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News
New Legislation May Save Internet Radio
Thursday, April 26th, 2007 at 4:00 PM - by Jeff Gamet
The future of Internet radio in the U.S. was cast into doubt after the Copyright Royalty Board refused to reconsider new rates that would cost most online stations more than they make in a year. But a bill was introduced into the House of Representatives on Thursday that may save the stations from financial death.
According to the Radio And Internet Newsletter, Representative Jay Inslee (D-WA) introduced the Internet Radio Equality Act Thursday afternoon in an effort to prevent what many see as the forced end of Internet radio through excessive royalty payment rates. Additional co-sponsors are expected to join Rep. Inslee soon.
In early March the Copyright Royalty Board approved a change to the royalty payment schedule Internet radio stations must follow. Instead of the 10 to 12 percent of gross income the stations had been paying, they would be required to pay per performance retroactively back to 2006 - costing most stations about 125 percent of their annual income.
The royalty rates as proposed by to the board by the RIAA’s digital music collection organization SoundExchange were also designed to ramp up through 2010 to more than twice the retroactive 2006 rates.
"Because a typical Internet radio station plays about 16 songs an hour, that’s a royalty obligation in 2006 of about 1.28 cents per listener-hour," said Kurt Hansen from the Radio And Internet Newsletter. "In 2006, a well-run Internet radio station might have been able to sell two radio spots an hour at a $3 net CPM (cost-per-thousand), which would add up to .6 cents per listener-hour."
If passed, Rep. Inslee’s bill will nullify the CRB rate change, and changes the royalty rate setting standard for Internet radio arbitration to a model that balances the needs of copyright owners, copyright users, and the public as opposed to a "willing buyer/willing seller" model. It also offers Internet radio stations the same royalty options as satellite radio: Either $0.33 per listener hour, or 7.5 percent of annual revenues.
This legislation is exactly what Internet-based stations have been hoping for since their requests to the CRB for affordable royalty rates fell on deaf ears. The CRB’s new rate plan is scheduled to go into effect on May 15, which gives legislators only a couple of weeks to fast-track the bill into law.
Should the Internet Radio Equality Act fail to pass, most online radio stations will go silent since they simply don’t make enough money to pay the royalty fees. And should the CRB royalty plan stand, the board will likely set its sights on traditional terrestrial radio stations next.
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