Will Royalty Fees Kill the Internet Radio Stars?

New royalty rates could pull the plug on online radio stations

| March 8, 2007

Internet radio has been around for almost as long as the internet. Like many web trends, it started out as a resource for in-the-know computer geeks. Now, roughly 52 million people are tuning in on a monthly basis, according to a study by Arbitron and Edison Media Research (pdf). Listeners are attracted to the commercial-free programs and diverse music selection, and artists love the additional outlet for their music. But a new Copyright Royalty Board decision pushed by the Recording Industry Association of America (RIAA), a trade group representing most mainstream record labels, might turn good old rock 'n' roll into cold, hard static.

At the beginning of the month, the board announced a hefty hike in the cost of royalties paid by internet radio stations. Radio and Internet Newsletter reports that, effective retroactively through the beginning of 2006, online stations will be required to pay $.0008 per song, per listener. The amount jumps to $.0011 for 2007 and $.0014 the following year, with an annual minimum of $500 for each channel.

For indie stations such as Radio Paradise, the new royalty rates are devastating. Founder Bill Goldsmith writes on SaveOurInternetRadio.com, 'We are now liable for royalties, retroactive to the beginning of 2006, that are equal to approximately 125 percent of our income.' According to Goldsmith, the problem began in the late '90s when Congress ruled that analog and digital broadcasts are not the same thing. 'Members of Congress (who at that time had no idea how this whole digital thing worked) accepted it at face value, and agreed that it was only fair that digital broadcasts be subject to additional copyright fees' -- fees that terrestrial radio stations owned by companies like Clear Channel don't face.

Tim Westergren, founder of Pandora.com, one of the most popular sources of music on the web, calls the move a misguided attempt to solve the record industry's business woes. 'This is a terribly ill-conceived attempt to crush a powerful and positive grassroots movement that is sweeping across the music world,' he writes on his blog. 'The record labels' struggles have nothing to do with online radio and killing it will further hurt their business, not help it.' Westergren and Glodsmith are calling for listeners to contact their congresspersons and sign a Save Internet Radio! online petition. Similarly, Gizmodo, an online gadget guide, has declared March 'Boycott the RIAA Month,' encouraging readers to stop buying CDs put out by labels that are members of the RIAA.

Unfortunately, there seems to be little that can be done. Webcasters have the option of moving their broadcast overseas, but as Pam McClusky, program manager of Ram Radio, an online country station, tells BlogCritics.org, 'I broadcast American music and this is going to bump us right out of our own country.'

Go there >> Webcast Royalty Rate Decision Announced

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