Three Years After: 3WK and Online Broadcasters' Royalty Payments Established

Categories: Local History
On Tuesday, July 7, the recording and Internet radio industries finally agreed on how the latter will compensate the former for streaming music via the web.

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The resolution was a long time coming. Former RFT writer Randall Roberts (now music editor for our sister paper, LA Weekly) wrote about the conflict two and a half years ago when he profiled Jim and Wanda Atkinson, Internet radio pioneers and proud proprietors of south St. Louis-based 3WK Internet Radio (est. 1997).

Here's a New York Times story about the newly established rules for royalty payments, aptly headlined "Music Labels Reach Online Royalty Deal." Be warned, though -- the Times piece is rough sledding. You might, after reading it six times through, s-l-o-w-l-y, have a notion about what was at stake in this tussle, and how things now stand. Probably not, though.

So here's some background:

Since the dawn of the radio age, U.S. broadcasters have paid royalties to songwriters. Unlike the rest of the industrialized world, however, American AM and FM stations do not compensate record labels or the performers themselves. That fact has been a bone of contention for decades and a topic of recent debate as Congress mulls it over. (For more, visit the website of musicFIRST, a coalition of artists intent upon making terrestrial radio pony up.) 

Though the U.S. government hasn't yet settled the AM/FM question, when Congress passed the landmark Digital Millennium Copyright Act of 1998 (DMCA), it stipulated that web streamers and satellite stations must pay songwriters and artists and their labels. When the dust cleared, a preliminary setup was established. The price was steep, and especially so for comparative bit players like 3WK with annual revenues of less than $1.25 million -- "small webcasters" in Congressional parlance -- who feared the required payments would force them out of business.

(For a detailed explanation, click through to Randy Roberts' 2006 story, "You Play, They Pay," and search for "DMCA," and, if you still want more, read "Small Webcasters Dealt Death Blow," the 2007 follow-up he wrote, on Daily RFT.)

Now, after much rancorous debate, last week's settlement nails down a structure, with new stipulations for mega-streamers like Pandora and small fry like 3WK.

Click to the jump to read an e-mail Q&A with 3WK's Wanda Atkinson about the settlement and the future of Internet radio...

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Jennifer Silverberg
Wanda Atkinson at 3WK HQ in 2006
RFT: What rate will you now be paying in royalties, and how will the new rate compare with what you've been paying up till now?

Wanda Atkinson: The full final settlement hasn't been posted yet, but it looks very similar to what we've been paying. Except it's gone from 10 percent of revenue to 12 percent. Don't know what the minimums are for small webcasters yet (right now it's $2,000 per year). Also can't figure out why satellite radio pays 6 percent (although theirs is a dying business model right now) and it looks like terrestrial radio will be a much less rate than 12 percent. Screwed again. Sigh...

What impact do you think the settlement will have on the viability of 3WK and stations like yours?

Depends on what the minimums are. We can handle 12 percent of revenue. But we're monetizing our streams pretty well. Don't know that other small webcasters (who haven't been paying up to now) can handle the expense. The market has already lost many, many radio stations to the ongoing copyright problems.

What do you think of the settlement?

Think it pretty much sucks. As I said above, satellite is paying much less, and it looks like when terrestrial radio finally has to pay, it will be much less also. Also am not happy that one company, AccuRadio, was basically in charge of the final decision. But since we were not actively involved this time in negotiations (and had no wish to be involved), I don't know what [AccuRadio founder] Kurt Hanson was up against when negotiating. This might have been the best solution at this time. Hopefully we can revisit it when terrestrial radio, if finally hit with this copyright, end up paying a much smaller percent.

So, it's inevitable that AM and FM stations will have to pay, but inevitable that they'll negotiate a cheaper deal?

Terrestrial radio has never paid this particular sound recording royalty. They've always insisted that their airplay amounted to advertising for the artists and thus they didn't have to pay a royalty to play their music. Terrestrial radio that simulcasts their streams on the Internet do have to pay this. But not AM/FM radio. They pay [only] songwriter copyrights.

Congress is right now discussing making terrestrial radio pay the sound-recording royalty, and most experts expect they will pass a bill in the next couple of years making radio pay. However, with the hugely powerful [National Association of Broadcasters] negotiating this -- unlike the minimally effective collection of small webcasters who negotiated our original deal -- we expect that terrestrial radio will pay a much smaller percentage than we must. If they do, we can probably collectively bring up the much higher rate we pay and get it remanded.

How's business?

I really don't want to discuss our revenue, other than that we fit the "small webcaster" definition of under $1.25 million in gross revenue. Way under. ;-)

Business has gotten much more competitive as advertisers realize they can access a very powerful demographic through Internet radio, especially since it's so much easier to listen via hand-held and car devices now. Remember, when we started twelve years ago -- and really up to last year -- the only way you could listen to Internet radio was on your computer. For twelve years we said, "Just wait until you can listen in your car, and everything will change." Well, change it did and not to small webcasters' benefit. The big guys with lots of money have officially moved in, and with big ad and marketing budgets, and big tech budgets, they have completely overwhelmed small webcasters. Where there once were hundreds of Internet radio stations to listen to, there are now maybe dozens. And most of those still around are catering to a more generic audience with more generic music in order to get more listeners.

Are there any changes at 3WK that our readers should know about? Are you still based out of south St. Louis where you were when Randy Roberts wrote his feature in '06?

Actually, we had to move the office back to our house. Can't remember if Randy visited us in our office on the Hill or not. Our daughter began college in 2008, and we needed to consolidate expenses in order to help pay for tuition.

We now have three stations instead of two: Classic Rock; Classic Alternative, which is late '70s thru early '90s alternative (our son James programs that one -- he does love his punk!); and Indie Rock, the new-music station.

We still have a very dedicated audience who love our music choices, but many new listeners are choosing music jukeboxes like Pandora because they can pick and choose what to listen to. We're seeing an increase in new-music awareness because of this, but also a dumbing-down of true music lovers. It's just so much easier to listen to similar songs as programmed by the big guys than it is to listen to unique music choices like we make at 3WK. That said, we won't change what we program or how we make our musical choices. Still love the music and the challenge.

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