The United States Internet radio world took a massive blow in 2016. This may be the one blow that may kill many of the Internet radio stations and a number of commercial radio stations that utilize the Internet for streaming.
The US Congress has passed a set of laws that in conjunction with the non-terrestrial US Royalty company (SoundExchange) will change how the royalties will be determined. The Webmaster Settlement Act of 2009 set much of this at an annual flat rate per channel (per stream of music). This was a law that is commonly referred to as a “Sunset Law.” In other words, it is valid for an allotted period of time and them is no longer valid. This law expired on December 31st, 2015.
The new Webmaster Settlement Act will now be based on a rate of $0.0017 per listener. This is effectively a multiplier that will drastically increase the royalty rates and has already seen a number of casualties in the Internet radio world within the United States. It is predicted that by the summer of 2016 close to 70% of all the independent Internet radio stations in the US will be shut down due to excessive debts through these new standards.
To put it into perspective, an average song is roughly 3:30 minutes long which is an average of 17 songs per hour. If a station has an average listening base of 100 listeners this equates to $2.89 USD owed per hour, $69.36 USD owed per day, and $25,316.40 USD owed per year. That is only the royalties and not counting for regular expenses such as the broadcaster, streaming, maintaining computer hardware, a website, and other expenses.
A 100 listener base is not a big number, but it gives you an idea. For the medium sized Internet stations and/or sites that have thousands this easily turns into hundreds of thousands or even millions of dollars that will be owed in the coming years. For many small community radio stations the overhead for royalties was normally in the range of 5 to 15 thousand and this new spike in the royalties is seen as the one nail in the US Internet radio coffin.
From December 2015 to January 2016, a number of established Internet radio broadcasters and radio streaming resources have already consolidated or have closed their stations for good.
SomaFM is expecting an increase of times 10 to their royalties for their 25 commercial-free channels. These are solely supported by their listeners and the founder of the San Francisco based Internet radio group, Rusty Hodge, forecasts the bill will be around $20,000 USD per month. Hodge is stating that the station is considering a number of methods to try to minimize this, but it will largely depend on the full Copyright Royalty Board (CRB) ruling which has yet to be fully published. This station alone will be a lethal blow to small labels and independent artists that SomaFM tries to support with its airtime.
Pulse87 of New York City has been one of the forces in Internet radio within the United States. The station’s operator, Joel Salkowitz, announced in the beginning of January 2016 that the station was going down. The Sheer expense of the royalties made it where the station would be bankrupt in a matter of months, and he decided to throw in the towel. When asked on how the new standards killed his station he pointed out that his royalty fees have spiked to over 2,000%. He also pointed out that it appears they want to have a maximum royalty income from a non-existent Internet radio base than a reasonable amount from thousands of Internet radio stations.