DIGITAL RIGHTS

COMPLIANCE

US Copyright laws give music producers, artists, and song writers the right to charge fees for the performance of their works. The US Congress has formalized some of these rights in the Digital Millenium Copyright Act and subsequent actions, related to the broadcasting of music and other copyrighted works on the Internet. The Copyright Office has endowed the RIAA (Recording Industry Association of America) with the formal authority to collect fees on behalf of its membership. The RIAA has established a business unit named “SoundExchange” for this purpose.

In addition to RIAA/SoundExchange, there are three other organizations that represent members of this trade and charge performance fees. They are ASCAP, BMI, and SESAC.

APPROXIMATE PRICING

There has been a great deal of confusion in the industry related to the rates structure and fees charged by these organizations. To aid your understanding, we have created the following overview. You can go to the web sites of each of these organizations to determine your precise obligation by using their on-line calculation tools or downloadable spreadsheets. Those are the tools that we used in determining the following calculations.

Annual Minimums:

RIAA/SoundExchange: $500 per year per station or channel, with a “maximum” minimum of $2500 (meaning if you have six stations or channels, your minimum is $2500 rather than $3000)

ASCAP: $264/year (for non-commercial broadcasters)

BMI:         $269/year (for non-commercial broadcasters)

SESAC:   $162/year

TOTAL:     approximately $1000 annually, or $83/month, for one station or channel

RIAA basic rates:

The following ATH usage rate calculation options will be available for the transition period of 2006 and 2007:

	Other Programming	Broadcast Simulcast Programming	Non-Music Programming
Prior Fees	$0.0117 per ATH	$0.0088 per ATH	$0.0008 per ATH
2006	$0.0123 per ATH	$0.0092 per ATH	$0.0011 per ATH
2007	$0.0169 per ATH	$0.0127 per ATH	$0.0014 per ATH

• For music: $0.000762 per performance (rule of thumb – 10,000 hours = $100/month [10,000 listener hours at 12 songs/hour = 120,000 performances X $.000762 = $91.44])
• For talk/news/sports/business: same rate as above per performance, but figured on only one performance per listener hour (so, 10,000 hours = $10/month, but the minimum would apply)
• Optional pricing per Aggregate Tuning Hour (ATH) based on 12 songs/hour, rather than per performance (intended to benefit music broadcasters that broadcast more than 12 songs/hour).
• Other rates apply to Not-For-Profit, Educational, and Subscription services.

ASCAP, greater of web revenue * .01615 or sessions * .00048.  Sessions are max 1 hour, so a listener on for two hours counts as two sessions. Web revenue relates to advertising or similar earnings from music-related web pages. The ratio of hours to sessions is variable, but in our experience 20,000 hours/month typically generates about 44,000 “sessions” (discounting sessions <5 min due to station flipping). Usage exceeding their minimum is about $16,000 web revenue or 600,000 sessions/year (equivalent to about 20,000 hours/month). Special rates for talk programs.

 BMI, greater of web revenue * .0175 or page hits * .00012. Usage exceeding their minimum is $12,000 web revenue or about 200,000 page hits/month.

 SESAC, average monthly page hits for music-related pages  * .00802 or average monthly page hits * .00802 * 1.3 for music-related web pages with ads, semi-annually. What they really want is a) number of stream hits (similar to ASCAP “sessions”), or b) number of music page hits where the stream resides. The minimum of $81/half year = 10,000 average hits/month. The ratio of stream hits to listener hours is variable, but in our experience on average 10,000 sessions (stream hits) are generated by 20,000 listener hours (discounting sessions <5 minutes for station flipping). They recommend estimating the minimum usage.

RATE SUMMARY - MUSIC

	RIAA	OTHERS	MO.TOTAL
5,000 hours	$50/mo	$60/mo (min.)	$110/mo
10,000 hours	$100/mo	$60/mo. (min.)	$160/mo
15,000 hours	$150/mo	$60/mo (min.)	$210/mo
20,000 hours	$200/mo	$60/mo (min.)	$260/mo

RATE SUMMARY - TALK

	RIAA	OTHERS	MO.TOTAL
5,000 hours	$40/mo (min.)	$60/mo (min.)	$100/mo
10,000 hours	$40/mo (min.)	$60/mo (min.)	$100/mo
15,000 hours	$40/mo (min.)	$60/mo (min.)	$100/mo
20,000 hours	$40/mo (min.)	$60/mo (min.)	$100/mo

Notes:

• RIAA and ASCAP annual minimums are paid upfront on signup, non-refundable, and not pro-rated. If you start streaming December 1st, you must pay the same annul minimum just for that one month.
• BMI minimum is paid quarterly in advance, but is pro-rated so if you start December 1st, you only pay 1/12th of the annual minimum.
• ASCAP rates are based on listening “sessions”, similar to RIAA rates.
• BMI and SESAC rates are based on web page hits for web sites that make music available – the rate is not based on listener hours or sessions
• ASCAP, BMI, charge for the greater of sessions/hits and web-based revenue. Both have formulas to calculate your obligation based on the revenue generated by your music web site.
• SESAC rates are based only on page hits, no revenue calculation

Reporting requirements:

• RIAA requires a usage report log of two weeks every quarter, to include artist, title, album, and number of performances of each song
• BMI requires quarterly reports similar to RIAA usage reports, but wants the report to cover the entire quarter, rather than a sampling of data
• ASCAP’s contract permits them to ask for logs, but they don’t normally do so
• SESAC has a simple, web-based form with no supporting reports