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Small Webcasters Dealt Death Blow

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This past Friday St. Louis-based Internet radio station 3WK.com was dealt a virtual death blow when the U.S. government-appointed Copyright Royalty Board announced new performance royalty rates. The rates, which all Internet stations are required to pay as compensation to artists in exchange for permission to broadcast their copyrighted material, are renegotiated every five years.

You can read all the mundane details about performance royalty rates and the Copyright Royalty Board (and also SoundExchange and the Small Webcaster Settlement Act) in "You Play, They Pay," published last fall in RFT. But the gory crux is this: If the rate imposed by the board is written into law, small Webcasters like 3WK will go out of business.

In its decision, the board completely scrapped an exemption that allowed mom-and-pop broadcasters like 3WK and RadioIO to pay royalties on the basis of percentage of gross income. Instead, the stations will have to pay under the same rules as Web radio monoliths. You can read more about the decision via online radio station Radio Paradise, which has set up a blog and a forum to protest the ruling.


"Our only business is streaming on the Internet," says Jim Atkinson, the "pop" of mom-and-pop 3WK . "The bigger guys, it's become a loss-leader. AOL Radio, Yahoo, MSN -- radio is not their main business. People like Clear Channel, with their FM and AM station, they just happen to be on the radio. We're the only ones who are trying to make a living at this, and under this ruling we won't be able to.

"[My wife] Wanda sat down and ran the numbers based on the new rates and compared them with our old rates," Atkinson goes on. "One month we paid $400, the next month was $500. Those numbers go up to $1,500 and $1,800. We wouldn't have the money to pay that. It wouldn't work. We would just have to close our business."

Small independent Webcasters faced a similar dilemma when the rates were negotiated in 2002, and Congress acted.

Recounts Jim Atkinson: "Last time it took a congressman to step in and say, 'Look, you guys need to sit down and come up with an agreement.' That's how the Small Webcasters' Settlement Act came about. I don't think anybody was totally happy with it in the end, but at least it was something usable."

Atkinson is hoping for a repeat, and pronto. Once the CRB's decision is written into the Congressional Record, 3WK.com will have to begin paying the new rate. What's worse, according to Atkinson, is that the payments are set to increase every year until 2012. "By five years, it's five times what we'd be paying" -- or about $6,000 a month.

The Atkinsons haven't given up yet. During past negotiations, online radio stations rallied listeners to protest, and congressmen were flooded with angry e-mails. The outcry prompted the settlement. The Atkinsons hope it doesn't come to that again.

You can stay abreast of the impending negotiations at the daily Radio and Internet Newsletter, which is monitoring the ongoing situation.

-Randall Roberts



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