Analysis shows CRB Internet Royalty increase "inconsistent with business reality"

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Music portal Rock.com announced an analysis to  demonstrate how inconsistent the recent CRB Internet performance royalty increase is with its ability to actually pay royalties based on the new scheme.
"I am trying to make this less of an emotional debate and just show the world in simple terms that there was a huge bust in rate determination and that all of us Web broadcasters are very sincere and not just 'crying wolf,'" said Steve Newman, CEO of Rock.com.


"Here's the basic math: The performance royalty rate in 2010 is 0.19 cents per song played. When we multiply this by 20 songs per hour, the royalty cost per listener hour is 3.8 cents. Rock.com's streaming costs are an additional 1.2 cents per listener hour, so our direct radio costs with royalties, even before salaries and overhead, is 5 cents per listener hour. On the revenue side, Rock.com can receive at most 0.3 cents per radio advertisement per listener. If we were to run 7 ads per hour – which is the maximum that our advertisers and we would accept to avoid clutter – that would provide a maximum 2.1 cents of revenue per listener hour. This is less than half the costs of running the Internet radio part of our business."

For this reason, Rock.com strongly endorses The Internet Radio Equality Act (S. 1353 in the Senate, H.R. 2060 in the House). This fixes the issue by pegging the Internet royalty rates to a percentage of revenue that is similar to the method used for royalties on satellite radio.

Rock.com also said it has no issue with the rate methodology used by ASCAP, BMI, and SESAC to calculate composer royalties.

RBR observation: Seems the only way Internet radio stations such as Rock.com could survive is to either make their service paid subscription or run some 15-20 ads per hour-comparable to terrestrial radio. Newman is likely correct in assuming seven ads per hour are about the maximum an advertiser will be willing to put up with as far as clutter goes. The reach will have to be huge to get them on board in a cluttered environment.


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