Internet Radio Fees

Thursday, March 08, 2007

Last week, three obscure bureaucrats known as the Copyright Royalty Board ruled that fees paid by digital music broadcasters to record labels will rise 238% over the next three years, from 8¢ per track to 19¢ in 2010.

The unexpected hike threatens to put many Internet radio stations out of business. Before, digital broadcasters were paying about 12% of revenue to the record labels. But now the per-track fees will exceed 100% of revenue for many Internet broadcasters. One of these is Oakland-based Pandora.com, the marvelous website that analyzes the “musical genome” of songs you like and recommends others that share similar sound qualities. According to one of the founders of Pandora.com, “with these rates, there’s no Pandora.”

If there’s anything less welcome than a surprise fee, it’s a fee that’s applied retroactively. The new royalty fees will be applied going forward and for all 2006. Another online radio company, Accuradio, owed $50,000 in royalty payments under the old rules last year. The new, retroactive increase leaves the station with a bill of $600,000, more than its total revenue last year.

This is particularly unsettling, given the high level of consolidation (and lack of listener choice) that has taken place with over-the-air radio, most notably through the influence of the corporate kingpin of homogeneity, Clear Channel. The same blanket of blandness that ruined local radio could settle over Internet radio once these fees take effect. In addition, the royalty fee hike may prove counterproductive to many record labels whose artists tend to be lesser-known figures who need the publicity more than anything.

Online petitions are circulating to get Congress to reconsider this ruling. If you’re unlucky enough to have a Senator who believes that the Internet is “a series of tubes,” he’s probably not going to read it. But, for the rest of us, it’s worth a shot to speak out:

Save the Streams (www.savethestreams.org)
Save our Internet Radio (www.saveourinternetradio.com)
Save Internet Radio! (www.petitiononline.com/SIR2007r/petition.html)

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