New Royalty Schedule May Scuttle Independent Internet Radio

Recent revisions to the internet radio royalty structure, issued by the Library of Congress' Copyright Royalty Board, have large and small online stations up in arms, with many threatening legal action.

The schedule would impose royalties retroactive to 2006, with the amount per performance escalating from $.0008 for 2006 to $.0019 in 2010.

The response, which includes growing threats of legal appeals, has been overwhelming and has risen to the point where it now includes congressional testimony, garnering some sympathy from some lawmakers and causing the Recording Industry Association of America spinoff SoundExchange-which stands to create a potential $2.3 billion per year company collecting the royalties-to consider a softer stance.

"These are negotiations. We're not trying to stick it to anybody," said SoundExchange spokesperson Wilhem Dicke in a recent interview with InternetNews.com. "In terms of what happens next? Either side could appeal to the U.S. District Court."

The announcement of the revised royalty schedule comes at a time when internet radio has moved from a holding pattern to a growth curve. It also comes at a time when traditional radio revenue is losing ground. Reports in late 2006 showed a dip in overall traditional radio revenue, with the biggest drop occuring in local advertising.

To offset the traditional radio sluggishness, broadcasters have continued to push into the online and non-spot advertising markets.

A very detailed analysis of the situation has appeared on BetaNews, analyzing what streaming radio providers would be charged by SoundExchange versus the fees that are paid today to performance royalty organizations (PROs) ASCAP, BMI, and SESAC. BetaNews noted that some radio stations pay as little as $972 per year in total royalty fees to PROs, but Tier 1 radio stations in major metropolitan areas pay significantly more.

"BetaNews can now project that AOL Radio could owe $146.4 million in royalties in 2010 alone," said the site's analysis. "LaunchCast would owe $113 million, Clear Channel would owe $61.7 million, and Live365.com would owe $42 million. Just the top four streamers would be billed $363 million during the same year that all 14,000 US radio stations combined would be billed $550 million."

In contrast, online stations would pay proportionally more.

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