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Web Broadcasters Lose Music License Appeal

April 17, 2007

• Consumer Groups Urge FCC to Reject XM-Sirius Merger • States Raise Questions about XM-Sirius Merger • XM-Sirius Merger Gets Antitrust OK • Senate, FCC Chairman Spar Over Media Consolidation • Wisconsin Seeks To Block Satellite Radio Merger • XM/Sirius Merger Gets a Boost • Webcasters, Music Industry Reach Accord On Royalties • Karmazin "Clarifies" XM-Sirius Merger Plans • Last Minute Stay Of Execution For Web Radio • Dead Air Ahead: Court Denies Webcasters' Appeal • Notes From The Future Of Radio • Senators Throw Support Behind Internet Radio • Internet Radio Gets a Reprieve • Web Broadcasters Lose Music License Appeal • Feds Agree To Rethink Internet Radio Royalties • Reception Poor at Senate Sirius-XM Hearing • XM-Sirius Merger May Encounter Technical Difficulties • The End Of Internet Radio As We Know It • XM-Sirius Merger Encounters Serious Opposition • XM, Sirius Agree to Merge • Record Companies, Congress Take On Satellite Radio • Satellite Radio Looks Wobbly --- Consumer Comments • Sirius • XM Radio

Internet broadcasters have lost their appeal of a music copyright ruling that many in the industry believe spells the end of Internet radio. The controversial ruling is scheduled to go into effect May 15.

Under the ruling, Internet radio stations would pay escalating fees per song, per listener, retroactive to 2006. The fees are significantly higher that those paid by comparable over the air broadcasters.

The appeal was filed by National Public Radio, on behalf of itself and others, arguing the fees were unfair and unreasonable. In rejecting the appeal, the U.S. Federal Copyright Royalty Board said the petitioners had failed to make a case for a rehearing of the issue.

The new formula for Internet radio music fees was developed by SoundExchange, the royalty-collections division of the Recording Industry Association of America. Some Internet radio executives have charged RIAA deliberately set out to create a system to put Internet broadcasters out of business, but the organization says that's not the case.

"Our artists and labels look forward to working with the Internet radio industry -- large and small, commercial and noncommercial -- so that together we can ensure it succeeds as a place where great music is available to music lovers of all genres," Executive Director John Simson said in a statement.

"It's the end of Internet radio as we know it," one broadcaster fumed. "The RIAA wants to put us all out of business."

The CRB's new royalty structure begins at $.0008 per performance, retroactive to January of 2006. While that may not seem like a lot at first, the CRB decision defines "per performance" for Web radio as streaming one song to one listener.

Kurt Hanson, writing for his Radio And Internet Newsletter (RAIN), calculated that an average Web radio station that plays 16 songs per hour would owe 1.28 cents per listener per hour. And the more listeners per hour, the more royalty fees the station would have to pay, "in the ballpark of 100% or more of total revenues," according to Hanson.

The rates would continue to increase each year. In 2007, Web broacasters would owe $.0011, $.0014 in 2008, $.0018 in 2009, and $.0019 in 2010. Those royalty fees only cover the actual broadcast of the songs to listeners -- the station owners would also have to pay royalties to the performers as well.

The owners of SaveNetRadio.org claimed that a royalty fee of $.0011 would tally up to "about 1.76c per hour, per listener. A station with [an average of 500 listeners] would be hit with fees of $211 per day, $6,336 a month or $76,000 a year."

"This amount of money is beyond the resources of all but the very wealthiest of corporations," they said in a post on their site. "Many of the internet radio stations are run by enthusiasts and hobbyists. These small stations are the ones bringing new music, and old favorites to you every day. Music you can't hear on corporate-owned terrestrial stations."

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