Internet radio saved! Behind the new “Pureplay” webcaster license

Finally, for the first time ever, Internet radio stations have a royalty deal that is reasonably viable and extends for a reasonably-long period of time.

The specific part of the Internet radio industry that this particular deal saves are the webcasters who are (A) larger than hobbyists — i.e., who have aspirations of earning more than $1.25 million in revenues per year — but (B) are not wholly-owned divisions of multi-billion-dollar companies (e.g., AOL & Yahoo and CBS & other terrestrial broadcast groups).

In other words, the set of webcasters who may be able to benefit from this agreement includes webcasters like Pandora, AccuRadio, Digitally Imported, Radioio, and potentially dozens of other companies — really, anyone who wants to get into webcasting as a real business.

For all of those webcasters, being stuck having to pay the CRB decision’s per-performance rates would almost certainly have been a death warrant — they were the equivilant of 70%, 100%, or even more of some webcasters’ total revenues. (In AccuRadio’s case for the first 6 months of 2009, the CRB rate would have been over 200% of our revenues!)

This agreement has three main benefits for those who choose to elect it:

It cuts the CRB per-performance rates for 2007-10 by approximately a third to a half.

It establishes per-performance rates for 2011-15 — with annual increases, to be sure, but nowhere near as huge as the kind of annual increases the CRB was coming up with, and without the risk and expense of participating in another CRB proceeding for that period.

And it gives smaller webcasters a chance to grow into these rates — with a “percentage of revenues” royalty rate for a webcaster’s early years (about 14% until they hit $1.25 million in annual revenues, and 25% for about a year thereafter). (Note, however, that this provision expires at the end of 2014.)

Given the fact that the deal for large pureplay webcasters is a “greater of“ the per-performance rate or 25% of revenues, that still means that Internet radio will pay a far, far higher royalty rate than broadcast, cable, or satellite radio pays.

Our hope is that, over the next few years, Congress will see fit to change the laws affecting radio royalty rates so that all forms of radio that have to pay a sound recordings performance royalty pay the same rates (and if those rates are set by a future CRB, the rates would be set under the same legal standards).