Will fees kill the radio sites?

Although it is an unprecedented addition, savvy readers might notice a first-ever ad on the blog today. That’s because, without a major intervention, internet radio stations will have to cease operations, when a new ruling takes effect May 15 that retroactively introduces royalty rates so high it will put them out of business (and as I understand, these rates are higher than those paid by other media and traditional radio).

I don’t know about you, but that would be a tragic end to one of the best things I’ve found on the internet. It’s maybe been two years since I first discovered my favorite station, MVY, which broadcasts from Martha’s Vineyard. Since then they’ve introduced me to countless new acts and great songs, not to mention “The Blues at Eight,” a fabulous hour of blues that’s on five nights a week. Since MVY has a Massachusetts dial signal in addition to their internet stream, and covers a lot of new artists and great festivals, I took seriously their concern about the impact of this ruling on stations like theirs.

Despite this threat to one of the most encouraging trends in radio I’ve seen in recent years, there is some hope. Two representatives recently introduced H.R. 2060, the Internet Radio Equality Act. To learn more, visit savenetradio.org, or just call your representatives and ask them to support the bill. I’ve never actually taken such a step before, but internet radio’s filled my living room with too many hours of joy to sit by and watch it end.

Update
Having been challenged by a musician friend that the Copyright Royalty Board’s decision is merely a crackdown on stations failing to appropriately remunerate artists, I wanted to add a little more background:

On March 2, 2007 the Copyright Royalty Board (CRB), which oversees sound recording royalties paid by Internet radio services, increased Internet radio’s royalty burden between 300 and 1200 percent and thereby jeopardized the industry’s future.

At the request of the Recording Industry Association of America, the CRB ignored the fact that Internet radio royalties were already double what satellite radio pays, and multiplied the royalties even further. The 2005 royalty rate was 7/100 of a penny per song streamed; the 2010 rate will be 19/100 of a penny per song streamed. And for small webcasters that were able to calculate royalties as a percentage of revenue in 2005 – that option was quashed by the CRB, so small webcasters’ royalties will grow exponentially!

Before this ruling was handed down, the vast majority of webcasters were barely making ends meet as Internet radio advertising revenue is just beginning to develop. Without a doubt most Internet radio services will go bankrupt and cease webcasting if this royalty rate is not reversed by the Congress, and webcasters’ demise will mean a great loss of creative and diverse radio. Surviving webcasters will need sweetheart licenses that major record labels will be only too happy to offer, so long as the webcaster permits the major label to control the programming and playlist.

Read more at savenetradio.org, or check out coverage on how the ruling affects NPR, and the basic provisions of the Internet Radio Equality Act.