Saturday, March 24, 2007

The End of Internet Radio?

Thanks to a new ruling from The Copyright Board at the Library of Congress, which was made public on March 6, a new tenfold increase in royalties must now be paid for streaming songs on the internet. And the payments are the same, whether the web site is commercial or non-commercial and is retroactive to 2006 as well.

A filing was made March 19 to make the Library of Congress review the ruling, but if unchanged, it will likely be the end of internet radio for both small and large web sites. In one article via the L.A. City Beat, the new costs are beyond astronomical:

Up until March 6, webcasters figured their royalty payments as an affordable percentage of total revenues. In the case of KCRW, that was a negligible number for [general manager Ruth] Seymour, since the entire NPR network had negotiated a flat fee and it was paid by the Corporation for Public Broadcasting. Maybe not anymore. Under the new system, which requires that Internet broadcasters pay per performance – meaning each time one person listens to one song – her new bill for 2006 went from essentially zero to about $350,000. And it’s going up. For each of the next four years, the rate goes up at least 30 percent every year."

An additional report was made on the change and the challenge to it via WKRN recently as well.

A company backing the plan, SoundExchange, claims that revenues for internet radio exploded to a level of $500 million dollars last year. Paul Maloney of RAIN - Radio and Internet Newsletter - says that claim is just false and is seeking support to battle the change:

Now, what you hear the SoundExchange people saying is, ‘Oh, studies show that the Internet radio industry made $500 million last year in advertising.’ And I’m here to guarantee you that that’s absolutely not true. It’s not even close to being true,” says Maloney. He also points out there’s no hidden money anywhere, as stations they have to submit their financials to SoundExchange."

I wonder if the merger-masters for the combining of XM and Sirius Satellite radio are endorsing this plan?

Certainly the RIAA, which has been forcing colleges to hand over student email and internet accounts so they can threaten lawsuits to collect a few hundred or perhaps thousand of dollars for trading digital sound files, likes the new law.

The claim is that royalty fees alone from internet radio would hit nearly $3 billion in 2008, more than four times the royalties that would be paid by non-web radio.

And despite claims that all the "royalties" will go to artists are smokescreens to the real issue - performers get pennies to the dollars that record company owners receive.

The fight for the existing and potential audiences is fierce, and this ruling will only insure that fewer and fewer web-casters are allowed to participate.


  1. i don't need radio. i need chainsaws and zombies

  2. There are some clear misconceptions here that need to be straightened out. First off, SoundExchange is NOT part of the RIAA. It has an 18 member board, half of which are represented by artists. And to say that
    "royalties will go to artists are smokescreens to the real issue - performers get pennies to the dollars that record company owners receive" is absurd--by law, SoundExchange distributes fifty percent of its royalties to artists. In fact, the lion's share of royaties (65 percent) goes to artists and small and independent labels. Many of these--which are essentially small business themselves--need this royalty money to survive.
    Your article points out that financial statements have been submitted by webcasters to SoundExchange, but that has not always been the case. A number of webcasters have consistently failed to fulfill the reporting obligations required by law.
    The current royalty rates were set by an independent board of judges appointed by the U.S. Copyright Office. Both sides had an opportunity to present its case, and to suggest that somehow the RIAA or SoundExchange somehow forced the new rates down the webcasters' throats is an complete and thorough misunderstanding of how the rates were set, not to mention a wholesale gratuitous demonization of SoundExchange, whose number one objection is to protect the intersts of the labels and artiss--large and small--they represent.

  3. Gee..I wonder who brought more gravity to the table..the RIAA and Soundexchange or a group of disparate internet broadcasters. Many wonderful listening opportunities will disappear. Thanks RIAA!

    Here's what drives me insane about the 'recording' industry. EVERY single new technology that comes along is castigated because it 'takes away revenue'. I remember when cassette tapes were going to be the end of the music industry.

    The people who make the money are the people who adapt. Apple and Jobs figured this out. When people have an opportunity to hear music that's not shoved down their throats via the ever-shrinking playlists of commercial radio, they just might go out and download some music or purchase a CD.

    Many artists have figured this out and operate pretty much out of MySpace and make a living. Why the recording industry is always behind by at least 10 years is a mystery to me, and part of the reason that CD sales are plummeting and will continue to plummet.

    You have to keep coming up with new ways to deliver your music...way to go RIAA. You blew this one.

  4. I was recently invited to take part of a podcast. I was in radio for several years and we thought it would be groovy fun.
    Now, we are rethinking it needless to say.

  5. zomb -- please see Friday's post and your wishes will be fulfilled.

    willemd - i never said SoundExchange was part of the RIAA. I said SoundExchange backs the new ruling and reports inflated earnings claims, according to some sources in the industry.
    and small and independent musicians get mostly zero airplay on the ariwaves outside of the Web. eliminating Webcasts via outrageous royalty fees will insure fewer and fewer earn anything, much less have a chance to be heard.
    and while "hearings" were held by the Copyright board, few knew of it and fewer attended. even they acknowledged the need, thanks to the filing of Mar. 19th, to hold more hearings on the matter.

  6. Joe,

    I agree with you. I am currently listening to "Indie Pop Rocks! on SomaFM", which is a great station if you are a fan of indie music. I have been listening to this station for about a week, and the only artist I've ever heard on both Soma and regular radio is the White Stripes.

    Where are we supposed to hear indie artists if internet radio comes to an end? ZERO of the stations I can get on my radio play any indie at all.

    Without internet radio, we would not and will not hear this music- which I feel is the best around. This will be good for artists already signed to major labels, but will send unsigned artists back to waiting tables.

    I guess that's what the RIAA wants.


  7. Hey Joe

    Thanks for the information on the Copyright Board ruling. I was just reading about this on Media 3.0 -- in Shelly Palmer's article about the decision (What is Internet Radio?). He brought up some interesting points, concerning thenature of radio in a "web" world. For example, if we have access to all song slal the time, do we really need a station to stream them to us? Why not just publish lsits of songs as RSS, and we can get the songs our selves?

    It's an interesting argument.

    - Jake

  8. you know, one thing i've theorized about the success of iPods and similar tech is it finally gets more of the control of what you'd like to hear without wading thru what the corporate market is pushing.
    so indeed getting the music ourselves is far more satisfying ...
    and thanks for the link to that article too, Jake!!