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Strangling Internet Radio In The Crib

The recording industry wants Internet radio stations to pay heftier royalty fees, a move many expect will kill off a chunk of Web broadcasters. 

According to SoundExchange, which is advocating on behalf of recording artists and labels, Internet radio is just another potential avenue for piracy. 

Business Week gives some background on the ongoing negotiations between SoundExchange and Web broadcasters. 

… the two sides could hammer out tiered royalty rates, charging different fees to Webcasters of different sizes, says Dave Van Dyke, an analyst with consultancy Bridge Ratings. Perhaps nonprofit stations would pay different, lower fees as well. Whatever the compromise, if one is reached at all, Webcasters “are still going to have to pay the piper very shortly,” Van Dyke says. While the minimum-fee compromise has appeased many large Webcasters, a deal on royalties is critical for smaller stations. “You may still see hundreds, if not thousands, of Webcasters go out of business,” he says.

The Net radio business is not yet all that lucrative, generating just tens of millions in ad revenue per year, Palumbo estimates. “The industry is immature in what it can withstand in terms of royalty payments,” he says.

It’s interesting to note that the music industry’s opening bargaining position was one in which a significant number of Internet radio stations would be crushed under the weight of tremendously onerous fees. Now, only “hundreds if not thousands” are poised to go under. 

It reminds me of a great Simpsons episode, where Bart goes to Australia to receive a “booting” for a crank call. A State Department official (played by the late, great Phil Hartman) tries to negotiate for leniency. 

“We’ve argued them down to … a booting.”

 Looks like SoundExchange is still polishing their boots.