IP Democracy: Small Internet Radio Stations Hit by Payment Scheme

For so long, Internet radio stations have populated the Internet with all kinds of interesting and niche formats. The biggest challenge for most Internet-only radio stations: making money.

Now, along comes a purported decision by the Copyright Royalty Board, an arm of the U.S. Copyright Office, which could thin, if not decimate, the ranks of Internet radio. It seems that the CRB has adopted a proposal put forth by Soundexchange, an arm of the RIAA used for collecting royalties for music in the “digital world.”

This new payment scheme, which applies for 2006 to 2010 and is retroactive for 2006, imposes a pay per performance royalty mechanism, instead of one that is based on revenues. The new system could make the cost of providing Internet radio prohibitive to the point of forcing small Internet radio station to shut down.

Regular over-the-air radio stations typically pay nothing for their Internet feeds (if what they put on the web is simply a simulcast) because it is assumed that they have already covered the requisite copyright costs via the on-air performance royalty payments the stations make to ASCAP/BMI and other royalty collection groups.

The upshot: the new payment scheme could force out the little guys but let the big guys keep streaming the same old boring radio stations that we get on our car radios. At a time when the record industry is fighting off obsolescence, it’d kind of sad that small Internet radio stations, which could actually bring new audiences to new music (and we know that the traditional over-the-air radio stations won’t play anything new), have to fight off the record industry.

Mike at TechDirt points out how the record business may have yet again shot itself in the foot.

Of course, this is utterly backwards and damaging to the industry itself. A webcaster (especially the smaller, independent ones) is a great means of promotion for artists. It tends to attract more loyal and well-targeted audiences, who are more likely to want to later go out and buy a CD, a t-shirt or attend a concert. It lets the industry better promote material from a wider range of artists.

Posted by Cynthia Brumfield on March 5, 2007 6:32 PM to IP Democracy