Internet Radio: Does It Have a Future?

There's a good chance that the future of Internet radio will be determined over the next couple of weeks. That's because by September 14, small Internet radio webcasters must accept or reject an offer made by SoundExchange, the nonprofit organization backed by big music labels like Sony BMG and Warner, and designated by the U.S. Copyright Office to collect and distribute digital performance royalties. That offer essentially says that small webcasters can continue paying the same rates they’ve paid since 1998. Small webcasters who do not sign the agreement, but continue streaming, will be responsible for paying the rates announced March 2 by the Library of Congress' Copyright Royalty Board.

What the Board said was that by 2010 new rates would more than double the current royalty rate each time a song is played, and that all webcasters would have to pay an annual fee of $500. Savenetradio.org claims that this translates to increases in sound recording royalty rates for Internet broadcasters by more than 300 percent over the next four years, and institute a minimum royalty fee for the industry of more than $1 billion.

Putting this another way, according to Congressman Jay Inslee (WA-01) this means that Internet radio per-song royalty rates under preexisting law starting in 2005 (that started at $.00008 dollars in 2005) will by 2010 be an 149 percent increase in royalty rates. For big webcasters -- Pandora, RealNetworks,Yahoo, and the like -- this is the 300 percent increase; for small webcasters -- the vast majority of Internet radio stations -- it is a 1,200 percent increase.

To be truthful, all this is a bit confusing; I don't even know the difference between a "big" webcaster and a "small" one. But of course, artists should be compensated for use of their music. However, it is disingenuous of the large labels -- which have taken advantage of musicians for decades -- to cry wolf because someone plays the odd song or two. To clarify the situation, Inslee co-authored the Internet Radio Equality Act (H.R. 2060), which would have the same rate to be paid by Internet-based webcasters as broadcasters now pay over satellite radio, over cable radio and over juke boxes.

-- Jonathan Erickson

Posted by Jon Erickson at 10:25 AM  Permalink