A death blow for online radio?

A recent ruling that threatens to cripple online webcasters earns harsh reactions from both NPR and Congress.

Published March 19, 2007 9:35PM (EDT)

Here's a story that continues to pick up steam. Back at the beginning of March, the Wall Street Journal reported that the Copyright Royalty Board, a little-known federal agency, ruled that Web broadcasters must pay a fee each time a listener hears a song. This is unlike the payment structure set up for regular radio, where the broadcasters must pay a royalty to the artists, but no per-play amount. The new ruling, effective retroactively to 2006, charges online broadcasters 0.08 cents per song per listener and will rise to 0.19 cents by 2010. Before 2006, online broadcasters only had to pay a flat rate of 12 percent of their revenue to SoundExchange, an RIAA offshoot company that collects royalties earned on digital music and distributes them to the labels and artists. The ruling has sparked some pointed reaction from the involved parties.

NPR vice president of communication Andi Sporkin explained that the new fees don't take into account the essential nature of public radio. "These new rates, at least 20 times more than what stations have paid in the past, treat us as if we were commercial radio -- although by its nature, public radio cannot increase revenue from more listeners or more content, the factors that set this new rate." NPR also threatened to file a petition for reconsideration with the CRB.

A story in today's New York Times highlighted some of the other negative aspects of the ruling, such as the damage done to companies that operate online radio channels -- which will now be subject to a $500 per-channel fee. That's no small amount for a company like AccuRadio, which operates 320 channels. AccuRadio head honcho explained to the Times that his company would have owed $600,000 last year, well above the $400,000 it earned in revenue. Similarly, Mark Lam, CEO of music aggregator Live365, told the Hollywood Reporter that the rate hike "kills off opportunities for artists and small broadcasters to be heard."

Congress has also turned its attention to the aggrieved webcasters. In a recent hearing on the future of radio, Rep. Edward Markey, D-Mass., argued that "[The ruling] represents a body blow to many nascent Internet radio broadcasters ... It makes little sense to me for the smallest players to pay proportionately the largest royalty fee."

For their part, the folks backing the record industry have said that until now, they were the ones being treated unfairly. Here's an excerpt from a statement (PDF) released by SoundExchange: "Artists have earned the right to be fairly compensated for the performance of their work by webcasters who benefit -- financially or otherwise -- from their talents. Without these royalty payments, these artists would, in many cases, be unable to continue contributing to the music world."

SoundExchange executive director John L. Simson, in the Times article quoted above, even went so far as to basically call the naysayers a bunch of Chicken Littles: "They said the same thing in 2002 [the last time fees were set] ... Not only did it not drive them out of business, we saw more people come online."

Those of you particularly concerned with these developments might want to check out SaveTheStreams.org, where you can sign a petition asking Congress to prevent the rate hikes. I'm interested in knowing your feelings about online radio and the new ruling. Who's in the right on this issue? And if the worst does come to pass, which stations would you be saddest to see go? Post your responses in the comments section. (Also: I hear that there will be a feature in Salon tonight about this very issue -- stay tuned.)

-- David Marchese

By Salon Staff

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