The Copyright Royalty Board (CRB a division of the Office of the Librarian of Congress) has announced its decision on Internet Radio Royalty rates, rejecting all of the arguments made by Webcasters and instead adopting the “per play” rate proposal put forth by SoundExchange (a digital music fee collection body created by the RIAA). The new rate of $0.0011 per song PER LISTENER. Means is a small to medium sized Internet Station plays one song, and 100 people are tuned in, the station must pay THAT royalty 100 times. A “performance” is defined as the streaming of one song to one listener; thus a station that has an average audience of 500 listeners racks up 500 “performances” for each song it plays.

The new rates force webcasters to pay for each song streamed to each user, and increase over the next few years as follows:

2006: $0.008 to stream one song to one listener
2007: $.0011
2008: $.0014
2009: $.0018
2010: $.0019

These fees are also retroactive to the begining of January 2006.

Those fees will add up quickly for webcasters; the Radio and Internet Newsletter (RAIN) calculates that, assuming that the average station plays 16 songs per hour, sites would have to pay “about 1.28 cents” per listener per hour using the 2006 rate, and would owe this retroactively, in addition to licensing fees going forward ($500 per channel). RAIN’s math indicates that the rate would render Internet radio unsustainable, or at the very least, more ad-laden than terrestrial radio — and that’s before the songwriters’ licenses are taken into account! Terrestrial Radio is, of course, conspicuously absent from the proceedings. Except that if they stream on the internet, their royalty rate is substantially less and does NOT include the per song/per user stipulation. Clear Channel’s total corporate obligation for November 2006 based on comScore Arbitron ratings and assuming 13 songs per hour, would be about $500,000… but if that’s for streaming, let’s say, 500 stations, it would only be a royalty obligation of about $1,000 per station per month in 2006. Are those stations selling enough online spots and website banners and sponsorships to make that affordable? I’m not sure.

For example…According to the comScore Arbitron ratings report for November 2006, the AOL Radio Network had a average audience (”ALH”) between 6AM and Midnight of 210,694 listeners. Multiplied by about 16 songs per hour, 18 hours per day, and 31 days per month, plus adding an additional 10% to account for overnight (Mid-6AM) listening, suggests that AOL played about 2.1 billion songs per channel that month. At the lowest of CRB’s royalty rate ($0.0008 per play), I’m guessing that would create a royalty obligation to SoundExchange for the month of March of about $1.65 million. Annualized, that’s about $20 million for 2006.