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Digital Watch: Even Online There’s No Such Thing as ‘Free Radio’

While internet radio is sometimes thought of as the wild and untamed cousin of terrestrial broadcast, it’s not entirely unshackled. While web broadcasters don’t require an FCC license, and are unrestricted with regard to using four letter words, stations still have to have to pay up for the right to play recorded music. Even if you find a way to host your station’s stream for free, eventually you’ll have to pay royalties if you play any tunes.

SoundExchange is the non-profit organization responsible for collecting one set of royalties–so-called “mechanical” royalties for recorded music–with that money going to the labels and artists that own the copyrights in the actual recordings. The group just reached a settlement with National Public Radio and the Corporation for Public Broadcasting on the rates that affiliated public and community stations will owe from 2016 to 2020.

SoundExchange reached a similar settlement with College Broadcasters Inc. last October, covering member college stations. It’s important to note that these royalty payments are only required for stations’ internet streams. In the US terrestrial broadcasts are exempted.

Non-commercial radio has had tense relationship with SoundExchange over the course of its twelve-year existence. That tension stems from the fact that unlike Pandora, Spotify, SiriusXM or commercial internet radio, non-commercial stations aren’t generating profit from their broadcasts, and revenue is often variable. This means SoundExchange payments often seem like just one more drain on resource, which is why college and public stations have pushed back to negotiate rates that are consistent with their non-profit model.

The details of the NPR/CPB deal haven’t been released, and the settlement must still be approved by the Copyright Royalty Board.

It also should be noted that non-commercial stations have been obligated to pay songwriter royalties to groups like ASCAP and BMI for decades; royalty obligations are not necessarily anything new. It’s just that paying performance royalties was ushered in with the internet era, in the Digital Millennium Copyright Act of 1995, to be exact.

Back to my opening musing, about how these royalty obligations make internet radio a little less free than might otherwise be assumed. This was on my mind because this week I talked to a reporter about a pirate station she’s covering. The reporter said that the station had actually received notice from ASCAP and BMI demanding that the station pay up. That’s the first time I’d ever heard of an unlicensed station being hounded by these groups, and I guessed that it was probably the station’s popular internet stream that caught their attention, not the relatively obscure FM signal.

Because of freedom from the FCC, internet radio has often been suggested as a strong alternative to unlicensed broadcasting. But hearing about ASCAP and BMI chasing down a pirate’s ostensibly more legit internet broadcast reminded me that the internet alternative may be free as in speech, but is not free as in beer.

The popular and influential internet station East Village Radio actually started out as an unlicensed FM in 2003 before moving to the supposedly safer environs of internet broadcasting. Yet, EVR closed down last May after an eleven-year run, saying “licensing fees and internet costs” were too large for the station to cover. And, because it wasn’t a non-commercial broadcast station, EVR couldn’t take advantage of the lower rates negotiated by the likes of NPR and CBI.

Although in the past I’ve resisted the equation between pirate radio and internet radio, perhaps the internet station that resists paying royalties is just a little more pirate than one that does. That broadcaster isn’t likely to have the FCC or federal marshals knocking at their door. However, still possible is a visit from a process server with a subpoena for an appearance in civil court when you get sued for back royalties.

Now, I’m not advocating that US internet stations try to dodge paying songwriter and performer royalties, though there is a case to be made that independent stations that generate little in the way of revenue or profit are at the greatest disadvantage. Rather, I think it’s useful to recognize the constraints of both internet and terrestrial radio. Would-be broadcasters are well advised to take these royalty obligations into account ahead of time.


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4 Responses to Digital Watch: Even Online There’s No Such Thing as ‘Free Radio’

  1. Will March 18, 2015 at 8:23 pm #

    Paul,

    A couple of points to clarify with respect to your post.

    “SoundExchange reached a similar settlement with College Broadcasters Inc. last October, covering member college stations”. The CBI-SX settlement still needs to be approved by the CRB and more importantly, the settlement is not exclusive to CBI members.

    “The details of the NPR/CPB deal haven’t been released, and the settlement must still be approved by the Copyright Royalty Board.” The settlement is publicly available. There are blog posts which give some ideas of the contents.

    Here is a bird’s eye view.

    Previous (current through 12/31/15) agreement – $480,000 per year – 279,500,000 MATH (Music Aggregate Tuning Hours annually)

    New settlement – $560,000 – 285,132,065 MATH per calendar year.

    Will R

  2. Jerry Drawhorn March 19, 2015 at 5:10 pm #

    I’m wondering if pirate stations will set up with non-US national providers…aka “Radio Caroline” the North Sea Pirate Radio station. What are the royalty requirements internationally? Do these vary from country to country? And would a country wiyh low royalty payments, say Guyana, become a haven for a provider that hosted a bunch of pirates.

    You might find you favorite pirate on http://www.radioblackbeard.guy???

  3. Paul Riismandel March 19, 2015 at 5:19 pm #

    Thanks for the additional info, Will.

    Jerry, that’s a good question. I actually talked about that with the reporter, too. My guess is that ASCAP, SoundExchange, et al, care more about where your business is located and where your listeners are than where your server or domain is.

    So, if you’re a pirate internet operation that doesn’t list a location and doesn’t have a US address on your domain registration, then you’re more likely to skate by. But if it’s clear you’re operating in the US and can be contacted at a US address, then you’re probably fair game. Of course, they still have to identify you somehow if they want to drag you into court.

  4. JohnF March 20, 2015 at 11:15 am #

    Paul,

    You say “While web broadcasters don’t require an FCC license” but once the FCC do get control of internet data through the ruse of ‘Net Neutrality’ that may no longer be the case once all the arguments about ‘lawful content’ etc start to be made and methods of enforcing same are proposed. Content/Content Producer licensing will be their natural response.

    john

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