Killing Internet Radio, Not So Softly

At SaveNetRadio.org, they are counting down to May 15th, “the day the music dies.” On that day new rates imposed by the federal Copyright Royalty Board for web streaming radio stations will go into effect that will nearly triple the current fees.

The fees, paid by broadcasters to license songs, wouldn’t just affect commercial providers, but non-commercial Internet radio like NPR as well. Broadcast radio stations don’t pay this fee at all, and the proposed rate for Internet radio is four times higher than satellite radio.

“With the new fees, 80 percent of Internet radio stations aren’t going to be able to afford it,” said Ari Kailimi, a.k.a DJ Effect, the station programmer and founder of W305, a Miami-based internet radio station with over 200,000 daily listeners.

In response, U.S. congressmen Jay Inslee, a Democrat from Washington, and Donald Manzullo, a Republican from Illinois, introduced the Internet Radio Equality Act last week in an effort to halt the rate hike. Their Internet Radio Equality Act would throw out the Board's decision and return the webcasting industry to a percentage of profits system. The percentage would be set at the same rate paid by satellite radio, 7.5 percent of revenue.

“[The fees] are definitely messed up,” Kalimi said. “With satellite you pay for the service, while Internet radio is free. They make millions just off the subscription fee, and then they pay less in royalties than we do.”

Anyone who spends more than an hour a day in a car -- and there a lot of you in Miami -- knows that commercial radio stations are horrid purveyors of mainstream schlock. Internet radio has made new artists, genres, and songs available to listeners all over the world. Artists have a new way to get their music out there, and small distributors have a way to wrangle in new customers.

Sites like Pandora, which uses the innovative Music Genome Project to create specialized radio stations for its six million users based on what they tell it about their musical tastes, are a blessing to music junkies everywhere.

“We can’t continue, at the new rate we can’t sustain the service,” said Pandora founder Tim Westergren from Washington D.C., where he is attending congressional hearings on the fee hike. “We are losing money now, even at the old rate, we were looking at another two years before we expected to be in the black.”

If the new rates go into effect, and sites like Pandora and W305 shut down, it would be a huge loss for music lovers, and perhaps an even bigger blow to musicians struggling to get their music to the public. A lot of smaller, independent Internet stations may go underground and avoid paying licensing fees all together, Kalimi said.

Beyond a loss of total Internet radio providers, whether or not the rate increase will help actual musicians is debatable.

“It’s disingenuous to say it’s better for the artist,” Westergren said. “With our liscensing deal now the royalties we pay go 50/50 to the artist and the label. If the fees increase, stations will enter into direct deals with labels at a discounted rate, but then the entire fee goes to the label and not the artist.” --Tovin Lapan

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