Is Internet radio doomed?

Is Internet radio doomed?
By Michael Fussell (Contact)
The Post and Courier
Thursday, June 14, 2007

Is Internet radio doomed? New rates threaten to wipe out industry

Is Internet radio doomed? New rates threaten to wipe out industry

New rates threaten to wipe out industry

Bunky Odom, a music industry veteran and Sullivan’s Island resident, had high hopes when he recently launched Radio Free Charleston, an Internet radio station.

“We want to bring new music to Charleston … music that doesn’t get played on traditional radio,” said Odom.

Those plans may soon be shattered if an upcoming, three-fold increase in record company royalty fees — fees that must be paid by Internet radio stations — isn’t overturned by the government.

Internet-based stations must pay a per-song rate for broadcasting a copyrighted song. The per-spin fee comes in response to ever-declining record company revenues due to poor CD sales. The Recording Industry of America (RIAA), the trade group that represents the recording industry’s largest record companies, proposed increased rates earlier this year for Internet radio stations. These fees do not apply to broadcast (terrestrial) or satellite radio.

Shocking many in the music industry, the proposed rates were quickly approved by The Copyright Royalty Board and will go into effect on July 15.

Previously, all Webcasters running music-based radio stations operated under the Digital Millennium Copyright Act, paying an annual fee, plus 12 percent of the stations’ profits to the music industry’s royalty collection organization, SoundExchange.

The new rates charge Internet stations a performance fee for each song streamed.

Because the current rates are retroactive to January 2006, an estimated 90 percent of Internet stations will go bankrupt as soon as the rates go into effect.

“It’s outrageous,” said Odom. “We can’t survive if these rates remain in place. The royalty fees would be higher than our revenues.”

Small Webcasters aren’t alone. Large streaming sites like Pandora, AOL Radio, Yahoo and Live365 are also facing a grim future.

Tim Westergren, Pandora’s founder, explains it like this. “This fee is so outrageously high that most Webcasters will have to shut down immediately,” he said. “We feel this is a power play by the big (record) labels who are trying to control an industry that is undergoing a fundamental shift; a shift from what was an industry controlled by a few powerful companies with a lot of money, to one controlled by fans and musicians. The labels are just trying to delay their own obsolescence.”

Nonprofit radio stations like NPR and college stations that offer a stream will also be subject to the increased fees, meaning that they will be paying more money to reach a smaller audience.

Many traditional, terrestrial radio stations also offer Web streams. These are popular with fans of the station who have moved out of the broadcast area, and office workers who listen to local stations on their computers. These streams will be subject to the higher rate forcing many stations to pull the Web stream.

“Most broadcast stations will shut off their stream immediately,” said Dave Rossi, former program manager at 96 Wave. “There just isn’t enough money there to justify keeping it going.”

Ed Seeger, chief executive officer of Mount Pleasant-based American Media Services, said his company has plans to launch more than 300 Internet stations in the next year. Two of those stations, and, are already streaming. Although the fee increase will impact plans to roll out the remaining stations, Seeger said his company remains optimistic.

“We’re moving forward, full-bore,” said Seeger. “We have been working with Congress and we’re confident that common sense will prevail and these rates will be overturned. I just can’t imagine that the American public would stand by and let this happen.”

Webcasters, music fans, and musicians have joined forces at to fight for the future of Internet radio. Momentum is building in Washington that has culminated in the Internet Radio Equality Act. This legislation would save many independent music Webcasters from going out of business by nullifying the decision of the Copyright Royalty Board that requires streaming radio stations to make large royalty payments.

In a press release posted on its Web site, SoundExchange’s chief executive officer argues that the Internet Equality Act represents the greed of corporate Webmasters.

“This legislation is a money grab by big corporations like Clear Channel and AOL at the expense of artists and labels,” writes SoundExchange’s John Simson.

That argument seems far-fetched, considering that the Internet Radio Equality Act is supported by small Webcasters across the country and that big record labels have a notorious reputation for taking advantage of musicians, and not for looking out for artists’ best interests.

“On the surface, this sounds like a good deal for musicians,” explained Westergren. “Yes, they will get paid more money, but that’s only if stations like ours are able to stay in business, which will be impossible under the proposed rates.”

SoundExchange recently proposed a different set of rules for small Webcasters, allowing theses sites to continue to pay a percentage of revenue, provided the station’s revenues don’t exceed $1.25 million per year.

One of the largest suppliers of digital music in the world, The Orchard, has a vested interest in seeing that Internet radio survives, allowing opportunities for lesser known artists to be discovered.

Orchard President Greg Scholl says, “In a future with less programming diversity and fewer online players, a small group of companies (for example, the major record labels) will likely be advantaged — as has been the case with terrestrial radio. This is not good, and not fair.”

With so much money, music and integrity at stake, all sides of this debate will continue to lobby and argue their cases.

“We’re witnessing a watershed moment, where for the first time ever, listeners and musicians are going to start dictating what this industry looks like,” said Westergren.

Internet radio stations

Radio Free Charleston –

Pandora –

Live365 –

Slacker –

American Media Service’s beach mu­sic station –

ShoutCast –

Proposed streaming rates

(per-spin, per-song)

2006 – $.0008.

2007 – $.0011.

2008 – $.0014.

2009 – $.0018.

2010 – $.0019.

For more

SaveNetRadio –

Radio Internet newsletter – http://www.kur­

2 Responses to “Is Internet radio doomed?”

  1. Carmel Lisciotto Says:

    I think it is.

    Carmelo Lisciotto

  2. Something has to be done to level the playing field for small internet broadcasters! The current royalty scheme is unfair and must be changed!

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