Royalty Statistics Disprove 'Sky Is Falling' Claims of CRB Critics

Royalty Statistics Disprove 'Sky Is Falling' Claims of CRB Critics

Facts Show Webcasters Dominated by 10 Large Companies; Small Webcasters Used as Smokescreen to Promote Rate Rollback

WASHINGTON, April 30 /PRNewswire/ -- A review of royalty payment statistics shows that the webcasting music business is dominated by 10 large, highly profitable companies. The review of 2006 royalty payments conducted by SoundExchange demonstrates that, through Savenetradio, the big webcasters are painting a highly distorted picture in an effort to maintain extremely low rates and high profit margins.

These facts are contrary to alarmist claims by opponents of the Copyright Royalty Board (CRB) who say that rates are too high. Further, the review shows that webcasting is growing dramatically.

"Now that Savenetradio's Jake Ward has publicly admitted that Savenetradio is a front for large webcasters and was launched by the Digital Music Association (DiMA), the organization that represents mega-corporate interests like Yahoo! and AOL, the veil has been lifted and the real beneficiaries of recently introduced legislation have been confirmed," said John Simson, Executive Director of SoundExchange.

Opponents of the CRB rate decision paint a picture of a webcaster industry made of small, largely non-commercial webcasters who will be forced out of business by the new CRB royalty rates even going so far as to say the music will "die." While webcasters say they support the interests of performing artists, an objective analysis convincingly demonstrates that their claims are highly distorted.

"There's no question that these statistics show that critics of the CRB decision are playing a game of 'Chicken Little,'" said Barrie Kessler, SoundExchange's Chief Operating Officer who conducted the analysis. "They are definitely claiming 'the sky is falling' but the facts show absolutely that it's blue skies ahead for webcasters, artists and labels."

The review of 2006 webcasting royalties paid SoundExchange shows that 82 percent of royalties were paid by the 10 largest webcasters, which make up 4 percent of all paying services. In contrast, small webcasters paid less than 2 percent of all royalties paid SoundExchange.

"Not only is Internet radio not going to die," said Simson, "it's going to continue to flourish. The statistics show it is a vigorous business dominated by large businesses that can easily pay fair market rates while also having room for small webcasters and niche services. In fact, these same large services stream in the United Kingdom and Europe where current rates are nearly identical to the rate set by the CRB for 2007."

Under a bill introduced by Reps. Jay Inslee (D-WA) and Don Manzullo (R- IL), large commercial services like Clear Channel and Microsoft would experience a windfall in excess of $10 million a year that otherwise would be paid to artists and labels.

Under a statutory license, webcasting services, large and small, have been given the opportunity to play millions of sound recordings released in the United States without seeking permission from anyone -- not the performer, not the copyright owner, not the composer. "Unfortunately, viable, financially- profitable webcasters seem to feel they should be able to play music, making a healthy profit, without fairly compensating performers or record labels. That's just plain wrong," said Simson.

Add to that the fact that webcasting is growing dramatically and it becomes unconscionable that these huge businesses are not willing to pay artists and labels their fare share for the product that is the engine behind their businesses.

During all of 1998, Arbitron reported that only 6 percent of all Americans listened to Internet radio. In January, 2007 alone, Arbitron reported that 20 percent of Americans 12 years and older listened to online radio, a total of 49 million Americans.

In fact, in a blatant attempt to derail the growing movement to secure fair royalty payments for performers in all types of media, the National Association of Broadcasters recently added to the disinformation campaign with the absurd characterization of webcasting as "a fledgling audio platform."

"It just goes to show that big corporate webcasters will go to any length to protect their outsized profits and unfairly low artists' payments," said Simson. Using misinformation and blatantly false statistics, they are trying to recruit small webcasters and even some artists to front for them, but their secret is out."

Since 2004 there has been a major jump in paying services -- growing from 430 distinct webcasting services registered and paying royalties in 2004 to 989 in 2006, demonstrating a huge jump in listeners and exposure for these businesses.

FACT SHEET

-- Webcaster royalty rates have essentially remained flat since 1998.

-- Despite webcaster claims to the contrary, the CRB's decision reflects a
modest increase over time.

* For 2006, the increase is only a 5 percent increase over the earlier
rate.

* The rate for 2010 reflects only an 8 percent annualized increase in
rates since 1998.

-- The CRB set a "per stream" rate for 2007 at $0.0011. Thus, a consumer
who listens 40 hours a month to one channel playing 15 songs an hour
will cost the webcaster 66 cents a month in royalties -- a sum far less
than what some webcasters charge listeners for subscriptions or can
recoup through other means such as advertising or merchandising.

In an analysis published in Royalty Week, Ben Newhouse, working from a recent Bridge Ratings report showing Internet radio users average 473.2 hours of music per year, and that based on 2006 rates, the "royalty bill for a webcaster is $6.49 per listener per year."

-- This most certainly is not a matter of big hit artists and major record
companies getting rich off the backs of small business webcasters.

* Two-thirds of total royalties collected by SoundExchange go to
artists and independent labels.

* The average each artist earned from webcasting royalties in 2006 was
$360.

CONTACT: RICHARD ADES OR
GREGG PERRY
202-640-5894
NEWS@SOUNDEXCHANGE.COM

First Call Analyst:
FCMN Contact:

Source: SoundExchange

CONTACT: Richard Ades or Gregg Perry, both of SoundExchange,
+1-202-640-5894, News@soundexchange.com

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