An Open Letter to Members of the RIAA

(Editor’s Note: Paul R. Gathard is president of Barnabus Road Media, a company that provides streaming radio services to several hundred commercial radio stations throughout the United States, Canada, and Europe, as well as several internet-only radio stations. Mr. Gathard has also served as an advisor to Small Webcaster Community Initiative. As such, Mr. Gathard is in a unique position to understand the needs of both commercial and non-commercial webcasters, and has proposed a royalty solution he sees as reasonable as it is equitable.)

I am sending this open letter to the general membership of the Recording Industry Association of America, or RIAA. My appeal is to all members of the RIAA, including its directors and officers.

It is my belief the RIAA does and can further influence the Board of Directors of the Performance Rights Organization, or PRO, called SoundExchange. I ask your thoughtful consideration in the rescue of thousands of small webcasters subject to the Copyright Royalty Board decision of March 2007. Webmasters who, by virtue of this new, unexecuted CRB rate structure, will surely wither and die upon it being made retroactively effective back to January 1, 2006.

I too believe all webcasters should pay copyright royalties based upon the amount of music listened to by the public over the internet. I further believe all webcasters should pay the same copyright rate for an hour of music played whether it is broadcast by a for-profit or not-for-profit business organization. Further, the revenue of the webcaster should have no bearing on the copyright rate that applies, as this tends to create a loophole for some webcasters to pay only the annual minimum copyright fee.

Artists and record labels should receive fair compensation for their creative and financial investment that most webcasters use to attract and retain an audience. I firmly believe the fairest standard would be to have one set rate for each hour of music played, using the Aggregate Tuning Hour, or ATH, method as the standard technical means of reporting and being the most easily usable method by webcasters of all sizes.

The problem with the CRB ruling of last March is primarily that the copyright rate issued will dramatically be in excess of the gross revenue of 90% of all webcasters operating in the United States. I suggest the following rate schedule, which would produce adequate revenues from the largest webcasters, and by virtue of a substantially smaller annual ATH, not bankrupt smaller webcasters:

• The copyright royalty fees used to cover SoundExchange’s administrative expenses should be a combination of one flat $500 annual fee per website provider with a component of the royalty rate used to cover the volume aspects of handling larger webcasters where auditing and other expenses may be required.
• I would leave the 2006 reporting and fees paid as an already completed transaction, meaning there would be no retro-payment to or from SoundExchange for 2006 royalty payments. The new 5-year rate period would be from January 1, 2007 until December 31, 2011.
• Rates first apply against the minimum annual fee and then any webcasts over a monthly ATH threshold produce additional payable royalties as suggested below.
• No loopholes or exceptions.
• A new omnibus webcaster copyright royalty rate schedule, suggested as follows:

  Current CRB Rates ($ per performance)

  Proposed Rates ($ per ATH)

  Year

  Rate

  Year

  Rate

  2006

  .0008

  2006

  —

  2007

  .0011

  2007

  .00028

  2008

  .0014

  2008

  .00031

  2009

  .0018

  2009

  .00033

  2010

  .0019

  2010

  .00035

  2011

  Unknown

  2011

  .00038

A rate structure featuring one rate applied to all webcasters for each hour of ATH cannot be argued as being unfair when applied to all types and sizes of webcasters. Artists and record labels will be paid, across the board, the same fee for each hour of ATH played no matter what.

Although the suggested rates are lower than what the CRB imposed upon commercial webcasters, the rates are in line with what the CRB used for non-commercial webcasters below the monthly ATH threshold for the year 2006. I think these proposed rates recognize some element of the beneficial music promotion and advertising provided by webcasters, and that these rates will actually generate more revenue to RIAA members than the rates that surviving post-CRB webcasters would currently pay.

There are no restrictive barriers to webcaster growth or loopholes in this rate structure and it will keep bad business models from escaping the righteous payment of royalties for each hour of ATH digitally transmitted over the internet. 

How can the recording industry be perceived by the public to be good and wholesome if it ruthlessly causes the demise of the internet radio industry? If nurtured with low copyright royalty rates, Internet radio will grow and become more prosperous, but killing internet radio before it has a chance to prove its worth makes little sense.

Make those playing your music pay something, but do not make the price of your product so high that webcasters will not dare the financial risk of signing up with SoundExchange. Don’t push edgy webcasters into illegal piracy when lower copyright royalty rates would have provided an equilibrium point and lowered their financial risks.

Sincerely,

Paul R. Gathard, President
Barnabas Road Media, Inc.