SoundExchange yesterday announced that it had signed agreements with 24 small commercial webcasters. Contrary to what many press reports have stated, this is not a settlement with Small Commercial Webcasters. In truth, what was announced was that 24 small webcasters had signed on to the unilateral offer that SoundExchange made to small webcasters, about which we wrote here. Essentially, this is the same offer that SoundExchange made in May, which was rejected by many independent webcasters as being insufficient to allow for the hoped for growth of these companies, and insufficient to encourage investment in these companies. These larger Small Commercial webcasters, including those that participated in the Copyright Royalty Board proceeding, rejected that offer and instead have sought to negotiate a settlement with SoundExchange that would meet their needs. Instead of reaching a true settlement with these companies that had participated throughout the CRB proceeding and now have an appeal pending before the Court of Appeals, SoundExchange instead announced that their unilateral proposal was accepted by 24 unnamed webcasters. Thus, rather than negotiating a settlement, if anything this announcement shows that SoundExchange has not been willing to negotiate – as it has not moved substantively off the proposal they announced over 4 months ago.
While 24 webcasters may have signed on, it would seem that these must be entities that don’t expect to grow their revenues to $1.25 million, or grow audiences that reach the 5,000,000 tuning hour limit at which, under the SoundExchange-imposed agreement, the webcaster needs to start paying at the full CRB-imposed royalty rate. Moreover, the agreements only cover music from SoundExchange members, excluding much independent music that many webcasters play. For music from companies that are not SoundExchange members, a webcaster has to pay at full CRB rates. For a small service playing major label music, the agreement may cover their needs, but for the larger companies playing less mainstream music, a different deal is needed.
SoundExchange’s press release announcing the agreements claimed that other small webcasters did not sign the agreement because aggregators would pay their royalties or because their business models more appropriately fit with the CRB rates. The press release does not mention that many webcasters did not sign because their business models include growing their businesses without going bankrupt, which does not seem to fit under the SoundExchange proposal. If this is the only deal that SoundExchange offers to small independent webcasters, SoundExchange will effectively do away with the independent webcaster who is serious about growing a business, but to whom a per performance royalty creates a situation where royalties exceed revenues. This would leave us with an industry essentially made up of hobbyists and big companies that subsidize their webcasting with their other lines of business – essentially crushing the hopes of those who saw the Internet as a way to build an independent radio business.
Small webcasters are not the only ones that are having settlement problems. According to a letter released by NAB President David Rehr, after over 3 months of waiting, SoundExchange rejected a proposal from broadcasters to reach a compromise on their streaming royalties. The Rehr letter claims that the rejection from SoundExchange, which is not public, did not seem to understand the broadcaster proposal. SoundExchange President John Simson was also been quoted as saying that he expected to reach a settlement with NPR over their streaming royalties by the end of September. With 12 days to go before the end of the month, we will see whether this is really a deal come true, or another settlement without substance.