Report: New CRB Rates Jeopardize Smaller Streaming Services, Hinders New Entrants

Accuradio's Kurt Hanson

A variety of smaller "pure-play" webcasters are concerned that the new CRB rates (NET NEWS, 12/17) could put them out of business, as well as discourage new entrants in the field, RAIN reports. Small webcasters will soon be forced to pay a higher per-stream rate at 17 cents per hundred streams. Unlike the WEBCASTER SETTLEMENT ACT of 2009, there is no a carve-out for small webcasters based on total revenue, which erases the difference between pureplay webcasters and radio station streams.

RUSTY HODGE, founder and owner of SOMAFM, calculated that he's have to pay 14 times more in royalty rates because of the changes, which raises the likelihood of blocking his streams in the U.S. “SOMAFM and a lot of other small webcasters are going to be faced with some tough choices, including limiting or completely blocking their U.S.-based listeners," he said. "Which may be the way to go; the majority of our listeners are outside the US anyway,” he told us."

“For a webcaster like ACCURADIO, which works hard to monetize its audience through banner ad networks and audio ad rep firms, but is just in the early days of building a direct sales force, this rate will eat up close to 100% of our total revenues,” ACCURADIO Founder/CEO KURT HANSON said. “But I’m more worried about smaller webcasters who are serving a niche audiences, like folk music or classical music or jazz — this rate could very well drive all out of them out of business.”

Furthermore, "This rate will be an incredible barrier to entry for anyone new trying to enter the space," HANSON  continued. "And a non-vibrant Internet radio industry is bad for webcasters, working musicians, and consumers alike.”

“One thing that’s bad for competition (if that were intended by the DMCA) but good for 'existing' Internet radio services is that it effectively forecloses entry by new competitors,” 8TRACKS founder DAVID PORTER wrote in a MEDIUM article. “There’s no longer an option for a Small Pureplay webcaster (% of revenue) so the table stakes for entering Internet radio in the US are probably at least $10–15 million for an angel or seed round. Raising such a round is unlikely in a highly competitive, relatively low margin business.”

Even though PANDORA was largely supportive of the new royalty rates, CEO BRIAN MCANDREWS admitted that “It would be a challenge for a new company to start up and pay these rates from the start.”

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