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The Web Radio Debate Continues

When it comes to Internet radio, everyone agrees on one point - the idea has grown quite a bit in recent years.

An estimated 52 million people listened to Internet radio at least once a month in 2006 and it's predicted that that number will double within three years and reach nearly 200 million by 2020.

But could that growth have been halted by a March decision by theCopyright Royalty Board, an arm of the Library of Congress, increasing the royalties Webcasters need to artists and record labels? Small webcasters - hobbyists who use services such as Live 365 - immediately cried foul and said the types of fees they'd be forced to pay would basically silence them. They have argued that many of them make no money and that they are doing artists a favor by exposing their songs to a growing audience of people who turn to the Web to discover new music. Opponents say that only the very rich will be able to broadcast on the Web if the fees, which are scheudled to go into effect on July 15, are upheld.

Proponents of the fees say that the very rich - in the form of big companies who are broadcasting over the Web - are already getting richer by not paying artists and labels their fair share.

Now, members of Congress are proposing legislation that would vacate the Copyright Royalty Board's decision. Yesterday. Senators Ron Wyden (D-Ore.) and Sam Brownback (R-Kan.) introduced companion legislation to a House bill recently introduced by Representatives Jay Inslee (D-Wash.) and Don Manzullo (R-Ill.) that basically calls for a reconsideration of the fee structure. They note that, for large Webcasters, the royalty increase could be between 40 percent and 70 percent of revenues. For small Webcasters the royalty increase could reach up to 1,200 percent of revenues.

John Simson, executive director of SoundExchange, which collects and distributes royalties on behalf of the recording industry, argued in a Viewpoint piece on today that performers and record labels deserve to fair and reasonable compensation when their music is played on Web radio stations, as well as satellite radio and cable audio music channels.

In a statement, Sen. Wyden said the bill is standing up for the small Webcasters and innovative startups. "Keeping Internet radio alive is part of a broader issue that is important to me -- keeping the e-commerce engine running by preventing discrimination against it," he said.

By Sam Diaz  |  May 11, 2007; 10:45 AM ET  | Category:  Sam Diaz
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Please email us to report offensive comments.

The idea if a World Wide Radio that allows us to reach stations around the world, by the touch of a button, is exhilarating. I hope for the day when we can reach radio stations from far distant places with the same ease than we do local stations today.

Posted by: Gerardo Javier Gálvez Arellano | May 12, 2007 3:52 PM

What this article fails to point out is that broadcast radio (over the airwaves) is exempt from paying royalties no matter how much money they make. And, in the past, artists have paid to have their music played.

Why should an internet radio station that isn't making any money, not playing any commercials pay royalties when a commercial broadcast station doesn't?

This is all about controlling the distribution channels and keeping the public from hearing independent new music.

Don't be fooled.


Posted by: Trent | May 13, 2007 6:43 AM

Internet broadcasting royalties are the best thing since the birthof protection rackets. The best thing about them: It's U.S. lawmakers collecting the cash.

When the "stations" move overseas, Congress will be paid again -- this time to pass laws forcing ISPs to block the signals and turn anyone and everyone into criminals for listening. Listening to music will be a greater sin than even child porn.

China does it with anything it doesn't like. A lot of countries do it. And because a Nazi inhabits the White House, the United States will do it.

Posted by: Al Capone | May 13, 2007 7:08 AM

Where is the mechanism that allows artists to determine and change their royalty rates instead of the government?

If an artist wants exposure they would offer their content at little or no value through small venues. If an artist wants revenue they can select a price within the limits of a large broadcaster.

Posted by: Mike | May 13, 2007 11:31 AM

Commerical radio (FM/AM) pay royalites as well. Before you start making stupid comments, you should check your facts.

They do not pay as much in royalities. In fact I figured out that a local station that bills $7M annually, would be paying about $10M in royalities if it had the same structure.

Bottomline, yes the new rates are unfair, but if you make comments that are completely unfactual, we will never make our point.

Posted by: Trent is an Idiot | May 13, 2007 11:33 AM

I think they have the whole concept of delivering music backwards! The free music I listen to has a huge impact on what CDs I buy, so the less free music there is to sample just means I'll probably be buying less CDs.

btw, I always thought of (free) Radio/Internet Radio was a good way to advertise the music, when/if a listener likes what they hear, they'll go out and buy the CD, problem is there really isn't all that much good music out there IMO.

Posted by: Ed Wolk | May 13, 2007 12:16 PM

Percentage of revenue across the board. The Lobbyists do NOT want this - becuase they are protecting BIG business. But really, they are protecting the fat cats that F!@#Ked up and misssed the boat once again. Give a constant level that is even and you will see the issue only piss of the legacy (traditional radio) folks, as they see their business become as frail as newspaper.

Posted by: Anonymous | May 15, 2007 12:43 PM

Sam, thanks for the post. There is a lot of confusion on this issue, as shown in the above comments. While terrestrial radio does pay royalties, they only pay them on the musical composition. Internet radio (and satellite & cable radio) all pay the musical composition royalty, and an additional (more expensive) sound recording royalty. There are too many details to get into in this post, but that brings me to my point.

The Information Technology and Innovation Foundation (ITIF) just released a report on Internet Radio and Copyright Royalties at an event on Capitol Hill on May 10. In the report, we describe problems with the current copyright royalty system for Internet Radio, and what steps Congress should take to reform this system. Specifically, we say that Congress should grant the same performance copyright to all broadcast technologies; modify the statutory license to allow copyright owners to specific separate rates for each sound recording; and allow copyright owners to assign separate rates to small and non-commercial webcasters.

Our approach differs from current proposals in that we advocate first eliminating the disparity between terrestrial and non-terrestrial radio, and second, breaking the monopoly that SoundExchange has on setting royalty rates by letting artists set individual royalty rates for their music thereby creating (for the first time) a competitive market for sound recordings.

The report is available on our website at -

Posted by: Daniel Castro | May 16, 2007 11:06 AM

It makes no sense to shut down the small internet stations which run without advertising and just get user contributions. The internet give us musical variety which is long absent from "maximize my income" FM radio, even the so-called "Public" radio stations. I purchase many CDs a year based on what I hear on internet radio stations playing bluegrass and gospel.

Posted by: George Conklin | May 25, 2007 12:45 PM

It makes no sense to shut down the small internet stations which run without advertising and just get user contributions. The internet give us musical variety which is long absent from "maximize my income" FM radio, even the so-called "Public" radio stations. I purchase many CDs a year based on what I hear on internet radio stations playing bluegrass and gospel.

Posted by: George Conklin | May 25, 2007 12:46 PM

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