AFTRA Rules Cause Radio Stations to Pull Streams

The Clear Channel Internet Group (CCIG) announced yesterday that it is officially pulling the plug on audio streaming for all of its radio stations' Web sites. The decision was made after the company received a bulletin last week from the Joint Policy Committee on Broadcast Talent Union Relations of the Association of National Advertisers and the American Association of Advertising Agencies regarding the rules for paying talent in commercial spots on the Internet.

The bulletin cited the policies of the American Federation of Television and Radio Artists (AFTRA), the organization responsible for negotiating the price of talent.

The announcement by Clear Channel, which owns over 1,140 radio stations in the United States, caused a bit of a stir in the Internet radio space. Emmis Communications, ABC/Disney and other media companies also pulled some of their streams.

A click on any one of Clear Channel's live streams takes you to a page with a brief apology.

"This was a corporate decision," said Kevin Mayer, chairman and CEO of CCIG. "We are working hard to resolve outstanding issues with all concerned parties. It is our intention to put the streams back up when it makes legal and financial sense."

While the bulletin just recently circulated, the rules have been around for a while. According to Ira Shepard, an attorney and labor law counsel for the advertising industry, the latest pay rates for redistribution were agreed upon during October 2000 contract negotiations.

Shepard states that while advertisers have been doing their best to comply with the rates, stations have occasionally repurposed their live broadcast feeds onto the Internet without notifying their advertisers. The bulletin distributed sought to call attention to these instances.

AFTRA's Web site states that a "producer may initiate Internet use for an initial term of one year for not less than 300 percent of the applicable session" for radio spots initially created for broadcast. Shepard says the numbers just seem high. Under this scenario, talent would have to be paid $220 for the creation of the spot, and an additional $660 for Internet rights for one year. This example assumes that only one individual participated in creating the spot.

Shepard offered the rates for television commercials as an example. A payment of $1500 to the talent in a commercial allows that commercial to be shown legally (in the eyes of AFTRA) on the Internet for one year. In contrast, if the same commercial is running on network TV, a payment of $500 per showing is paid to talent the first few times. After the commercial has been shown a few times, the price due to talent begins to decline on a sliding scale until it reaches the absolute minimum price of $47.50 per showing. Shepard adds that for cable, a flat fee is paid based on the number of channels the advertiser would like to show the commercial on.

But given the fragile economics of Internet broadcasting, these fees might be enough to set back the streaming industry. "Those prices were set when VC capital was still flowing," says Darren Harly, COO of StreamAudio .

Harley believes that asking for more money because a commercial is distributed over the Internet is like asking an advertiser to pay more money every time somebody listens to the commercial on a boom box instead of in the car. But, as an executive at a streaming company that provides an encoding and ad insertion solution for radio stations, Harley believes that the situation will "definitely have a positive effect on business."

An Enticement for Ad Insertion

The maze of rights and payment issues that has been created by the AFTRA regulations is likely to cause many streamers to look toward ad insertion as a way to bypass the confusion. Ad insertion cuts the ads in the broadcast feed and replaces them with Internet specific ads. This option allows for advertisers to create spots and pay only for the Internet rights.

But Harley estimates that close to half of the radio stations out there are still "live" stations, meaning that they have not yet converted to an automated digital system. Live stations have to manually insert ads into their streams, and are therefore less likely to resume streaming given the rules.

The confusion over advertising is just the latest in snags for Web broadcasters. The U.S. Copyright Office has previously stated that terrestrial radio stations broadcasting on the Web are not exempt from the compulsory fee for music which all webcasters are required to pay. The amount of this fee is to be set at a future hearing. The National Association of Broadcasters has filed with the courts to protest the ruling, while the RIAA is weighing in on the side of the fee.

"All the stations that are calling us are pulling off because they can't figure it out, but they say they'll be back as soon as possible," says Harley.