters have come online.”
Station officials at KCRW are not sure whether this ruling would make it go broke. They do acknowledge that serious changes will be necessary.
Though Dewan knew that increases were in the works, he was surprised by the enormity of the increases.
“We’re talking to NPR and looking at exploring options,” Dewan said.“This rule is extremely cost prohibitive for us.”
Originally published in the Santa Monica Daily Press print edition on March 12, 2007. Read the original PDF.