Internet Radio Just Got More Expensive

Maura | March 2, 2007 - 4:52 am

radio.jpgKurt Hansen’s Radio And Internet Newsletter breaks down the higher royalty costs for Internet radio broadcasts, which were announced today by the Copyright Royalty Board. The board decided to go with the rate suggestions put forth by SoundExchange*, the division of the RIAA focused on collecting digital royalties, and not broadcasters; perhaps unsurprisingly, they’re prohibitively expensive for even the largest broadcasters, and in some cases the required royalty payments may equal or exceed 100% of an Internet radio station’s revenue. Hansen breaks down the math for each type of radio station–AOL Radio, under the new rules, could owe royalties of about $1.65 million a month, based on November’s statistics–and closes his column with this thought:

Although this is undeniably a huge victory for the legal departments of record labels (or at least for the lawyers at their industry trade association, the RIAA), I doubt that the heads of the record labels and their marketing executives actually want to see Internet radio driven out of business. (This may be a case of “Be careful what you wish for, you may get it.”)

Oh, we don’t know. Judging by the RIAA’s apparent wariness toward having its members’ music promoted online at all, we wouldn’t be surprised if this is, in fact, a case of exactly that.

*UPDATE: Thanks to a slight misunderstanding of the relationship between the RIAA and SoundExchange–as our commenters pointed out, SoundExchange spun off from the RIAA a few years ago, and now it’s actually a nonprofit organization that pays out royalties to indie labels as well–the above joke doesn’t work at all; however, this decision’s detrimental effect on the future of Internet radio can’t be overstated. As Hypebot notes, smaller stations like Radio Paradise will have to pay as much as 125% of their total revenue underneath this new rate structure, effectively putting them out of business.

Webcast royalty rate decision announced [RAIN: Radio And Internet Newsletter, via Hypebot]