Published June 27, 2007
WASHINGTON – So you just found a new Internet radio channel that has the coolest music and you're telling all your pals about it? Well, it might not exist after July 15.
And to give a taste of that sound, Internet radio broadcasters Tuesday observed a "Day of Silence" in which they set out to shake up their audiences by turning off their broadcasts and running a vigorous online campaign to rally Congress over new fees they say are unfair.
Online listeners who tried to go to their favorite music sites and public radio stations likely found messages to call their representatives in Congress to block the new rates, and — as Savenetradio.org said — "preserve music diversity on-line."
The clash between Internet radio broadcasters and music industry advocates is over copyright royalty costs, which were recently reset by the Copyright Royalty Board — CRB — led by a panel of three judges and housed under the Library of Congress.
Wanda and Jim Atkinson said the new rules have to be changed.
"It will literally destroy most Web-casters," said Wanda Atkinson, who with her husband runs 3wk.com, a site that runs an indie rock and classic rock channel. "There's no basis in reality for their decision."
The Atkinsons, both 51, of St. Louis, said the new rates imposed by the CRB would mean a 400 percent increase in their royalty costs from over a year ago. Given that, Wanda said they would have to shut down the classic rock channel, and scrap plans for a third channel they'd hoped to get off the ground. They're comfortable financially outside their radio enterprise, but it would essentially mean the business would no longer make money.
But one of the chief advocates for rate change said much of the criticism raised by the Internet radio community is unfounded.
Richard Ades, spokesman for SoundExchange, a non-profit organization that collects and distributes musician royalty payments, said his organization has offered the small Web-casters — like the Atkinsons — to keep the rates down where they were before the CRB acted this March. He said the real fight is coming from the larger Web-casters, like AmericaOnline and Yahoo!, who stand to make money off plans to derail the royalty schedule.
"We're trying to get the fairest deals. I think our contention is that artists and labels need to be paid for the music they create and everybody loves. They want their fair piece of the pie," Ades said.
Under the previous plan, which ended in 2005, Web-caster royalties were determined on a fraction of revenues. The new royalty payments would be based on a per-performance basis: an online listener who hears one play of a song would equal one performance, and that would equal $0.0011 in royalty payments in 2007.
The charges gradually increase to $0.0019 per performance in 2010, the last year covered by the CBP decision. The rates affect commercial as well as non-commercial Web-casters who have more than 159,000 "aggregate tuning hours," a number estimating the amount of listenership a broadcaster receives. The ruling has been appealed to the U.S. Court of Appeals for the District of Columbia.
While the incremental cost is small, the total cost for even a small outfit — that could have tens of thousands, or hundreds of thousands of listeners — is too much, said Michael Roe, the founder of Radioio.com, an Internet radio provider.
"There are very few entities that would likely survive it," Roe said.
Tuesday's campaign was designed to bolster the push behind Internet Radio Equality Act, sponsored by Rep. Jay Inslee, D-Wash. The bill aims to set the royalty payments by Internet radio providers equal to those paid by satellite radio and other digital radio formats — another point of contention by Internet radio broadcasters.
But Ades argues that Web radio, satellite radio and radio over other digital means are different animals, and his organization does not dispute the way Congress currently handles it. He said, for instance, royalties are paid by satellite radio, but the numbers are not public. A process is to finalize rates for satellite radio by the end of the year. He said SoundExchange agrees with the Web-casters that royalties should be collected from AM and FM stations.
He says the "Day of Silence," not only no longer makes a point, but also makes the case for his group.
"Without music, you've got nothing. ... If you don't pay them ... they're not going to be able to make music," he said.
Nevertheless, the Web protest appeared to catch the attention of the online community. Jake Ward, a hired spokesman for the SaveNetRadio Coalition, said Web traffic through a site routing e-mail to Congress hit record highs. Inslee's office said it was receiving about three times the usual phone traffic.
And still, Web radio enthusiasts are hoping that the rate change won't cut off their source of music, and in some cases, their creative outlet.
Alistair Barnett, 30, of Redding, Conn., also goes by the moniker "Angry Canadian" on the Internet radio service Live365. He favors his punk rock channel, but also runs a classic rock channel, which he hoped might become more lucrative for him. While he's a Web consultant by day, he DJs online as a hobby.
But once the new rates came down, his hopes of taking his classic rock channel to the next level — from just a hobby to a hobby that makes him some extra cash — were derailed.
"When I tallied it up, I would be paying $600 a month just to have 50 listeners. ... I can't afford that," he said.
"What this will do if the rates go into effect is only the big guys will be out there," Barnett said.