site stats WhizGidget Wonders...
Tuesday, June 19, 2007
The Day The Music Dies...
...will be July 15 for a lot of internet radio stations unless something happens really soon.

Hi, my name is WhizGidget and I love streaming radio. I love local stations that do it, international stations that do it, and independent stations that do it. I am one of millions of people who stream radio every day while they're on their computers either working or playing games, and if my streams go silent I may go slightly mad. Oh sure, I have an iPod, but sometimes you want a little more unpredictability in your life, or variety, or even just some news of what’s going on outside your walled and windowless existence while you’re a “prairie dog office worker” (kudos to you if you get that reference without resorting to a Google search).

Here's what's going on - a small and obscure organization called the Copyright Royalty Board ruled in March that internet broadcasters need to pay a bigger royalty on music that they stream online *and* an annual fee of $500 (per channel). So they’ve raised the rates stating that radio stations need to pay fees to labels and performers based on the number of listeners that these stations have... and made it retroactive back to January 1, 2006.

What does this all mean in money terms? Well, the rate in 2005 was 7/100 of a penny per song streamed, and this would raise it to 19/100 of a penny streamed. It doesn't sound like much until you consider how many songs get streamed by 'net radio stations 24 hours a day all year long. Also add to it that most small internet radio stations have very little advertising (if any!) to support their costs past the break even point.

For many radio stations that means on July 15 they will go instantly bankrupt and permanently silent. Most stations are currently paying about 6-12% of revenue at the moment which is acceptable for a small station, and maybe for the big guys (like Pandora, and Yahoo) - that's right, even the internet broadcasters pay royalties right now in order to stay on the air, and I'm just fine with that. It’s fair. But raising the rates so that it’s almost prohibitive to be in this business isn’t fair.

There's a theory out there that this royalty board is just trying to get all the niche stations to start playing more Top40 because that will bring listeners, and therefore revenue, in and then they can afford this ridiculous bounty. I think the theory is the ridiculous thing - why would I want to continue listening to a station playing jazz only to be interrupted by Justin Timberlake's "What Goes Around Comes Around" or something horrid by the Pussycat Dolls?

I find the Copyright Royalty Board's bounty completely unacceptable and I am not alone in that thinking. Musicians, radio stations, and politicians have gotten together to try and battle this situation.

If this doesn't get overturned, renegotiated or stayed, the big guys like Pandora, Live365, and Yahoo will face a payment of over 1 billion dollars to SoundExchange (the non-profit that takes care of royalty collection for the record companies). It does bear noting that regular broadcast radio does not face this increase for their broadcasts - unless they also have an online stream. Traditional radio is already challenged as it is, and if they have to pay this same retroactive fee for their online streaming, some radio stations may go out of business as well. So this might not just affect your independent station, but your car radio too.

SoundExchange, in their defense, recently offered the Small Webcaster Settlement Act to 'net radio streamers. This proposal gives webcasters a 3 year grace period to pay the fees because they understand that internet radio is still very young and some of these stations need time to build their businesses. While I understand that royalties need to be paid to artists and labels (and I'm all for that), there are going to be radio stations that will never be able to build themselves to the point where they can be profitable *and* pay those fees. We will, over the course of this summer and the next 3 years, see internet radio disappear if this doesn't get overturned. This settlement act is just delaying the inevitable, not helping the broadcasters - and it would only cover that which SoundExchange is responsible for, and not any other dealings with ASCAP, BMI, etc. Internet radio may still have the RIAA to deal with as well with this new little royalty idea.

The U.S. Court of Appeals is the current hope at the moment - internet radio needs them to rule a stay on the rate increase in order for them to have more time to negotiate rates. If they can't agree, then Congress has to step in and there are already bills in front of the House and the Senate regarding this matter. The Internet Radio Equality Act offers a very fair solution to the problem. This act would require internet radio stations to pay 7.5% of their revenue, proportionate to their earnings. This is fairly similar to the fees that are paid by the satellite radio broadcasters and wouldn't render the 'net silent (and it would give the internet broadcasters a break in some cases since they pay almost twice what satellite broadcasters pay).

So be aware of what's going on and watch for the legislation that will either help or hinder internet radio. This could lead to rules for other media distributed on the web: print, video, or generic audio. If they win against internet radio, podcasters will most likely be next. Meanwhile, I'm still going hope that internet radio survives this because I don't want silence when I come to work on July 16...

...or that truly will be a Black Monday.

For more information on this and for ways to help save internet radio, please visit the Save Internet Radio website. No, I'm not affiliated with that site in any way, nor do I have an online radio station myself. I'm just a dedicated listener.