CRB's chilling effect could force Net radio to migrate north
·Apr 9, 12:06 PM
Posted by: Paul Maloney
From the Toronto Star: "Online radio is one of
the Internet’s quiet success stories. While podcasting and Internet
video garner the lion’s share of attention, webcasting has emerged as
a major force with millions tuning in daily
to thousands of services that freely stream their signals
online…
"Despite
their popularity, there is growing fear that a recent U.S. royalty
decision could effectively shut down thousands of webcasting services.
The U.S. Copyright
Royalty Board recently established a new royalty scheme
that dramatically increases the fees that webcasters will be required
to pay to stream music online…
"Given the concern about the future viability of Internet
radio in the U.S., there has been mounting speculation that some
webcasters may consider setting up shop
in Canada, where the U.S. rates do not apply. For example, Mercora,
a service that allows individuals to launch their own webcasts, has established a Canadian site that falls outside U.S. regulatory and royalty rules…
 "The
Canadian fee structure is still under development with webcasters
likely to face several charges. Next week, the Copyright
Board of Canada begins hearings on Tariff
22, a tariff proposed by the Society of Composers, Authors
and Music Publishers of Canada (SOCAN)
to cover the performance of music online…
"SOCAN has asked the Copyright Board to grant a tariff
that features a minimum monthly fee of
$200 and establishes a royalty rate that runs as high
as 16.7% of gross revenues (or gross operating expenses if those
are higher) for on-demand streaming. The webcast
rates vary from 3% to 9% of gross revenues, depending
on the type of webcaster. Several groups are challenging the SOCAN
tariff request and a final decision from the Copyright Board is not expected for months.
"In addition to the Tariff 22 royalties, there are at least two other potential licences.
The Canadian Musical Reproduction Rights Agency Ltd. (CMRRA)
licenses the music reproduction right. CMRRA… is now negotiating
individual licences for Internet-only radio stations.
"The Audio-Visual Licensing Agency (AVLA),
which licenses the duplication of master sound recordings, has also created a licence for webcasters
that copy music on to Canadian servers for webcasting to Canadians.
The agreement establishes transmission and subscriber fees as well
as sets limits on the number of songs that
can be webcast for any individual artists (no more than
four in a three-hour period) and prescribes the quality
of the transmission (no greater than 96 kilobytes per
second).
"The net effect of these tariffs and licences is that
webcasting in Canada can get expensive,
particularly for non-commercial and niche webcasters.
"By wisely focusing on a percentage
of revenue model rather than the U.S. per-stream approach,
the Canadian framework may enable webcasters
to get off the ground, yet a streamlined system for streaming
will be needed before Canada develops into a genuine Internet radio
haven."
Read this entire Toronto Star article here.
  The problem with moving webcast operations offshore is that eventually there will be reciprocal agreements between various countries’ rights organizations. In this scenario, webcasters would be required — at least theoretically — to pay royalties to various countries’ rights organizations based on the location of the listener, not the webcaster.
This still leaves at least two options for webcasters if the current royalty decision stands (and shuts down U.S. webcasting):
A. Webcasters could move to a country whose record industry is not a participant in the IFPI (International Federation of the Phonographic Industry). A wildly successful webcaster could still be blocked from U.S. listeners at the ISP level, but a smaller-sized one might not be.
B. Webcasters could change their target audience to the country into which they move — for example, we could move AccuRadio to Vancouver and target Canadian listeners, or to Shanghai and target Chinese listeners, until 2010 (when hopefully sane royalty rates might kick in under the 2010-15 CRB determination, and we could move back to Chicago).
We’ll discuss this issue in more detail next Monday at the RAIN Las Vegas Summit. Be sure to join us if you can! —KH
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