Wayne Schrader, 35, of St. Petersburg, is a techie with a love for vintage music of the early 20th century, especially jazz. A few years ago he came across an online radio station called Absinthe Radio that specializes in jazz from the '20s and '30s. It's one of thousands of net radio stations, or webstreams, hosted by the website Live365, available 24/7 and free to the listener. The niche developed a dedicated audience of several thousand, but the founder of the show found it difficult to keep up and was looking for a successor. Schrader took over in August '05. It's a "tremendously important genre," he says. "It has the roots of a lot of different trees."
Like any serious hobbyist, Schrader pays a lot to support his passion. He combs used music stores for out-of-print albums and CDs, and pays Live365 $335.52 a year to store 500 MB of music on its server; the cost also includes the licensing fees paid to the major composers' organizations like BMI and ASCAP. "It doesn't benefit me at all," Schrader says of the financial investment in his hobby.
Nielsen Media Research estimates 70 million Americans listen to webstreams. Live365 boasts 3-million-plus listeners. In the last 30 days, 4,493 of them listened to Absinthe Radio.
Schrader's listeners have never heard his voice — Absinthe Radio is a D.J.-less station. Still, he keeps them updated on the station's website, absintheradio.com, and he says he receives "an occasional e-mail from France. There's always a story attached to it. Like, 'My grandfather used to play that in the war.'" A thousand songs automatically cycle through and Schrader tries to change them up a couple times a month to keep his listeners, and himself, from getting bored.
Unfortunately, within the next week, Schrader and his listeners might have to resort to their own collections or, gasp, the smooth sounds that pass for jazz on commercial radio. On July 15, a royalty increase is set that would have a disproportionately damaging effect on small webcasters — including one-man shows like Schrader's.
"If royalties go up dramatically, I can see Live365 bumping up their fees over 1,000 bucks," says Schrader. "If I had to pay more, it would tip the apple cart."
Broadcasters on radio and the Web have long paid royalties to composers. But it wasn't until the onset of Internet radio that recording artists and record labels could get a piece of the pie, too. Radio stations had always argued that airplay was free promotion, but with the Net came the possibility that "perfect digital copies" of recordings could be made.
That argument led to the Digital Performance Right in Sound Recordings Act (DPRA) of 1995. DPRA gave record companies and recording artists the right to license and collect royalties for the public performance of their sound recordings on the Internet, cable or satellite radio services. The Recording Industry Association of America established the nonprofit SoundExchange to collect the resulting revenue stream.
Paying artists for their work is a good thing. But the stated mission of SoundExchange, which includes fostering "the development and growth" of the Internet, is contradicted by its actions.
SE pushed the Copyright Royalty Board (CRB) for rate increases that charge small webcasters like Schrader, community radio stations like WMNF and behemoths like Clear Channel and AOL the same amount: $0.0008 per song in 2006 and climbing to $0.0019 per song in 2010 — an increase of 300-1200 percent over the next five years. For noncommercial stations and smaller companies with revenues of less than $1.2 million annually, this can equal more than 100 percent of revenue. The CRB ruled in favor of SE in March for these rates to go into effect on the 15th, retroactive to Jan. 1, 2006.
Tim Westergren, CEO of Internet radio site pandora.com, says there's no way Pandora would survive under a business model "that's evaporated." Pandora.com has 7 million registered users, and any given listener can create up to 100 streams of personalized radio. Pandora, which made a profit of $400,000 last year, would pay $600,000 under the new rate system. Kurt Hanson, CEO of Accuradio, an online multichannel radio station and publisher of the Radio and Internet Newsletter (RAIN), said, "The law told the judges not to look at the effects of their decision in the real world." Sites like Pandora and Accuradio stream music below CD quality and give exposure to artists who don't get mainstream airplay, which they believe leads to increased record sales.
Most net radio stations across the country participated in the Day of Silence on June 26 to raise awareness and a little hell. They chose to trade in their music streams for public service announcements on savenetradio.org, urging listeners to call their congresspeople and support the new H.R. 2060, the Internet Radio Equality Act. The bill was introduced in April by Jay Inslee, D-WA, to counteract the CRB decision (it was followed by a companion bill of the same name in the Senate). H.R. 2060 would set rates at 7.5 percent of total revenue, .5 percent more than the rate satellite radio currently pays SoundExchange.
"There has to be a business model that allows creative webcasters to thrive, and the existing rule removes all the oxygen from this space," said Inslee. His bill most likely won't get through the House in the next few days, but the game isn't necessarily over after July 15. Negotiations continue between SoundExchange the Intercollegiate Broadcasting System (which represents college radio stations like Sarasota's WSLR) and the Corporation for Public Broadcasting (which represents NPR and community radio stations like WMNF).
"Small webcasters have been very successful in getting their stories out to the public," says Jenny Toomey of the Future of Music Coalition, a not-for-profit collaboration that's seeking balance among the various parties in the controversy. "The pressure is on SoundExchange to settle."
Dawn Morgan, an editorial assistant at Creative Loafing, is also a volunteer programmer with community radio 88.5 WMNF.
This article appears in Jul 11-17, 2007.