AccuRadio's statement to the Senate Judiciary Committee
400 N. Wells, Suite 408 | Chicago, IL 60610 | 312-527-3879
My name is Kurt Hanson, and I am the founder of AccuRadio.com, a relatively small but well-respected webcaster offering consumers over 320 channels of rock, pop, jazz, country, R&B, classical, Celtic, Broadway, indie rock, cabaret, hip-hop, pop standards, Christian, salsa, and more, with an audience of over 300,000 listeners per month. Senators, I appreciate the opportunity to make a statement to your committee.
Before Congress considers extending a sound recordings performance royalty to broadcast radio, I urge you to consider the incredible damage that a similar a royalty is doing to the medium of Internet radio.
The medium of Internet radio, most observers agree, is one of the best things that has happened to the music industry, especially to working musicians and independent record labels, in decades.
Exposure on Internet radio is helping dozens of genres of music – and tens of thousands of performers – get airplay, gain fans, and sell records. This vibrant medium, which according to Arbitron already has over 33 million monthly U.S. listeners, has been enthusiastically embraced by musicians and labels around the country and the world.
Nonetheless, Internet radio is on the brink of extinction due to a flawed standard in the DMCA, the subsequent Copyright Royalty Board decision on performance royalties, and the unwillingness of Sound Exchange to negotiate a viable compromise solution.
As you know, broadcast radio pays no royalties for the sound recordings performance, and cable radio and satellite radio pay only about 7.5% of their revenues for that royalty. However, under last year’s Copyright Royalty Board decision, in the current advertising environment webcasters are required to pay in the range of 75% to 200% of revenues for this one royalty obligation!
The damage is particularly severe for AccuRadio’s class of webcasters, which we call “Small Commercial Webcasters“ – those of us who are more than hobbyists (as we have employees, offices, and reasonable business plans) but lack the deep financial pockets of large corporate parents such as Yahoo! and Clear Channel or those firms that have raised millions of dollars in venture capital funding.
For almost three years now, the Small Commerical Webcasters have been trying to negotiate a fair royalty rate with SoundExchange. Aside from their making a non-negotiated, unilateral offer for a brief period a year ago and one subsequent day of meetings, we have been rebuffed by SoundExchange consistently, and despite their assurances to Congress last summer that they would negotiate with various classes of webcasters in good faith and in a timely manner, we have never received a counteroffer to our proposals.
As a result of this royalty crisis, AccuRadio’s audience has leveled off, its revenues have been declining, and its ability to raise investment capital has been decimated. Like most webcasters in our class – and perhaps like the larger operators as well – we will be driven out of business without a negotiated solution (or a fix from Congress) soon.
In the Digital Millennium Copyright Act (DMCA), Congress extended a sound recordings performance royalty to the medium of Internet radio and instructed the U.S. Copyright Office to set a royalty rate using a new standard called “willing buyer / willing seller.”
That instruction is at the heart of the Internet radio royalty crisis, as it is an almost impossible-to-implement standard. (A royalty rate of 200% of revenues cannot be what Congress intended, can it?) By contrast, the traditional 801(b) royalty-rate standard balances the interests of copyright owners, copyright users, and the general public.
Given the crisis in Internet radio, I would urge the Judiciary Committee not to consider extending a performance royalty to an additional form of radio – and certainly not with that “willing buyer / willing seller” standard – until the Internet radio situation is resolved.
Saving Internet radio would inure to the benefit of webcasters, musicians, and consumers alike.
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