Internet Radio Industry About to Go on Diet

Sunday, July 15 is a day that will go down in infamy. Wait. That’s too strong a statement. Besides, Franklin D. Roosevelt already used that phrase, and it’s not fair to compare the two events.

Try this: On Sunday, July 15, online radio’s volume will go down. The action of the Copyright Royalty Board imposing excessively high royalty rates will result in the closure of internet radio stations. Sunday, internet radio owners will owe fees back-dated to January 1, 2006. There’s a ninety-day period to pay the new royalties, or fold. There’s also a sense from my side of the fence that July 15 will see the first wave of shutdowns, followed by a second wave after the lawsuits start.

But, how much of a volume dip will be heard on this fateful day? Will you, if you are one of the 52-72 million persons who are reportedly listening to internet radio each month, notice a change? Will your favorite online station close, causing you only a five-minute delay before finding another station that’s still streaming your musical tastes? Will this shutdown of internet radio turn out to be a loss for most amateur station owners, and a boost for the larger, sophisticated, corporate operators that know they can be defiant for another three months (or until the lawsuits start flying)?

SaveNetRadio did a marvelous job of attempting to coordinate a defense against this rate increase; it just wasn’t marvelous enough. The group was outflanked in nearly every move by a far more savvy public relations arm of SoundExchange and its accompanying lobbying efforts of equal quality. Let’s not forget that SoundExchange has the four major record labels’ Roledex files to pull from, and that three of these labels are owned by companies outside of the US.

Don’t look for any knights in shining armor to save this round; the legislative and judicial branches that have been hearing arguments are intent on avoiding involvement. There’s been all silence from the major online radio players and broadcasters over this issue. It’s like, excuse this observation, everyone is waiting to cull the herd so there are fewer competitors to deal with.

Large internet radio operators, broadcasters waiting to step up their online involvement, are blasé faire over the rate increase, which shows that the fight won’t end this Sunday. It will only be the beginning of a much bigger battle that’s headed for the courts. That’s when the big players will get vocal.

The Day of Silence showed just how fractured this internet radio industry is. My estimate is that 60% of the 900+ stations listed at Audio Graphics’ continued streaming on that day. Consumer traffic to Radio Row increased 59.1% as well. People sought other stations when all were supposed to be down, and found them. They will continue to find other stations after the deadline on July 15th.

Internet radio will sustain a drop in total number of stations but it won’t be significant enough to cause concern for anyone except the station operators who have to give up their hobby (or weak revenue model).

SoundExchange has won round 1. The Copyright Royalty Board’s decision will stand. Its contol over distribution of music online wil grow stronger, and then the labels (through RIAA) will start hounding those internet stations left standing. (Broadcasters be warned; this will be done as RIAA also ramps up its efforts to collect “performance fees” from you for the first time.)

Internet radio is about to change dramatically. By this time next week you’ll know if it is dramatic enough to affect you. By this time two weeks from now you’ll have developed a new online radio routine, and my guess is that you’ll not really care until internet radio starts sounding as homogenized as broadcast radio has become.

Unfortunately, by that time it will be too late to resuscitate the former, independent, internet radio stations created over the past ten years.

One Response to “Internet Radio Industry About to Go on Diet”

  1. Kind of leaves a sick feeling in your stomach, doesn’t it.

    When I’m in my car, I listen to NPR because I’d rather hear news than 15 minutes of music mixed with 45 minutes of commercials…not to mention that here in Wilmington, NC, the only thing on the airwaves is crap.

    I get my music fix during the business day (8am – 6pm) from Pandora. I’m a paid subscriber (I know…you’re thinking ‘sucker’, but I really like the service…), and I can only hope that something good comes out of all this mess.

    What amazes me is that SoundExchange isn’t interested in getting on board the 7.5% of revenue model being proposed in H.R. 2060. It stands to reason that 7.5% of something is better than 300% of nothing. Everyone wins under the percentage of revenue model…and everyone gets paid.

    I have two theories as to why SoundExchange has resisted and lobbied so fiercely:

    1.) The RIAA wants to force direct deals with labels, whereby the artists DO NOT GET the 50/50 split required under the terms governing SoundExchange and the Labels have greater control over the distribution of music on the Internet (not to mention the freedom to foist more of their super-star[less] crap on the listening public.)

    2.) The labels want to see a wholesale increase in performance royalty rates on a global scale…that is, in broadcast, satellite, and webcasting, both inside the US and abroad. Wherever their content is heard, they want higher rates. How long do you think it will be before PPL (in UK) determines (or is pressured into determining) that higher performance royalty rates are due? In my book, it won’t be long before the Europeans kiss their 3% – 4% of revenue model goodbye.

    So, I guess like many, I will just have to wait and see what’s available on Monday morning. After watching the testimony before the House on YouTube, I have little faith of seeing anything accomplished there. The committee chairwoman is, for all intents and purposes, a figurehead with no real understanding of the situation; a naive woman blinded by her own belief that there’s actually a sincere desire on SoundExchange’s part to negotiate with webcasters. She obviously missed the writing on the wall that the greater incentive to SoundExchange is to allow as many webcasters to go belly-up as possible.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: