Internet radio stung by new royalty fees

Written by Brett Thomas

April 18, 2007 | 10:22

Tags: #broadcast #copyright #fee #fees #internet #licensing #radio

Companies: #riaa

Many people are fans of Internet radio - whatever your favourite flavour of music, odds are you can find it streaming from some site or another. Much like regular radio, Internet radio is often free to listen to, paid for by advertisers or out of the pockets of its hosts simply to help fill a gap or build a brand.

If you don't listen to Internet radio yet, don't feel too out of touch - it's still a pretty youth culture thing, and has only been picking up enough steam to get noticed in recent months.

Yep, it's just starting to pick up steam - so, obviously it's time to start fee-charging it to death. And that's exactly what's about to happen.

Since Internet radio is starting to pick up speed, the RIAA has requested (of course, on behalf of its absolutely starving artists) that copyright fees for the nascent practice be increased. Currently, an Internet radio station (which can operate on a considerably lower overall budget than a regular radio station) in the USA pays a flat annual fee plus 12% of its net profits to appease copyright holders.

Now, the RIAA wants those fees increased to a per-song cost, along with the annual fee and the profit percentage. The fee will be collected by a non-profit agency known as SoundExchange for the benefits of the copyright holders - but this agency functions as nothing but a facade for the RIAA. Most rights to songs are owned by record labels, not by artists (who receive a small fraction of what the label receives), so the group will do little aside from collect the money and pass it on, taking its small cut of operating expenses in the process.

The request was approved by the Copyright Royalty Board (CRB) a couple months ago. The CRB is responsible for hearing and making decisions on whether royalties that are requested by a copyright holder are fair. At the time, the decision was appealed by a group of Internet broadcasters.

The board has declined to hear the appeal now, which was made by such names as AOL, Yahoo!, and National Public Radio. The CRB said that the groups offered no new evidence that was not already considered in its last hearing on the matter. Therefore, it saw no reason to overturn its previous decision.

Of course, those involved in the service would beg to differ -- webcasting radio reaches smaller listening pools, which provides less advertising revenue. The hope of webcasting was that it could provide a listener with any fare he or she wanted without having to turn down the same ten stations owned by the same one company. With smaller bills and a royalty based on profits, it was possible to offer a large variety of music to audiences who otherwise may not listen to radio at all, while providing a great way to reach very targeted advertising demographics.

The new fees will be liable to put most internet radio broadcasters out of business immediately, as they won't bring in as much money per day as they owe in royalties for the songs they played. has explained its own financial situation. For the $400,000 in profits the company made, it paid $48,000 (a license fee of 5% to the artists and then 12% to the RIAA through SoundExchange). Under the new computation, which would retroactively apply to 2006, the bill would be a staggering $600,000 -- enough to bankrupt the company.

The decision is already getting a lot of bad press both in the US and in the UK. In order to stop the fees, a campaign has been also started at petitioning the US Congress to intervene. They'd better move fast, though -- the new fees will start levying as of May 15th of this year and be retroactively applied to 2006.

Have you got a thought on the Internet radio debacle? Sing us your song in our forums. If we've heard it before, you can leave ten pence in the basket, please...
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