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The Numbers on Playing Commercial Music on Internet Streaming

The bare facts from Keith: I'd like to provide you the info on how we determine costs of playing Art's established commercial music on the Internet and in podcasts. Since 2007, Internet Radio stations were saddled with having to pay "mechanical fees" like that of CD publishers, that terrestrial radio stations were exempt from for decades. These fees were set by the Copyright board and when enforced caused companies like Pandora to re-visit their business model. Fortunately for them, being large operations, were able to appeal and negotiate lower caps on their usage. (It seems that it's cheaper to pay 25% of their gross sales instead of the fees, imagine that! So 25% is a deal for them.) But pretty much everyone else in 2015 must currently pay 0.0023 for each playback of a song to a listener. There are no known exemptions for "bumper music" or partial playback. Leaving ASCAP and BMI aside for the moment, this one license fee is significant. It's not inconceivable to expect 10,000 listeners to the show each night. Doing the math, 10,000 listeners x 12 songs a night x 22 days a month is $5566. The fees from ASCAP and BMI are based on your gross revenues. They want a straight percent off the top of any income from sponsors and subscriptions. (Which is all of our income.) They don't even care that you only play 5 minutes of music an hour! So depending on how many subscribers we get, these fees go up and down. Not based on plays, but subscriber income. The additional fees added to the above is approximately another $500 per month. (Not counting SESAC yet.) So now we're at $6066 / mo for 10,000 listeners. Think of the paying subscribers as having to pay for all the streaming licensing. So you have to have enough people paying to cover the cost of everyone. If we do not achieve a certain minimum, we cannot cover the costs right away. As the program grows, we must maintain a certain ratio to pay these fees. Let's be generous and say we can achieve a 25% ratio of paid to free listeners. 2,500 subscribers paying $5/mo yielding us $4.50 net is $11,250. Less $6066 for music license alone nets $5184 per month. That's not much to pay for 3 full time people. Not to mention all the other costs of running this thing, bandwidth, equipment investments, software, storage costs, etc. As the show grows, maybe the subscriber base grows and maybe just the free stream listeners will grow. We believe the ratio needs to be closer to 35-40% subscribers to free listeners, to keep this running. Yeah, there is money to be made from those "very few" commercials, but it also raises the license fees. This ratio may be hard to maintain, let alone have enough to start on day one! Payments are made monthly, so we better have the funds ready! It gets worse! Now those downloadable podcasts that everyone wants, for those who pay the subscription, gets another license fee to handle "Permanent Digital Downloads." These are the podcast files that can be downloaded on your MP3 player and played over and over, so the rates are even higher, 9.1 cents per song. Remember also, they don't understand bumper music either, a song is a song, no matter how much of it. (We may stand corrected, but this seems to be the situation as it stands.) If we were to include 12 bumper music songs in a show we pay 12 times. So for each subscriber: 12 songs x 9.1 cents x 22 shows a month is $24.02. So, who wants to pay $30 a month? Even if we could get beyond the streaming license costs, we could never have the music in the podcast file. Does that sound appealing to you either? Bottom Line In order to pay the outrageous "mechanical rights" license for commercial music playing on the "free to everyone" stream, we must have a certain percentage of the listeners to be paying subscribers. Yes we can offer more incentives to attract more subs. But we won't really know. Get this, we would also be responsible to manually log each and every playback of a song, along with the number of people listening at that time, for each of the 12 songs on each of the 22 days on each of the streaming platforms we would appear on and supply that info to each licensing agency. Any volunteers? At this point who has a crystal ball? Going forward, if the music industry could understand the talk radio type of user, and establish a different rate structure for limited play bumper music, that would help. If we could operate under some other entity that already pays these fees, that would help, but we'd just be giving them more of our income also. P.S. If anyone in authority knows where we went wrong in our understanding of the rates quoted above, please contact me, webmaster@artbell.com we're hoping there's a way.

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