The 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)
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So if Amazon is smart, they will set up EC2 and S3 in the UK and let you host your radio site from the UK or even Gibralatar. That would fix the issue without ruffling the feathers of our Congressmen who are busy with so many bigger issues such as how to get a $5 billion Alaskan highway between a town with 50,000 people and it’s airport that serves 300 passengers per day. I mean, really now!
So what’s the over/under date on TechCrunch breaking the news on the huge jump in offshore internet radio stations?
UPDATE! Internet radio has been saved. Stations will not be shutting down Sunday. Wired has posted an article updating on the latest developments this evening. http://rocklandusa.com/blog/20.....een-saved/
Why in the world would you charge internet radio stations differently from terrestial?
Does the internet station only have to be hosted in a country other than the US? or must the base of operations also be outside the US?
Either way, just pack up and move and stick it to the American government. Australia is nice this time of year and we would welcome some more tech innovation as well as your tax dollars.
BM
you’re entirely right, and if the fees in Australia weren’t so bad ($500 AUD/ qtr min per station) I’d start a streaming business myself. If anyone has successfully country shopped let us know, I’d love to find a reliable place to host a stream station.
The charging model is going to be retrospective, not retroactive? What, they are going to be nostalgic about the past since January 2006?
Andy
your point is lost on me, and Google as well . The fees are being imposed retrospectively.
Surely it isn’t too bad if internet radio goes down? What about non-net radio in the US? Is that any good?
Get your facts right before using throwaway phrases, TechCrunch. Terrestrial radio in the West isn’t “in decline” at all — in fact, at least in Europe, it’s never been healthier. Listenership is up, there are more analogue and digital stations to choose from terrestrially than ever before, the advent of community radio has allowed would-be net broadcasters to get a slot on an FM station in their local area… sure, the very largest commercial radio players’ profits are down, but things aren’t declining just yet!
Andy
listener numbers on Terrestrial radio in English speaking markets in particular have been in decline for years, the experience with Clear Channel in the US has been repeated in Australia through Macquarie Radio and others: it’s not a throw away line, it’s actually the broad consensus view. Try Googling it..
With all due respect, I don’t need to Google it; I work for a radio station in the UK and I’ve seen the figures. Apocryphal, evidence-untroubled tales of the terminal decline of radio listening are one of the biggest obstacles we face in gaining advertising revenue. According to RAJAR, the industry-standard body for UK radio ratings, listening to radio in the UK is at 90% for the first quarter this year, compared to 89% back in 1999. It’s been hovering around that mark for years and with the advent of digital broadcasting, things can only look up.
Regarding “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” and other comments on just off-shoring to Europe or Australia ……
Even if this is a loop hole now then I suspect the US government would move to have those non-US sites be blocked to requests from US based computers. So like online gambling sites they may have to implement some kind of blocking to stop US accesses to last.fm.
Moving outside of the US will not help you evade royalty payments.
If you want to stream US music, you will have to pay royalties to the American companies that distribute that music.
HOWEVER, non-American locales are not bound to the CRB’s payment structure or to the SoundEx arrangement. For example, Europe and Russia have their own licensing bodies.
Places like the Carribean don’t have licensing bodies. However, by the same token, they don’t have laws preventing the RIAA from really messing with your site. So, you give up some laws that negatively effect you in return for giving up laws that would protect you.
You see, we do not have a balance of powers in the USA.
The people’s wishes are subordinate to judicial, legislative, executive, and administrative law.
For these branches, there are no inalienable rights to anything!
yeah seems totally broke -
- and something that will unfairly ; nudge Terrestrial radio up in numbers.
a sad day,RB
One more reason not to vote for the RIAA stooge that is Barak Obama.
Interesting… SoundExchange must have realized that if all the webcasters go out of business, so do they. Maybe there is something to this free-market crap. (Nah, probably not.)
What ever would become of Internet radio then…
Options are good. Options are very good.
I don’t really understand how going offshore would help anything. Its worse as I understand it than Jorge says, its not about streaming U.S. produced music, its about streaming music TO the U.S.
You can be based anywhere you want, but that doesn’t change the fact that you’ll be subject to the per listener fee of wherever you’re streaming to.
How you think when the economic crisis will end? I wish to make statistics of independent opinions!