It brings up another point that I have totally forgotten to mention. This point isn't even being discussed, but it goes a long way toward showing how unfairly internet radio is treated in comparison to terrestrial radio.
Internet broadcasters pay PERFORMANCE royalties (whcih goes to the performer of the song and is what is about to increase immensely) and PUBLISHER royalties (which go to the authors of the songs).
Terrestrial radio pays NO PERFORMANCE royalties at ALL, because the RIAA does view them as an advertising vehicle! PLUS under the new agreement, if a terrestrial station has an internet stream as well, they only pay 50% of the fee that an internet station does.
WHAT THE HELL!!!
Here's the story Cheese submitted...
Web radio reels from rate rulingSurge in royalties threatens operators, many in industry say
Published March 7, 2007
Last year, AccuRadio.com, a Chicago Internet radio operation, paid 12 percent of its revenues, or about $48,000, in royalties to performers of the songs it played, said founder Kurt Hanson.
But a ruling by the Copyright Royalty Board of the Library of Congress made public Tuesday threatens to increase that royalty more than tenfold, putting AccuRadio and almost every other operator in the rapidly growing Web radio field out of business, Hanson said.
Those affected by the new rates, which change the royalty paid to a song's performers from a percentage of revenue to a per-song, per-listener fee, include not just Web-only outfits mimicking traditional radio stations, but also more specialized digital music services such as Pandora (pandora.com) and the Internet streams of traditional broadcast stations.
"It's absurd," said Hanson. "Under this, our royalty would go to $600,000 for the year, which means we would be bankrupted."
An Arbitron/Edison Media Research study last year estimated that 52 million Americans had listened to Internet radio in the previous month.
The liability for Pandora in the new rate's first year, he calculated, could pass $3.5 billion because the ruling includes a $500 minimum per channel, and Pandora functions by having its 6 million users set up as many as 100 of their own music channels.
"It's an utterly ridiculous ruling that renders any form of Internet radio non-economic," Pandora founder Tim Westergren wrote in a blog post on his site.
At KCRW-FM, a Los Angeles-area public radio station popular on the Web, the royalties paid could climb this year to $190,000, even taking into account the discount the rules give non-commercial stations.
"It essentially doubles our streaming costs online," said Anil Dewan, the station's director of new media.
Under the royalty agreement in place since 2002, the rates paid to a song's performers, separate from those paid to its composers, were between 6 and 12 percent of a station's revenue. The new rates, a structure advocated by SoundExchange before the copyright board, charge 8/100ths of a cent per song per listener for 2006, for which the ruling would apply retroactively, 11/100ths for 2007, and slightly more in the last three years of the agreement.
It sounds like small change, but it adds up to much greater numbers than the percentage-of-revenue method--in the case of Hanson's operation, to the more than $600,000 for 2006. A co-owner of California Web station Radio Paradise said its fees would go up about tenfold, as well.
Traditional radio stations pay only royalties to the composers of songs and digital radio pays that royalty as well.
Still, although petition drives against Friday's ruling are under way and Internet radio sites now bear alarmist headlines, like AccuRadio's "Internet radio is in danger of becoming EXTINCT!," most of the fledgling industry's key players hope the current outcry is merely the prelude to a compromise.
SoundExchange, the body created by the Recording Industry Association of America to collect the royalties due to the performers of music, called the ruling fair and said the fears of putting Webcasters out of business were overblown.
"They've been saying this since 2002, that they were going to go out of business," said Willem Dicke, a spokesman for SoundExchange.
"Instead what's happened is the industry has grown tremendously."
Dicke said the advertising revenues from online music broadcasting have grown rapidly over the past few years, from about $50 million in 2003 to $500 million last year, giving Webcasters enough resources to cover the new royalty rates.
Hanson said he has heard of some smaller outfits who have ceased Webcasting already, but AccuRadio continues, as does Pandora and the California operation Radio Paradise.
"We genuinely believe we're going to come out of this eventually with a solution we can live with," said Bill Goldsmith, co-owner of Radio Paradise.
Pandora's Westergren wrote, "We are continuing in the belief that sanity will return as everyone involved, including the 50 million avid online radio listeners, realize just how outrageous this is."
The Webcasters believe the recording industry will recognize the value it receives from music being played on the Web, which draws not only passionate music listeners, but is often accompanied by links that allow listeners to purchase copies of the music they are hearing.
"Internet radio's got to be good for the music industry and they must know it," Hanson said. "And it really is good at selling music. It's probably one of the better things for the music industry in the last decade. We think that reason will prevail here."
