New royalty rates may kill online radio

08.03.2007
Will a recently approved increase in music royalty fees for Internet radio operators kill online radio?

The answer is yes, according to operators of Internet radio stations who are railing against a March 2 decision to increase music royalty fees for Web radio operators.

But that's not the case, said a spokesman for , the group set up by the Recording Industry Association of America (RIAA) to collect those royalties for performers and record companies.

Under a by the Copyright Royalty Board of the Library of Congress, royalty rates will be changed from a percentage of revenue to a per-song, per-listener fee. The entities affected include pure play Internet radio stations, digital music stations like Pandora.com and traditional broadcast stations that also stream their programs.

"In our case, we've been operating for the last five years under what's called the small commercial webcaster royalty rate, which is something that Congress sort of forced SoundExchange to offer small webcasters so they didn't go bankrupt five years ago," said Kurt Hanson, who runs Chicago-based AccuRadio.com and also publishes the . "That rate -- the sound recordings royalty -- is about 12 percent of revenues. Broadcast radio pays a composer royalty and has never had to pay the sound recordings royalty," Hanson said.

Under that royalty agreement, which has been in place since 2002, the rates paid to performers were between 6 percent and 12 percent of a station's revenue.