Once upon a time radio was exciting and interesting and full of characters . . .
There was this guy named Bob Smith. He was a Brooklyn kid who fell under the spell of Alan Freed, the Moondog, whose 50,000 watts of sheer radio power from Cleveland blanketed the East Coast and corrupted generations yet unknown. Bob decided he wanted to be a DJ too. There was just this one little problem.
Bob liked to play rhythm and blues, and he was a white guy.
He wasn't satisfied with the citified fusion of rockabilly and rhythm & blues that went by the name of rock & roll. His was the real, raw stuff. Big Mama Thornton and Howlin' Wolf type stuff. The stuff that could peel the paint off the wall. Stuff your mama told you would ruin you, and she was right.
Of course on the radio Bob could sound black enough, but experiments like an integrated dance club in Virginia in the early sixties didn't go over well. In addition, Bob craved a national audience, and it was hard to find one playing rhythm and blues when the A&R men said you couldn't sell it to white kids unless you dressed it up like Elvis Presley or (I kid you not) Pat Boone.
Bob drifted for a while, through Virginia and Louisiana before he finally ended up in Del Rio, Texas. Del Rio was a sleepy little border town known in earlier decades as the base of Dr. John Brinkley. Brinkley was a quack who convinced men that a variety of nostrums, from colored water to slivers of goat gonads implanted you-can-guess-where, would improve their sexual performance. Having been run out of Kansas for his quackery, he established a base of operations in Del Rio and bribed the Mexican government into letting him build a 500,000 watt radio station just across the border from Del Rio, in Villa Acuña. XERA was so powerful that it was heard all the way up into Canada. (In later years it was rumored that the KGB used XERA's broadcasts, heard all the way over the pole, to help train its spies in English.)
The radio station, now renamed XERF, was still operating when Bob got there, but only as a shadow of its former self, selling time to pay-before-you-pray preachers and in and out of trouble with the Mexican government. It had two things he was looking for, though: a powerful half-megawatt signal, and a management that didn't much care what he played as long as there was money to be made. He in turn brought something new to the station: a format that mixed rhythm & blues and rock 'n' roll with the gravelly-voiced antics of his new radio persona. Listeners from Texas to Saskatchewan and all over the US tuned in to this potent mix, bringing wealth to the station and fame to Bob Smith's alter ego.
And thus it was that Wolfman Jack, never having found a real home in the US, became the king of late night radio. From Mexico.
Now why am I telling you this?
Through a Byzantine series of legislations, negotiations and arbitrations, a panel called the Copyright Royalty Board (chartered by Congress to handle this sort of thing) has announced royalty rates for Internet broadcasters playing music licensed by SoundExchange, an arm of the Recording Industry Association of America (RIAA). The rate is $.0008 per performance for all performances in 2006, increasing to $.0019 per performance in 2010. Now that doesn't sound like much, and in raw terms it isn't -- it's about a penny for 12 performances.
But what constitutes a performance? That is the devil that lives in the details. One performance is the streaming of one song, to one listener. Kurt Hanson of the Radio and Internet Newsletter breaks down the numbers:
Because a typical Internet radio station plays about 16 songs an hour, that's a royalty obligation in 2006 of about 1.28 cents per listener-hour.There is no corresponding fee for terrestrial, over-the-air broadcasters.
In 2006, a well-run Internet radio station might have been able to sell two radio spots an hour at a $3 net CPM (cost-per-thousand), which would add up to .6 cents per listener-hour.
Even adding in ancillary revenues from occasional video gateway ads, banner ads on the website, and so forth, total revenues per listener-hour would only be in the 1.0 to 1.2 cents per listener-hour range.
That math suggests that the royalty rate decision — for the performance alone, not even including composers' royalties! — is in the ballpark of 100% or more of total revenues.
Non-commercial broadcasters will pay a $500 fee up to a full-time listening audience of about 220; after that they will pay commercial rates.
The reason for this seems obvious to the casual observer. Some combination of large Internet broadcasters, traditional terrestrial broadcasters, the RIAA, and who knows what else is trying to kill off small Internet broadcasters. To what end, I don't know, other than to preserve their business models and eliminate competition. Even large non-commercial broadcasters like Seattle's KUOW or New York's WFMU will be hard pressed to come up with fees for any performances covered by SoundExchange if they play such music on a regular basis.
All of which brings me back to Wolfman Jack. He ended up leaving the US and finding fame and fortune in Mexico because there wasn't a place for him in the US. He's not the first. British broadcasters, frustrated by their government's limitations on radio, turned to venues like Radio Caroline, broadcasting from a ship anchored in the North Sea, and Radio Luxembourg, which had studios in London and programmed for a British audience. (Minor aside: When the Sex Pistols were banished from the BBC because of songs like "God Save The Queen" and "Anarchy In The UK", they turned to Radio Luxembourg. I distinctly remember seeing them at the top of a sales chart at an HMV store I visited in London over Christmas 1977, even though their records were banned from airplay in Britain.)
If the CRB's insane proposal goes through, expect three things to happen:
All three of these possibilities have the effect of depriving SoundExchange and, by extension, the RIAA of revenue. Personally, I can't cry too many tears over this prospect. The artists who made the music may suffer some as well, and that's certainly unfortunate, but my understanding of the matter is that artists' shares of the money the RIAA sees are minimal at any rate unless you're talking about the really big acts.
- Current Internet broadcasters who rely on SoundExchange-licensed material, such as Radio Paradise and KPIG, will go under. They won't be able to make the nut.
- Unless, that is, they can go offshore. I fully expect some entrepreneur in another part of the world to start offering dedicated servers and other services themed toward US Internet broadcasters.
- And some who can make the transition will abandon SoundExchange entirely, moving to other sources of content that SoundExchange doesn't cover..
Hopefully this will also have the effect of promoting artists who are good, but not good enough for the entertainment-industrial complex to take a chance on them.
Now let me state for the record that I would rather see reasonable royalty rates that don't require a huge upheaval in Internet radio and will allow everyone to make a little money instead of everyone making none To that end I am going to follow the recommendations on Radio Paradise's home page -- sign their petition, contact my Congresscritters, educate the public (that's you and me), lather, rinse, repeat. Otherwise we run the risk of once again having innovation stifled by regulation, followed by expatriation as entrepreneurs go overseas to follow their vision and maybe make a little money doing it.
Labels: copyright, mexican radio, radio, riaa, royalties, technology, wolfman jack