Krypton Radio - Sci Radio in the Crossfire

The U.S. Copyright Royalty Board has set new internet radio royalty rates that no one but the giant media companies can afford. Independent internet radio stations have begun closing by the thousands. One unique sci-fi radio station fights on.

As independent radio stations go, Krypton Radio is more independent than most. Broadcasting on the internet instead of over conventional terrestrial airwaves, the station serves a worldwide community of sci-fi geeks and fans that could never served otherwise. The internet is full of stations like this, serving very select and wildly disparate tastes in music and entertainment.

Or it was.

A dizzying rate hike in music licensing took place on January 1, forcing thousands of stations off the virtual airwaves. When the internet radio portal Live365 went offline on February 1, it took 5,000 stations with it in one gulp. Here’s the condensed version of what happened.

Terrestrial radio pays songwriters’ royalties for everything they play. Internet radio stations aren't considered "real radio" by the Library of Congress, but “streaming audio” instead, so they're charged a mechanical duplication fee that old-style radio stations don't have to pay. This is based on the idea that the music has to be "duplicated" in order to transmit it over the internet in an audio stream, so internet radio stations have to pay licensing fees twice, even though this is precisely what happens during a normal over-the-air broadcast - music has to be converted to an electronic form so that it can move from place to place regardless of the medium.

This extra tacked-on royalty just took a nasty, breathtaking jump upwards on January 1. The net result was that as of February 1, about seven thousand internet stations who could afford to be on the air last year, went silent forever.

Special interest radio stations are the most valuable out of what it being lost, because they offer music and opportunities for new artists that standard commercial radio simply does not offer. Diversity of commercial radio has been being substantially curtailed as it is as giant companies snap up smaller stations and force them all to play the same stuff regardless of region. These same smaller internet radio stations are also the ones who have the hardest time paying the already exhorbitant license fees.

Smaller internet stations – those making less than $1.5 million per year – were protected from the exorbitant fees paid by industry giants such as Spotify and Pandora by something called the Webmaster Settlement Act of 2009 (WSA) . It provided a percentage of revenue calculation for determining royalty rates paid to record labels. As of January 1, 2016, that protection expired. Small broadcasters now face increases of 10-14 times what they had been paying.

Krypton Radio is one of only two remaining sci-fi, geek culture format stations in the U.S. That puts them on the endangered species list as radio stations go. Still, the boutique station is one of the luckier ones, in that it’s actually making a small profit. Their team, working mostly as volunteers, have been working for years to achieve their now world-wide audience. Between its Patreon campaign and its advertisers, the plucky sci-fi station stands a fair chance of figuring out how to survive the massive rate hike.

Countless hobbyist, regional interest and specialty stations are now gone, with some estimates putting the number put out of business at a frightening 7,000 stations. There had been hope that the ruling by the CRB would eventually contain a reaffirmation of the protections afforded small stations, but alas, the new ruling contains no language that even approaches this.

The rate hike was well received by recording artists across the nation, who have traditionally received very little of the royalties pie, though this has much due to the inefficiency of the royalties collection system as anything, due to the nearly 90% overheads charged by the music licensing companies. Less than 10% of royalties collected actually go to the artists themselves, with the record labels cherry picking who  gets paid and who doesn’t.  The measure arguably did as much or more harm to the music industry as a whole than the good it was intended to do for the musicians. With independent radio left completely out in the cold in the arbitration, a major distribution channel by which new artists can get their music heard by their prospective audience is being crushed to the point of collapse.

The job of the CRB is to set rates for commercial broadcasting, but internet radio is, for them, almost an afterthought. Public radio and college radio were two groups that have negotiated special rates in the past, and did so again this time in the so-called Web IV process which resulted in this year’s new rate. Unfortunately, being able to participation in the conversation on royalties is expensive and largely defined by bureaucratic paper shuffling. Lacking an organized advocacy group, small webcasters had no particular voice in the proceedings. The only voices that were heard were those of the giants, Pandora, Spotify and iHeartRadio. The biggest blow to the proceedings, however, had already come from Pandora.

In 2013, Pandora decided that its proposal, the Internet Radio Fairness Act, popular withinternet radio broadcasters but vehemently opposed by the music licensing agencies, was a battle it no longer wanted to fight. Without Pandora pushing for the rights of all internetbroadcasters great and small, internet radio had had lost its champion. The result was the new deal, which panders to the giants in the industry but all but outlaws small independentinternet radio. For example, Rich Bressler, CFO of iHeartRadio seems very pleased with the outcome:

As you all know, in December the copyright royalty board, or CRB, came out with new rates that digital music services like iHeart will pay for the next five years, reducing our per-play rate by 32%. These new CRB rates make our investments in iHeartRadio even more significant. We believe these new rates will encourage the growth of digital streaming and help build a more sustainable digital music marketplace for the benefit of artists, consumers and the rest of the music industry.

Bressler is trying to chum the waters to attract new investors for the beleagured iHeartMedia, who iscurrently saddled with $20 billion in debt. He also omitted the fact that the rates were reduced for his music-on-demand service, but that regular streaming radio’s fees went up 17% in a single jump. The new rates will only encourage the growth of the establish giants, but have already destroyed thousands of stations across the United States.

Internet radio stations are being faced with two choices: either shut down completely, or use streaming services outside the country where they can pay licensing fees for countries that still have reasonable rates. Radionomy is one such service, a sister company of Vivendi, both companies being owned by Universal. Broadcasting suppliers streams from their own web site makes them one giant radio station, legal and licensed under Belgian law, but with tens of thousands of radio streams. Now, thanks to a new law suit spearheaded by Sony Music and a collection of its subsidiary labels, this too is under attack. Sony filed suit in California to sue this Belgian company and is characterizing its tens of thousands of legal stream providers as “pirates”, and is seeking damages on the order of $150,000 per song. One could assume that Sony’s intent is to completely shut down Radionomy as one of the last licensed broadcasting alternatives for independent internet radio.

Is it all over for webcasters like Krypton Radio? It might not be. The Webcaster Settlement Act of 2009 was created two years after the CRB’s initial ruling in 2007. In theory, SoundExchangecould correct the disastrous ruling that has killed thousands of radio stations so far.

There are two petitions currently collecting electronic signatures. One is posted by David Goldberg, an attorney representing the StreamLicensing.com  platform which aggregates Internet radio stations, expressed a positive outlook when he spoke with Radio & Internet News:

“I do think labels, SoundExchange, everyone, sees the value in small webcasting,” he said. “The landscape has changed since 2009, when the small webcaster settlement was passed. But there are reasons why everybody will want to at least talk about something.”

In the meantime, Krypton Radio faces an uncertain future, along with thousands more of the remaining small webcasters still streaming.

“The road ahead may be rocky,” said Krypton Radio’s founder and station manager Gene Turnbow. “but we have some ideas on how we’re going to handle this crisis. We’re here to bring sci-fi artists and the people who want to hear them together. We're not ready to give that up quite yet.”

Krypton Radio’s mission of bringing sci-fi radio to the world continues despite the damage already done to the American independent internet radio business community. Will there be congressional action, saving the industry? If you want to do your part, visit radiodiversity.org and join the online community trying to save internet radio from oblivion. You may also wish to sign the petition to save U.S. independent internet radio.

About Krypton Radio

Based in Sherman Oaks, California, Krypton Radio was founded in 2009 by movie industry veterans Gene Turnbow & Susan Fox. Since then the internet-only station has grown from a small fan project into a full service radio station heard in 195 countries around the world. Krypton Radio has marched to (and played) a different beat, one defined by the fans themselves.

Krypton Radio is wholly owned by Krypton Media Group, Inc., a California corporation.

About Gene Turnbow

Animator, musician, writer, programmer and illustrator, Gene has done everything from game design to industrial robotics, from makeup FX and model making to restoration of national treasures of cinema for the New York Museum of Modern Art. With over 20 years in the motion picture and gaming industries, Gene is now working with his dedicated team to make Krypton Radio the Next Big Thing.

Media Contact

Gene Turnbow / President Krypton Media Group
kryptonradio@kryptonradio.com


Categories: Internet and Streaming Media, Radio, Intellectual Property, Small Business, Broadcasting, Arts and Entertainment

Tags: geek radio, geek transmedia, internet radio, sci-fi, science fiction, transmedia