Webcast Royalty Collection Corrupt

Four music webcasting leaders — RealNetworks, Yahoo, Pandora and Live365 — point out that the so-called “administrative fees” the music industry will charge for collecting royalties will cost them $1 billion per year, not a penny of which will go to artists.

Here’s how they say they derived that figure: When the CRB decided earlier this year to change the rules for Internet broadcasters, it also decided to levy a $500 minimum annual fee per Internet radio “channel.” SoundExchange, the non-profit music industry entity that collects the royalty and other fees on behalf of record labels, says that minimum payment is supposed to cover administrative costs.

But since some of the larger Internet radio services potentially offer their listeners hundreds of thousands of unique “channels” (RealNetworks’ Rhapsody offered more than 400,000 in 2006 alone, according to a company spokesman), the companies view the ruling as forcing them to multiply that mandatory minimum payment accordingly (for Real, that would amount to $200 million).

Note that SoundExchange collected only $20 million in royalties last year. That means collection fees will be at least fifty times greater than the collections themselves. What a scam!