on the front lines of a new medium…
How a start-up like EVR can gain a toehold in an industry that for decades has been unfriendly to the little guy can be summed up by a slight tweak to the illuminated sign hanging in the booth: In place of the familiar “ON AIR” is a sign that reads “ONLINE.”
“Clear Channel” – the multibillion-dollar radio conglomerate – “kicked out a lot of people wherever they could, and just beamed in from another city,” says Wareham. “Now, with the Internet, you don’t have to have this huge transmitter.”
With more than 1 million listeners a month, EVR is at the forefront of this emerging medium. In addition to fostering more independent voices and breaking underground acts, EVR has become a must-visit for big-label stars like Wareham and, more recently, Big Boi of the Grammy-winning, platinum-selling hip-hop group Outkast.
You’d think the sky might be the limit for an organically grown station such as EVR deftly leveraging street cred, an easy relationship with artists, and the identity of a bohemian counterculture neighborhood into a burgeoning Internet audience. But EVR general manager Peter Ferraro has to be very careful when it comes to growing his business. The way the current performance-royalty pay structure is set up for webcasters, if EVR’s audience numbers do in fact reach the sky, so, too, do their operating costs.
Under the Congressional Digital Music Copyright Act of 1998, Internet broadcasters are required to pay a digital performance royalty for each and every listener, making it very difficult to scale up their business. By contrast, their terrestrial counterparts benefit from a flat royalty rate: As their audience grows, the cost per listener falls.
“The very existence of EVR in the current royalty climate is pretty punk rock,” says Mr. Ferraro, who is trying to avoid the same fate as WOXY, an independent rock webcaster that was forced to shut down earlier this year for ostensibly becoming too popular.
Unlike WOXY, Ferraro is going to great lengths to make sure EVR’s revenues – a mix of Web advertising, show sponsorships, and events with corporate sponsors – keep pace with their growing music-licensing costs. As of now, 30 percent of EVR’s annual operating costs goes to paying performance royalties. As their audience grows, theoretically that percentage will increase until EVR is potentially snuffed out.
But there is hope: Pending legislation in Congress (the Performance Rights Act) would compensate artists when their performances are played on terrestrial radio (currently, only the composer and music publisher are paid), and offer fixed, discounted royalty rates to small terrestrial broadcasters. Last year, at a meeting of the Senate Judiciary Committee on the bill, Sen. Dianne Feinstein (D) of California said she believed “strongly that parity and fairness require that we provide the same discounts for small webcasters.”
Currently, the National Association of Broadcasters and the Record Industry Association of America are negotiating the terms of the proposed legislation. Though a Senate Judiciary Committee source told the Monitor that webcasters shouldn’t rely on the NAB to carry their water, the source did say that Senator Feinstein remains committed to webcasters.
If webcasters are included in the bill, Ferraro says there might be a “small business explosion” in the Internet radio space, “a sector that will pay royalties and expose people to music that is often characterized as existing in the ‘long tail.’ “