Help Keep Internet Radio Online

Dear Senator Schumer:

On March 2, 2007 the Copyright Royalty Board announced new royalty rates for all Internet Radio stations, with the new rates retroactive to January of 2006. These new rates are significantly higher than expected and are many times over what is being paid now. In fact, if they remain unchanged, many or perhaps most online radio stations will have to cease operations after having had to declare bankruptcy due to the retroactive-to-2006 aspects of these new rates.

Internet Radio is treated differently than Terrestrial (broadcast) Radio. While both Internet and Terrestrial Radio pay royalties to BMI, SESAC and ASCAP, when it comes to record labels and artists, Terrestrial Radio pays no royalties -- none at all. It is only Internet Radio stations that must pay royalties to Sound Exchange at a rate is set by the US Copyright Board.

In 2002, Congress passed the "Small Webcaster Settlement Act," that forced Sound Exchange to offer to small Webcasters a rate based on a percentage of revenue.

Last year, a new round of hearings was held by the Copyright Royalty Board to determine new rates for the 2006-2010 periods. The hearings lasted several months. Then, three judges retired to deliberate and render a decision, which decision was announced on Friday, March 2, 2007. The surprise in their decision was the elimination of the "Small Webcaster Settlement Act." This meant all small Webcasters could no longer make Sound Exchange payments based on a percentage of their revenues.

The new rates essentially levy a fee of $0.0011 per performance per listener in 2007, escalating to $0.0019 in 2010. Since each hour, the average radio station plays 16 songs, that's about $0.0176 per hour, per listener in 2007. An Internet Radio Station with a 500 listener average would now be required to pay $211 per day, $6,336 a month or $76,000 for the 2007 year!

This amount of money is beyond the resources of the small independent Internet Radio Stations, many of which are run by enthusiasts and hobbyists. These small stations are the ones bringing new music and old favorites to us every day, with their playlist fine-tuned to their listeners' choices by their listeners themselves. Music like this can not easily be found on the corporate-owned mega stations, Internet or Terrestrial.

As royalty rates were 8% of gross revenues, a $76,000 fee under the new rates equates to gross annual revenues of $950,000 under the old rates. Yet the "gross annual revenues" enjoyed by a station with 500 listeners on average, are more in the $15,000 range; most of which are derived from listener donations with the station run on a "break-even"
basis.

To expect these stations to increase their donations five-fold to cover this additional cost in 2007 is folly. To expect them to also "find" over $50,000 to pay the retroactive 2006 fee is more than a little unreasonable.

The Copyright Royalty Board must have known this.

Without your help to repeal this unfair Internet-Radio-only "tax,"
re-instate the more equitable Small Webcaster Settlement Act, or perhaps even to extend the "Act" to also include Terrestrial Radio stations, March 2, 2007 will be added to February 3, 1959 as yet another... "day the music died."

Very truly yours,
Walter C. Schmidt
383 Second Ave
Massapequa Park, NY 11762
(516) 799-8300
waltsdorsai@gmail.com