The potential demise of Internet radio in the United States has been an on again, off again thing for the past few months while SoundExchange and webcasters attempt to work out a music royalty payment scheme. The latest breakdown in negotiations has Internet broadcasters crying foul over demands that they find ways to add copy protection schemes to their music streams.

The negotiations stemmed from SoundExchange-proposed royalty payment hikes that the Copyright Royalty Board agreed to and enacted. The new fees work on a per-song basis, instead of the flat-fee schedule broadcasters had been paying before. The new payment plan was designed to be retroactive to the beginning of 2006, and in many cases amounts to more than revenue stations are bringing in.

SoundExchange, the RIAA's royalty collection arm, and webcasters represented by the Digital Media Association (DiMA), have been working to reach an acceptable compromise. DiMA, however, chose to reject the latest SoundExchange proposal that includes caps on the minimum fees stations must pay for radio streams because it also includes verbiage that requires stations to come up with ways to prevent "streamripping," or the recording of station webcasts.

To take advantage of the payment cap, stations must agree to provide more detailed information about the music they are playing, and to "work to stop users from engaging in streamripping." DiMA representatives feel that the payment cap is being used to leverage webcasters into adding DRM copy protection to their music streams.

"DiMA and our members are happy to cooperate on issues of common interest even if outside the scope of the CRB decision, but SoundExchange has demanded enforceable technology mandates that are unreasonable, unworkable and way off-topic," said Jonathan Potter, Executive Director of the Digital Media Association. "They seek to leverage this absurd fee to impose mandates that they have unsuccessfully sought elsewhere."

While DiMA claims that streamripping is essentially a non-issue because it is easier for people to use P2P systems to download unlicensed copies of songs, SoundExchange disagrees. SoundExchange representatives see streamripping as a real threat that could dilute royalty revenue streams.

Both sides are now accusing each other of acting in bad faith and misrepresenting the facts, when only a week ago they appeared to be coming closer to an agreement. That near-agreement came during a roundtable meeting with the House Commerce Committee.

Should the negotiations break down completely, leaving the CRB ruling intact, most webcasters in the United States would likely shut down to avoid the new royalty rates.

Mr. Potter added "This is a disappointing turn after what we thought had been a very productive roundtable."