Music Royalties Hamper Growth of Internet Radio
OTTAWA, Ontario —
Music royalties are an understandable fact of broadcasting life. After all, the
artists who made the songs deserve to be paid.
is a psychedelic
Internet radio station
in Guipavas, France.
However, the actual regime of music
royalties varies wildly from country to country, uninfluenced by any global
standard of “fairness.” Worse yet, the fees charged to over-the-air
broadcasters are substantially less than those charged to Internet (streaming)
radio stations, because the two sectors are governed under different rules. In
some cases, the fees are so onerous that countries such as the United Kingdom
simply do not have Internet-only music radio stations.
A comprehensive history of the
development of radio music royalties would fill a book. The short version:
Radio broadcasters didn’t initially pay artists and publishers for the use of
their materials on-air, because this use was too novel. However, as radio
gained traction around the world, music rights-holders such as the American
Society of Composers, Authors and Publishers (ASCAP) started charging radio
stations for recorded music usage.
battles between ASCAP and broadcasters in the United States over ever-rising
music royalties grew so heated, that the broadcasters formed their own music
rights organization called Broadcast Music Inc. (BMI) in 1941.
For eight months that year, CBS and
NBC radio only played lesser-known BMI artists on-air; boycotting ASCAP’s
artists until the two sides reached a deal that saw music royalties lowered.
This is just one nation’s copyright story;
there are many, many others. The fact that there are so many others explains
why broadcast music royalties vary so much from nation to nation, to this very
“There have been some efforts to unify
how different nations handle copyright — like the Berne Convention and European
Copyright Directive — but there are still many distinctions and differences
that make operating an international streaming service very complicated,” said
Geoff Duncan, a media distribution/production consultant who writes on digital
media for www.DigitalTrends.com
“This is why streaming services can
often operate under different terms in different countries, or don’t operate in
some countries at all,” he said.
is a Bangladesh Internet-only radio station
that streams Bengali content live 24 hours a day.
It is reasonable to assume that an
Internet radio station cannot match the listenership of an over-the-air
broadcaster. After all, an Internet radio station delivers content using a
one-to-one delivery method, with each new listener requiring his or her own
audio stream that must be provisioned and paid for. In contrast, a broadcaster
can reach millions with a single one-to-many transmission, with the only limit
to audience size being the transmission’s coverage area.
Given this fact, one could assume that
Internet radio stations should pay a fraction of what over-the-air broadcasters
pay in music royalties; at least in terms of their overall audience size and
revenues. In reality, this is not the case.
“Historically, traditional broadcast
radio has received favorable agreements for using music, though the level of
these differ to a great extent country by country,” said James Cridland;
managing director of Media UK, a U.K. media analysis website. In practice this
means that “Most countries charge broadcast radio stations a percentage of
qualifying revenue, which significantly lessens risk for these companies,” he
In contrast, “Internet radio stations
are charged per song, per listener — irrespective of revenues being earned,”
said Cridland. “And, in most countries, the charges are comparatively high in
comparison to broadcast radio. A radio station that becomes successful has a
double-whammy of higher bandwidth bills and higher music costs, without necessarily
being instantly able to translate that popularity into advertising revenue.”
onerousness of the fees charged Internet radio stations playing music vary from
country to country. In the U.S., for instance, hobby and small to midsize
streaming stations can cope by purchasing a “blanket license” from a
third-party firm such as Stream Licensing (streamlicensing.com), which covers the royalty payments, reporting and
other details in exchange for a monthly fee.
Jazz Florida streams from Coconut Creek, Florida.
But this won’t help “larger
broadcasters,” said Marvin Glass, the company’s owner. “When a larger
broadcaster discovers that unless he takes in a significant amount of money he
is going to be paying out more than he takes in, he quickly throws in the towel
on Internet music radio.”
Internet music royalties are even
tougher in the U.K. “I believe the online music royalty structure here is a
large reason why we have no Internet-only radio stations of any scale,” said
Cridland. “It is simply uneconomic to attempt to run an Internet-only station.”
has calculated that should Pandora ever try to launch in the U.K., their music
rights liabilities alone would be almost 100 percent of their available
advertising revenue. This is “10 times what traditional broadcasters pay,” he
said. “It’s impossible to run a station like that.”
There are a lot of players in the
music royalty business; particularly the Big Three recording companies — Sony
Music Entertainment, Universal Music Group and Warner Music Group — who have
major stakes in maintaining music royalties at current or higher levels.
well, “It’s almost impossible to find an artist who is satisfied with income
they receive from Internet streaming,” said Geoff Duncan. “Sure, massive acts
like Jay-Z and Beyoncé might earn millions, but for every one of those massive
success stories there are thousands (more likely tens of thousands) of artists
who earn only a few dollars — if anything at all.”
Against this backdrop, it seems
unlikely music royalties will ever drop significantly for Internet radio
stations; despite the fact that these royalties are stunting the sector’s
growth, and limiting the potential for exposing online listeners to music that
they might subsequently buy and download directly.
“Maybe streaming music services can
generate enough ad revenue off non-paying users to stay afloat,” said Duncan.
“Or perhaps streaming music services can survive as an adjunct or loss-leader
to another, higher-margin business; like Apple with its iOS device empire.
Either way, it’s difficult to see right now where some of these companies will
James Careless reports on the industry for
Radio World from Ottawa, Ontario.