The music industry has received permission from the U.S. government to double the special tax they place on Internet radio stations, retroactive to the beginning of 2021. It is the latest salvo in the corporate music industry’s long war to kill off non-corporate Internet radio stations. I’ve run an Internet radio station since 2003. There is no money to be made in doing so (I do it for the love of music), and I’ve always been one step ahead of the corporate music industry’s attempts to kill my independent station with their insane tax assessments.
Even now that the tax has been doubled, I wouldn’t mind it if this money went to the artists who I play. But it doesn’t. The money goes to music label corporate balance sheets and the personal pocket of SoundExchange’s CEO, who makes over a million dollars a year off of Internet radio stations.
This special tax is assessed only on independent Internet radio stations. Terrestrial radio stations and subscription corporate music sites like Spotify and iTunes don’t have to pay this tax, and they aren’t subject to the huge new increase. It is a tax on independent radio stations to make it increasingly costly for stations to offer independent artists to listeners.
How the Tax Works
As I explained in an earlier article, the music industry invented this special tax that they call the performance rights to the sound recording. The music industry created a corporation to collect a tax on this invented right called “SoundExchange.” When an Internet radio station plays a song, SoundExchange demands a payment be made for every listener to every song the station plays. If while the song was playing, 100 connections were made to your station, you have to pay the tax 100 times. The tax is a fraction of a penny per connection per song, but 100 assessments for every song, a dozen songs per hour, 24 hours in a day… it adds up quickly. Again, the music artists never see a penny of this tax. It goes to the owner of the recording, which is usually the record label that “owns” the artist.
Here’s how the tax is designed to drive out small independent Internet radio stations. SoundExchange requires a station to pay a minimum amount toward your tax at the beginning of each year. For each channel or stream a station has, you are charged one minimum fee. World Fusion Radio has three channels, Global Chillout, Moonlight Meditations, and World Revolutions, so I am charged three minimum tax payments on New Year’s Day of each year. I pay it or I am declared an illegal operator and subject to legal action.
If you are a big mainstream station, then the minimum amount is a prepayment on the taxes you will end up owing anyway. But the minimum amount is a rather high minimum amount. World Fusion Radio is a niche market station. I play independent music that people can’t hear anywhere else and doesn’t appeal to mainstream audiences or corporate advertisers who fund the big mainstream stations. My listener numbers are minuscule compared to mainstream radio stations. In the 18 years that I have run my station, I have never once had audience numbers large enough to owe a tax amount close to SoundExchange’s minimum tax payment. Yes, even when I add up every connection to every song played, it never comes close to the amount I prepaid. The actual tax that should be assessed on the station is hundreds of dollars below the minimum payment.
You’d think that since I paid SoundExchange hundreds of dollars more than I actually owe based on the songs-times-connections tax formula, they’d refund the overpayment. Even the IRS and cable TV companies do that. Not SoundExchange. They pocket the overpayment. That’s money SoundExchange doesn’t even have to pay the owner of the sound recording rights. See the earlier link about the CEO’s salary.
Now, that minimum payment is doubled, increasing the monetary burden on me, and increasing the profits of SoundExchange. This, despite the reality that World Fusion Radio will never, ever have enough performances to justify the heavy tax bill. Either I give up and close my station, or I hand over thousands of dollars to further enrich SoundExchange.
This tax has already driven hundreds of Internet radio stations out of business. That is by design. The corporate record labels want to eliminate independent music on the Internet. SoundExchange is how they are doing it. It is why the tax is not assessed on terrestrial radio or corporate music sites.
Because of the doubling of the tax, it is now the case that over 80% of World Fusion Radio’s expenses are the tax demanded by SoundExchange. SoundExchange sent to me a bill to cover the retroactive assessment of the tax for the first half of 2021. It’s borderline theft, but if I don’t pay it, they threaten fines of several times that amount and a court order to shut down my station.
And this increases my future operating costs. Thanks to SoundExchange (this is just their latest and largest tax increase), my expenses are four times higher than they were four years ago. So, I have to ask my listeners for help. Please go to WorldFusionRadio.com and give a few dollars to keep alive the music on World Fusion Radio. Thank you for your support.
Running the numbers and why I may have to eliminate a station.
The minimum tax payment is the same for each station.
Stream – Percentage of listeners
Global Chillout 48.3%
Moonlight Meditations 42.4%
World Revolutions 9.3%