July 15th: The Day Internet Radio Dies?

Friday, July 13, 2007

CMJ.com reports: What is being called by many webcasters as the “Day Of Reckoning” will come this weekend after months of protesting a ruling from the Copyright Royalty Board that will almost double the royalty rates facing Internet radio stations both small and large. The ruling comes as a shock to many who have seen Internet radio as an answer to terrestrial radio, giving a voice to independent artists, and playlists that span genres, decades and tastes. Although the rate increase will set royalty costs at less than one fifth of a penny per song played by 2010, this is still an increase of 300 percent for large webcasters and an increase of nearly 1,200 percent for smaller operations. The additional fees for just one webcasting service like Live365, currently set at $500 per channel, have been estimated at $4.2 million for just 2006 alone.

If said ruling goes into effect, many radio stations’ Internet streaming capabilities will be unaffordable.

“Gone, goodbye, over and out, see ya,” says Ted Lebowitz, music director at BaGeL Radio, who streams via Live365. “We do pay royalties, and we pay them to SoundExchange, who turn around and spend that money harassing us for rates that no one can afford. If artists aren’t getting paid they should look to the culprit, which is SoundExchange, a bunch of RIAA lawyers doing what lawyers do best—making negotiations take forever so they keep getting paid.”

But what has become a he-said/she-said war between SoundExchange (an offshoot of the RIAA that will be collecting the CRB’s ruling) and compatriots of SaveNetRadio (a coalition formed to campaign a proposed Internet Radio Equality Act that will eliminate the proposed increase on fees), are claiming two very different sides of the story. According to Richard Ades, a spokesperson for SoundExchange, the thought that many webcasters will be bankrupt is just a claim.

“There’s a lot of propaganda out right now that [webcasters] will be going under and that is just not true,” says Ades. “The CRB and only the judges on the CRB board got to see propitiatory evidence and only they could make that judgment. This is about the artists. They are the small business people who need to be paid for their music.”

Only time will tell whether the claims will be made true, a realization that many webcasters would rather not see take place. Since the March ruling, a number of offers have been put on the table, but none have pleased either party. Currently, according to SoundExchange, there are three offers. The first is to extend the Small Webcaster Settlement Act (SWSA) which was set up in 2002 until 2010, that sets below-market royalty rates for small Internet radio stations in order to give them time to build their business. However under that act, two prominent webcasters, Pandora and Live365, would be bankrupted due to the fact that they aggregate more than 10,000 individual webcasters, but have staffs of 100 or fewer. The second offer was a similar offer made to non-commercial radio, which includes college radio, NPR and religious stations to give them a separate rate as well. And the latest from SoundExchange was a cap on the minimum rate at $2,500 opposed to the original $500 per channel proposed. All proposals are still in negotiations.

“SoundExchange doesn’t understand the impact the royalty rate increase will have on the industry and has dramatically underestimated the threat it poses to every webcaster,” says Jake Ward, spokesperson for SaveNetRadio. “Moreover, the proposal is a tacit admission that the rates set by the CRB are too high for a business to succeed, otherwise they would not need to be lowered to give any webcasters a chance at success.”

You can read more online here.