Without Congress’ help Internet radio will wither

Knight Ridder/Tribune News Service The following editorial appeared in the San Jose Mercury News on Thursday, April 18, 2002. The Internet has opened up a new universe of radio, unbound by limits of signals and

Knight Ridder/Tribune News Service

The following editorial appeared in the San Jose Mercury News on Thursday, April 18, 2002.

The Internet has opened up a new universe of radio, unbound by limits of signals and of spectrum.

From classical to rock, from East Coast to West, there are hundreds of Internet radio stations. They include streamed versions of broadcast stations and a quirky band of Internet-only Webcasters, largely of entrepreneurs and music collectors on shoestring budgets. They offer originality and variety not found on an FM dial dominated by corporate conglomerates.

But Internet radio is in jeopardy. At issue is the size of a new royalty that Webcasters will pay recording companies and performing artists for playing their tapes and CDs.

Giving performers a piece of the action isn’t a bad idea, if the cut is reasonable. But the proposed royalty is excessive, and the paperwork that Webcasters would have to keep is burdensome as well as potentially invasive of listeners’ privacy. The combination could wipe out many of Internet radio’s pioneers.

Performance fees are a new royalty Congress passed at the behest of the recording industry’s Internet-phobic lobby, the Recording Industry Association of America. Radio stations haven’t had to pay a performance royalty, on the theory that the tunes they play on the air serve to promote CD sales. Instead, they pay a royalty to the songwriter.

In 1995, however, Congress bought the RIAA’s argument that Internet radio stations should pay both, on the grounds that Web streaming produces perfect digital copies, creating opportunities for theft. That has not turned out to be true: Streaming degrades the quality of a recording. Piracy from streaming hasn’t been a problem.

An arbitration panel charged with setting the royalty is recommending 0.14 cent per listener per song for Internet-only Webcasters and half that for broadcast stations that also stream over the Internet. Those sums may not sound like much, but 0.14 cent is 10 times what the Webcasters had requested and 100 times, in some cases, what they pay songwriters.

Fractions of a cent add up fast to real money. They’d also be retroactive to 1998.

For Radio Paradise, a Web-only rock station, the $9,000 a month it would owe would be triple the revenue that it takes in, according owner Bill Goldsmith. He and others say the payments and costs of tracking information on listeners would force them off the Net. The ones who could stick it out, at a loss, would be the big commercial broadcasters.

Next month, the U.S. Copyright Office will respond to the arbitration panel’s recommendation. After that, either side can appeal to federal court.

If the Patent Office doesn’t slash the royalty, Congress should consider rescinding it.

Internet radio gives consumers reason to go out and install high-speed Internet cable or DSL in their homes. By rescuing Internet radio, Congress would encourage the growth of broadband and diversity of entertainment on Net — a winning combination.


(c) 2002, San Jose Mercury News (San Jose, Calif.) Visit Mercury Center, the World Wide Web site of the Mercury News, at https://www.sjmercury.com Distributed by Knight Ridder/Tribune Information Services

21 Comments

  1. Seems to me that there is obvious room for compromise here. The artists should of course be compensated for their work but the compensation should be reasonable. After all, if the radio broadcasts go out of business. There will be no royalties at all.

  2. I really didn’t even know that internet radio was run like a regular radio station. $9000 a month in royalties is huge.

  3. I did infact know that the royalties being generated by internet was growing at a fast rate but never this amount $9000 a month !! Of course the artists should be compensated but like the above comment if the broadcasters go out of business theres no royalties at all !

  4. Personally, as a part-time musician, I have no problem with having my music played royalty free on the radio. It’s free promotion after all, and I think that artists should be encouraged to make their living from performing live, rather than through royalties.

    The music landscaped has changed so much and we really need to adapt the industry to the new technologies, not the other way around.

  5. @tgotch64 I love Pandora. Although lately I’ve noticed my many stations have all started to converge. Lots of artist cross over…apparently my music taste is not very varied?!

    Regards,
    T @ The Premier Resource for Tall Womens Clothing.

  6. Yeah Mike. $9000 /monthly is quite huge. Btw, a great blog there. Looking forward for more stories to be read on. Very informative story there.

    Regards,
    Movies

  7. Wow. 14 cents per song per listener is a ridiculously high amount. I don’t know much about an internet radio website might make, but I doubt its enough to pay that much for each listener. Like these music producers and artists don’t have enough money, now they want more. The rich get richer, nothing new though.

  8. Wow. $9000…that is some money. I also love Pandora, since a friend of mine told me about it. Great selections, customization and it is free…what else I can wish for 🙂

    All the best in New Year 2010
    🙂

  9. I used to be a listener to internet radio. Got out of the habit. Anyway I prefer solace while banging away at the keyboard. However, your reminder is good… maybe I can find a quiet unintrusive radio channel for muzak-type background.

    Gary

  10. I personally love internet radio, it helps me stay focused when I’m doing a task online.

    I’ll be heartbroken if it goes away.

    It’s a huge blessing to me and many people I know.

    Sam

  11. I think internet radio is going to have the same sorts of problems that regular on air radio has had of late-the need to provide, unique local content to attract and audience while keeping costs very low. It’s a tough road to climb, but the lower costs assoicated with the internet should give them a fighting chance.

  12. I did infact know that the royalties being generated by internet was growing at a fast rate but never this amount $9000 a month !! Of course the artists should be compensated but like the above comment if the broadcasters go out of business theres no royalties at all !

  13. Radio outlasted televsion and now it is on the net. The market is fragmenting so radio as we know it today will likely not be the same.

  14. The high speed Internet really has changed a lot of things. This is a good example of how things will continue to change some for the better and some not so good.

  15. You can not calaim copyrights for everything anymore. It’s like trying to plug holes in old bucket with your fingers.

  16. Internet is simply killing all other media.

    Btw, very nice post. Keep on going!

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