Will Royalty Fees Kill the Internet Radio Stars?

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

Go there, too >>
Webcasters Get Socked Again

And there >>
Putting Our Money Where Our Mouths Are: Boycott
the RIAA in March

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