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The new performance royalty rates that internet radio will pay artists and record labels were released on December 16 and many small and mid-sized internet-only broadcasters are now fearing they’ll be put out of business. While there was a modest increase on the fee paid for each song played, the bigger concern is what’s missing.

Since 2009 webcasters with lower revenues have been able to pay rates based upon that income, rather than based on tracks played and audience size. Under the Webmaster Settlement Act of 2009 (WSA) stations with less than $1.25 million in revenue were able to pay a percentage of that in royalties ranging from 12% to 14%. That agreement was made between SoundExchange, which negotiates and collects performance royalties on behalf of copyright owners, and a group of internet radio stations. However, the WSA ended on December 31, 2015 and there is no new agreement to take its place.

This means that all internet broadcasters that qualified for revenue-based royalties in 2015 will now have to pay based upon the number of performances. This is calculated based upon the number of tracks played multiplied by the number of listeners to each track, which is then multiplied by the rate of $.0017 per performance. So, if a station averages 100 listeners at any given time and plays an average of 15 tracks an hour, then it has 1500 performances an hour, 36,000 per day, and 13,140,000 performances a year. This adds up to a royalty of $22,338 a year.

To understand how significant this change might be, consider that 100 average listeners isn’t a very big audience. So even if a webcaster were able to make $100,000 a year–equivalent to the budget of a small community radio station–the royalty obligation under the WSA would have only been $12,000. However, it’s more likely that a webcaster with that size audience would have a hard time making even $12,000 a year. For very small webcasters with little actual operating revenue the cost of doing business threatens to greatly outweigh actual income.

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