Affordable Webcasting Rates, Finally

A group of Webcasters and SoundExchange just announced an agreement for webcasting royalty rates through 2015 and retroactive to 2006.  These rates are much more favorable than the ones handed down by the Copyright Royalty Board (CRB) for a few reasons:

• There is now a percentage-of-revenue option for large webcasters.  There had been a percentage of revenue option for small webcasters but this went away after one grew past a certain threshold, resulting in weird (read unaffordable) scale economies.  Some may think that 25% of revenues is too high but it seems consistent along the spectrum ranging from the most control to the least: ecommerce downloads (~ 65-70%) and on-demand streaming (~ 50%).
• There is a percentage of expenses rate but this goes away once a webcaster gets past a certain size.  This will actually encourage webcasters to bootstrap early on, which may be a healthy thing to do anyway.
• The per-performance rates are nearly 50% of the CRB rates.  The rate for 2009 is $0.00093 or 9.3 hundredths of a cent.  For easy math, let's assume that there are 14 songs played in an hour, the royalty cost is 1.3 cents.  Multiplied by 1000, it comes to about $13 cost per thousand streamed hours.  Add in songwriter royalties and bandwidth, and let's call the cost, say $20 per thousand hours.  Seems like a lot but, if you can serve 4 audio ads and maybe 1 visual ad during that hour at an average effective CPM of $5, you get $25 revenue per thousand hours or a gross margin of 20%.  Not great but at least there is line of sight to creating a viable business. 
• This ought to be heartening for businesses looking for funding.  Until now there had been uncertainty concerning the royalty rates and, as most people know, investors *hate* uncertainty for such a material input in any business they are considering investing in.  

Congrats to the webcasters and their lawyers as well as to SoundExchange and its board for arriving at what seems to be a deal everyone can live with.  

Comments

[Jason S.]

Hey Rags!

Remember those rates your quoting are for services not considered Bundled, meaning no Subscription and/or Syndication. If you have subscription/syndication then you are at the NAB negotiated rates which are not as favorable...

Year Rate
2006 $0.0008
2007 $0.0011
2008 $0.0014
2009 $0.0015
2010 $0.0016
2011 $0.0017
2012 $0.0020
2013 $0.0022
2014 $0.0023
2015 $0.0025