Proposed Internet Radio Licensing Fees Dwarf Terrestrial Radio

Something seems amiss here. According to BetaNews, the Copyright Licensing Board (an arm of the Library of Congress) ruled in March that online radio (streamed music) must pay royalties to the RIAA (via the SoundExchange, an industry group) that greatly exceed the amount paid by “real” (AM/FM) radio stations.

The retroactive fee change (how can they make it retroactive?) will probably doom Pandora. And the San Jose Mercury News calls it a “huge gift” to the record industry (13 March Op-Ed, pay-to-view).

BetaNews estimates that online webcasting leader AOL Radio may receive a bill for copyright holders’ royalties retroactive to 2006 amounting to $23.7 million, payable to a collective representing the US recording industry… This while the world’s three major copyright holders’ groups – ASCAP, BMI, and SESAC – collectively charge terrestrial broadcast radio stations $972 per year per station, for the rights to broadcast exactly the same music to an equivalent or larger audience.

From Wired:

In the old, percentage-based fee system, webcasters paid SoundExchange — the Recording Industry Association of America-associated organization that pushed the Copyright Royalty Board to adopt the new rates — between 6 percent and 12 percent of their revenue, depending on audience reach. The new system charges all webcasters a flat fee per song per listener; for instance, in 2007, streaming companies would owe $0.0011 per song per listener (rates change based on year)…

Kurt Hanson, publisher of RAIN and CEO of AccuRadio, went so far as to speculate that Pandora, which is based in the United States, could “disappear” as a result of the new rates. Overseas competitors like Last.fm, which is based in London and removed from the board’s restrictions, could easily claim Pandora’s market share. If Pandora has to pay the annual $500 minimum for each channel, Hanson said, its sound-recording royalty bill for 2006 alone would be capped at about $2 billion (based on the service’s 300 million registered users, each of whom gets to create up to 100 unique channels).

The fee schedule approved by the Copyright Board was the one proposed by the record companies. According to BetaNews, the Board was swayed by the testimony (pdf, 164pp) of Adam B. Jaffe, professor of economics at Brandeis University (member of President’s Council of Economic Advisers under Bush 41).

Learn more (and what you can do) at SaveTheStreams.org, RAIN (the Radio and Internet Newsletter) and the Broadcast Law Blog.