WBEB Radio Stands Up to the Music Industry

Over the weekend, WBEB-FM, Philadelphia owner Jerry Lee pulled the plug on his station's
Internet stream and in doing so he became among the first to stand up to the music industry.

Lee had about enough when the new Internet royalty rates were most recently announced.

Lee's big issue is that the industry has absolutely no bargaining leverage in setting rates. In 2015 and beyond the rates will likely just keep increasing.

But he also has issues with Internet streaming for terrestrial broadcasters: "If we have helped our listeners migrate to streaming, radio will become a very bad business".

Your first thought might be that this founding father of radio's second golden age is making a mistake.

The facts are that streaming a terrestrial radio station adds very little to the total audience after all these years of trying.

There are some "at-work" listeners.

The estimates I have seen are for an additional 2-3% online audience. Internet listening for terrestrial radio is not credited to the radio station under Arbitron rules unless the terrestrial operator simulcasts 100% of their programming and commercials.

This is where it gets sticky.

A number of national advertisers have notified stations that they are not allowed to run their commercials since they haven't paid AFTRA. It's difficult for any station in the country to meet Arbitron's rules on this.

Of course, if a couple of major groups decided to follow Lee's initiative, SoundExchange (the record industry's negotiating group) would have to return to the table.

Unfortunately, radio groups tend to look at important issues as short-term problems and they are not concerned about the long-term consequences. Many consolidators will not even be around in 2015 and certainly the ones that are will have had their ears pinned back (even more than they have been today).

Lee is taking a different approach.

Starting now on the B-101 website, the station is offering online listeners a chance to purchase what he calls "a great radio at a very good price through Amazon". He estimates that a third of his streaming audience will come back to B-101's air product.

Meanwhile, Lee's research shows very little exposure to Greater Media's WNUW which is trying to cut into B-101's audience terrestrial. They can keep streaming and not much will hurt B-101 competitively according to Lee.

When a respected and very successful owner such as Jerry Lee takes such a decisive approach to the royalty situation, it reminds us of what's really happening:

1. Terrestrial radio streaming as well as independent webcasting cannot become a growth business unless and until SoundExchange gets real on rates. That's not likely -- so in effect SoundExchange has become the Dr. Kevorkian for its artists and bands.

2. Terrestrial broadcasters are their own worst enemies as they will prove again on this issue. Time to step up and draw a line on these ridiculous royalty rate demands from the record labels. Broadcasters falsely see the Internet as their future, but it can only be the future if the infrastructure for streaming will support commerce and unusually high royalty rates makes Internet streaming a non-starter.

3. The best use of a terrestrial broadcasters time and money is to invest in their on-air programming because the only way they can open the door to the digital future is to be united on fair royalty rates. That isn't going to happen. So, what individual stations wanting to do the right thing can control is their local programming. Unfortunately, consolidators are busy cutting back assets and watering down on-air programming at the exact worst time in our history.

Listeners are ready for a diverse offering of Internet streaming including but not limited to rebroadcast of the terrestrial signal.

Advertisers are ready. Internet advertising is one of the few categories that has remained in the growth column (although it, too, has declined in the current economy).

Unfortunately, the two sides that have screwed up their industries -- radio consolidators and record labels -- are standing in the way of the digital future.

The labels -- because they cannot fathom that by overcharging an industry that can't afford to get on its feet it is hurting their artists and profits.

Radio consolidators -- because once again they lack the resolve to stand up and do the right thing for all radio stations -- not just their financially failing companies -- by sending an unmistakable message to the labels.

Either negotiate fairer rates or suffer the consequences -- alone.

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