By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
By Alice Laussade
By Scott Reitz
"Let's look at one of the top-rated stations on the Internet right now, Digitally Imported," Sheets says, referring to Digitally Imported's stats on shoutcast.com. "At just about any given time of day you will see about 2,000-plus listeners tuned in. Now assume a radio station has only one listener tuned in 24 hours a day for one year. In a typical hour, depending on the style of music you play, you can average 10 to 15 songs per hour. Let's say 10 to make the math easy. So 10 songs per hour times 24 hours a day times 365 days a year times $0.0014 per song played gives you a bill of $122.64.
"Now Digitally Imported has at least 2,000 listeners on a continuous basis," Sheets continues. "So take that $122.64 and multiply it by 2,000 and they have a bill of $245,280. This is a commercial-free station, mind you, so expenses in fees alone is 200,000 percent of their income, let alone the bandwidth they are already paying for to accommodate 2,000-plus listeners at the highest bandwidth possible. Add to that the money they have to pay to buy CDs and the proposed fees for making a digital copy of each song to their hard drive--an 'ephemeral copy'--and they are going to go broke."
Consequently, even commercial stations such as KPIG will have to cease streaming. If they play 10 songs in one hour with 1,000 listeners, that's $7 an hour, which adds up to additional annual expenses of more than $60,000. "It's obvious that the RIAA would like to keep all control of music on the Web in their own hands: pay to listen, pay to download," says Bill Goldsmith, program consultant for KPIG. "That's their ultimate goal." Goldsmith, who also streams the "eclectic, intelligent rock" station RadioParadise.com, says that the panel's decision will kill off any Web presence for his stations. "RadioParadise.com has a total income that's about 50 percent of what the royalty fees would be under the CARP proposal. It'll be about $7,000 a month, and my income is half that."
Sheets considers himself one of the lucky ones--for now. "Fortunately I play a lot of unsigned artists--up to 80 percent of my playlist--so I think I won't be hit as hard," he says. "Honestly, there's enough unsigned artists from Texas that I can get away without playing national artists. But the basic problem is that these regulations will squash the growth of Internet before it has a chance to really evolve in the way radio evolved when it first started. The rulings seem to be an opportunity for the Big Five labels to squash any competition in the Internet radio industry."
To wit: KALX, which has the capacity to serve a whopping 60 online listeners at any one time but rarely reaches that mark, will shut down its Web stream if the decision is finalized in May, according to general manager Sandra Wasson. "A lot of stations have already gone off the air," she says, referring to fellow Bay Area college stations KUSF and KSJS. Although the noncommercial rates are much lower than those of commercial stations, the estimated $1,200 a year that KALX would have to pay to serve these 60 listeners still adds up to far more than it is currently required to pay songwriters by ASCAP ($244 per year), BMI ($244) and SESAC ($66).
Not only is KALX not going to shell out the extra dough, it also couldn't possibly accommodate the ridiculous record-keeping requirements of the plan. All online stations would also have to create voluminous reports filled with user data. For each song played, more than 30 items must be logged including: date, time, time zone (!), recording length, release year of track, ISRC code, UPC code, label, catalog number and on and on. Keeping track of this data will be so time-consuming that someone would have to be hired solely to gather it, and that ain't gonna happen at KALX. Regular radio stations are not required to do any of this, except for an occasional songlist/songwriter audit over a period of a couple of days. These rules set forth for streamers are nothing short of bullshit busywork designed to deter anyone from wanting to have a Web station of any kind.
"For the most part, the radio industry understands the need to compensate copyright holders," says George Bundy of the Web radio consultancy BRS Media, who adds that everyone involved agrees that some royalties should be paid. "But the benchmark has been set too high."
The union of recording artists doesn't always see eye to eye with the RIAA, but on this issue they stand together. Ann Chaitovitz from the American Federation of Television and Radio Artists supports the new fee structure. "What I really see is that Webcasters are crying wolf," she says, noting that streamers have heretofore had a free ride. She says the proposed fees are not only fair, but smaller than what artists really deserve. Chaitovitz also quarrels with regular radio's fee structure, which pays songwriters but not performers. "We are trying to change the radio laws," she says. "We've been fighting for that since before the Internet."
As usual, the RIAA is milking the cause of standing up for the "creators." "The concern is that the creators should be paid by those who are using their work," says Steven Marks, senior vice president for business and legal affairs with the RIAA. But what about all the promotion that artists and record companies get when their music is played online? Doesn't that sell records and help artists? Marks says no: "The arbitrators found that there was no verifiable evidence that there was any promotion."