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NetRadio: The Day the Music Died, Maybe

September 29, 2007

The Day the Music Died, Maybe
By Kwan Booth
July 15 could mark the end of the web as we hear it. That is the day new royalty rates take effect for Internet radio stations based in the United States. Opponents say the new fees, which will increase the yearly amount paid by Internet broadcasters by 300 to 1200 percent over the next five years, will effectively wipe out the industry.

On March 2, alarms sounded throughout the music community when the Copyright Royalty Board (CRB) ruled that Internet radio stations will now be charged based on the number of listeners. The CRB is the government organization charged with overseeing sound recording royalties paid by Internet radio services. Previously, stations paid a percentage of their revenue.

Supporters of the ruling, which include music organizations the Recording Industry Association of America (RIAA) and SoundExchange, say the decision is just and will ensure that musicians and labels are properly compensated.

However, the SaveNetRadio Coalition-an organization comprised of webcasters, musicians, record labels and supporters has introduced the Internet Radio Equality Act into Congress in the hopes of overturning the CRB’s decision.

“The whole point of the Internet Radio Equality Act is to fix the broken system by which rates for Internet broadcasters (only) are set now” said Rusty Hodge in an email. Hodge is the founder of SomaFM, a listener supported Internet station ran from the Mission District.

Under the ruling Internet radio, which has fewer listeners and far lower annual revenues than terrestrial and satellite networks, will have to pay the highest relative royalties. For example, according the Coalition, broadcast radio earns approximately $20 billion in annual revenue, but is exempt from and pays no performance.

On the other hand, the six largest Internet-only radio services anticipate combined revenue of only $37.5 million in 2006, but will pay 47 percent-or $17.6 million-in royalties under the new CRB ruling.

While some networks, like San Francisco based Live365, are made up hundreds of radio stations, most programmers run small bedroom operations with at most a handful of employees. They maintain the new rates will, in most cases, exceed their yearly income.

Hodge told the San Francisco Chronicle that while his 2006 royalties were $20,000, under the new law he would owe $600,000. “That’s about three times the total income we made in 2006. We’re not getting rich off of this.”

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