D-Day Sunday For Internet Radio As Court Rejects Royalties Appeal

SaveNetRadio.orgThe U.S. Court of Appeals has rejected a request to delay the onset of new royalty fees that could wipe out most of the US internet radio industry.

The court said that the issues raised by the webcasters did not satisfy its “stringent standards.”

The new Copyright Review Board imposed fee structure comes into affect this Sunday, and imposes a per song, per listener charging model that is retrospective to January 2006. The new fee structure could immediately bankrupt many existing players, whilst driving the remaining sites offline as the economics of streaming music become unprofitable. Previously Internet Radio stations paid royalties on a percentage of profit in a similar way to terrestrial and satellite radio operators.

The Internet Radio Equality Act of 2007, a bill before Congress would replace the new royalty structure with a flat fee equal to 7.5 percent of the webcasters’ total revenues, however the bipartisan bill has yet to pass.

As we noted previously, the only people to benefit from the new fee structure are big media. CBS in particular has a lot to gain and would appear to be supporting the changes by failing to pull their streaming radio stations or Last.fm off air for the National Day of Silence June 26, despite nearly universal support from others including Yahoo, Pandora and Real. A world with less competitors strengthens CBS’s position and certainly would help CBS build a better return from the $280million it paid for Last.fm, a site hosted and run from the United Kingdom and therefore not subject to these royalty changes.

The biggest losers of all from the potential wipe out of internet radio is us. Whether you listen to internet radio or not, having the choice available enriches the internet for everyone. Lack of choice was the driving factor in the decline of terrestrial radio in the Western World; do we really want to replicate the same market online, where in one years time the only choice in online radio is from sites owned by CBS and Clear Channel?

UPDATE: Wired has a post indicating that Sound Exchange, the body that collects the royalty fees, has stated to a congressional hearing that they will NOT enforce the new regime whilst more reasonable rates are negotiated, and most importantly for services such as Pandora, the per channel fee seems to be off the agenda. The full details aren’t yet available but it seems that for the time being at least, US Internet Radio may survive.

(in part via Ars)