The clock is ticking for Internet radio, from public broadcasting streams from stations like KCRW to Internet-only streaming services like Pandora. The Copyright Royalties Board recently approved new rates and restrictions that would increase costs for streamers by three to twelve times their previous rate. This month, the CRB rejected an appeal by broadcasters to reconsider the rates. As a result, by May 15 streamers will have to not only begin paying the 2007 rate but also back-dated royalties going back to the beginning of 2006. Without changes to the rules, many stations will simply shutter on the 15th of May. (That won’t be limited to US-based radio stations, either; any station broadcasting in the US — theoretically, any station at all — is subject to US liability.)

The new rules are wrong on three counts:

The rules would devastate internet streams, while other media pay little or nothing. Terrestrial (AM/FM) radio pays nothing. Satellite radio pays about 3-7% of income. And yet online radio will be charged per listener, per song and will be subjected to fees regardless of proportionate income. There’s even a poorly-defined minimum fee that slaps everyone. Small stations won’t be able to afford it. Struggling public radio in the US will have to shutter streams and lose income from people pledging online and pay back fees at a time they’re strapped for cash. Internet-only services will have to shutter to protect investors from liability. And big stations and big services will have to give up, as well; even with the money to support the fees, they may be unable to justify their profit model. (One service speaking out against the new rules, for example: Yahoo! Music.)

The rules would hurt artists’ revenues. Let’s put aside promotion for a moment: the Internet has the potential to become a vital revenue stream. Internet radio should pay a reasonable rate for using music. If those rates are set so high that the streams have to shut down, though, we’re back to FM and satellite radio, which pay little or nothing and play far less of our music; in the case of FM, to a smaller audience (since that college radio station that just got international distribution now has none).

The rules would hurt musical audiences and the artists working to connect with them. Losing revenues, even the small revenues from radio, hurts. Losing promotion hurts artists even more. How many artists have you discovered because you heard them on the radio? How many more have you discovered via internet streams, or discovery-focused services like and Pandora? Compare satellite radio and the FM stations you can tune in locally, and the situation is dismal in terms of variety. This situation is destructive to listeners and artists alike. And, ironically, that means it hurts labels. Streaming songs impacts music stores, online and off, because it’s a mechanism for discovering music. (Ironically, even many online stores stream whole tracks because it helps them sell them.) Letting internet radio operate for free isn’t even under discussion; at the heart of this debate is setting fare rates and allowing Internet radio to survive.

US Legislation Offers a Solution

We’ve seen various efforts to “boycott” the RIAA, an organization of member labels that backs the collection agency in this case (SoundExchange) and has lobbied on the behalf of the new rules. But that ignores the fact that the RIAA is already working against the best interests of its members — and trying to inflict damage on the member labels’ record sales is unlikely to either change their membership status in the RIAA or the RIAA’s lobbying position, however misguided.

With time running out, a better solution is to support legislation that would intervene in the new rules. Members of Congress often don’t hear anything from constituents on this issue. As groups like flooded the Congressional switchboard with phone calls, two Members took action. The bipartisan bill, H.R. 2060, the “Internet Radio Equality Act”, sponsored by Representatives Jay Inslee (D-WA) and Donald Manzullo (R-IL), promises to set the rates at a more reasonable level related to income (7.5% of revenue, or 33 cents per hour per listener). The new legislation is backed by streamers and artists alike.

If you want to support the new legislation and you live in the United States, you can find numbers for your Representatives via’s site:
H.R. 2060 Action Alert

You won’t be alone. Pandora reports over 200,000 of their listeners have called their Congresspeople, and sent so many faxes they shut down Capitol Hill’s fax infrastructure. Pandora delivered boxes of faxes by hand. (Source: IP Democracy.)

If Streaming Rates Stand, “We’ll Have to Shutter”, Says Pandora Founder
Pandora’s Founder on Decoding Taste and Promoting Indie Music

For more background on the issue, see the Save Internet Radio blog. Found other good discussion or information? Do share in comments.