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Radio AM to FM: May 3, 2002

Saving Internet Radio

With the amazing blandness of traditional radio a fact of life in this era of radio consolidation, internet radio streams are fast becoming one of the few ways to hear both new music and a variety that can't be matched.

But the best internet "webcasts," streams of audio distributed and received by computer, are in danger of disappearing completely due to a new fee structure being considered by the US Copyright Office and endorsed by the Recording Industry Association of America, also known as the RIAA.

Simply put, the new rules would be prohibitively expensive for the webcasters, most of whom make little or no money as it is. This is due to the fact that the rules and fees being considered were based on a seriously flawed 1998 business model that saw webcasting as being dominated by large corporations deriving profits from advertising -- much the same as traditional radio -- rather than the individuals who actually dominate today, most of whom make no money from advertising and instead put their own money into the operation.

Ironically, broadcast stations do not pay these fees -- royalties that get paid to the recording copyright holder -- due to an exemption such stations have held for years. Radio is a promotional tool for music, after all ... heck, record companies often pay stations in one way or another to get songs on the air.

However, it is not the royalties themselves that are causing problems. Most webcasters agree that royalties should be paid; the problem centers on how they are determined. Rather than a share of the profits, the RIAA wants a per-listen royalty of 0.14 cents per listener that is tuned in.

That can easily add up to thousands of dollars per month for the most popular webcasts, generally estimated to be more than 200% of the typical webcaster's gross revenue. One estimate has the royalties pegged at $2.4 billion, equal to approximately 13 percent of broadcast radio's total advertising revenue for 2001.

To highlight the problem, many webcasters participated in a Day of Silence on Wednesday, May 1st, in which the streams were either simply shut off, or replaced with silence interspersed with announcements on how listeners can get involved and convince Congress to help save internet radio. Steve Wolf of WOLF-FM hosted an all-day talk show on the subject.

Five major broadcasting groups and National Religious Broadcasters have petitioned the Librarian of Congress to put aside or amend fees, with the maximum suggested royalty set to 0.02 cents per listener. The big ratings company Arbitron believes there should be a five-year moratorium on royalties, stating that the impact of the fees would be to dramatically reduce the consumer's choice of streaming content, limit diversity, eliminate competition and impede the growth of the medium.

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Copyright © 2002 Richard Wagoner and The Copley Press.

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