Internet radio stations to protest royalty hikes

Internet radio stations to protest royalty hikes
They will replace music with silence today to fight royalty rate hikes.
By Jim Puzzanghera, Times Staff Writer
June 26, 2007


WASHINGTON — Across the Internet, the music will die today.

It's a protest staged by online radio stations to preview what they say will happen when substantially higher royalty rates kick in next month, silencing for good stations that can't afford them.

Thousands of webcasters will replace their music streams today with periods of silence and occasional messages about the dispute, urging people to press Congress to reverse the royalty rate and fee increase set by a federal board. But despite growing support, Congress is unlikely to act before July 15, when the new rates take effect.

That leaves Internet radio operators hoping that a federal court will grant an emergency stay, or that negotiations with SoundExchange, the organization that collects and distributes Internet music royalties, will lead to lower rates and fees.

"It's not a moneymaking venture; it's a labor of love," said Ted Leibowitz, 39, a software engineer who runs BAGeL Radio from his San Francisco apartment.

He pays about $1,000 a year to broadcast "indie rock" 24 hours a day, sending out about 40,000 music streams a month through Live365.com, an Internet radio service based in Foster City, Calif. The new royalty rates threaten to shut down Live365, and Leibowitz estimates that he would have to pay more than $100,000 a year in royalties and fees to keep his station going.

"Even if I was a wealthy man," he said, "that would be a very expensive hobby."

So BAGeL Radio is joining Yahoo Music, MTV Online, Rhapsody and other sites in the National Day of Silence led by SaveNetRadio, a coalition of large and small webcasters and artists opposing the royalty hike. Many of those sites will point their listeners to an hourlong forum on the issue being aired continuously today by KCRW-FM (89.9) in Santa Monica, which may have to cut back its Internet music streaming if the rates take effect.

The webcasters are protesting a decision in March by the Copyright Royalty Board, an obscure group of federal judges. The current rate of 0.08 of a cent per listener each time a song is played will more than double by 2010. The board also set a $500-a-year administrative fee for each channel a webcaster broadcasts, and removed an alternative rate structure for small sites that capped royalties at 10% to 12% of their revenue.

Many webcasters will have to pay a large lump sum July 15 because the new rates and fees are retroactive to the start of 2006, when the old rates expired.

The ruling sparked outrage on the Internet, where about 72 million listeners a month tune in Internet music stations as an alternative to broadcast and satellite radio.

Despite the royalty ruling, SoundExchange can strike separate deals with websites. John Simson, the organization's executive director, said negotiations were continuing and dismissed fears of an Internet radio apocalypse July 15.

"We're going to be very busy the next two weeks," he said.

The $500-a-channel fee is as controversial as the per-song royalty hike. Live365, for example, has about 10,000 channels, many of which are run by hobbyists, who pay as little as $10 a month for the company to handle their technology needs and royalties.

Chief Executive N. Mark Lam estimates that Live365 will owe $7 million on July 15. The company made about $7,000 profit on $8.7 million in revenue last year — its first annual profit since launching in 1999. He predicted the new rates would kill the company.

Yahoo Music and Pandora have a similar problem because they create personalized music channels for thousands of listeners, all subject to the $500 fee. Ian Rogers, general manager of Yahoo Music, estimated the company would have to pay about $750 million in that fee alone.

Legislation has been introduced in the House and the Senate to roll back the royalty rate and fee increases. Although the House bill has 119 co-sponsors, there's almost no chance that it can get through Congress before July 15.

Rep. Jay Inslee (D-Wash.), the lead sponsor of the House bill, said he would continue to push for passage after the deadline. "We're just not going to let this nascent industry die and we're not going to let people's websites go blank," he said.