Internet radio royalty rates decided (Verdict: it ain't good news)

Monday, March 5, 2007 at 8:59 AM

SoundExchangeIt wasn't only the royalty rates for XM and Sirius that expired in 2006, the Copyright Royalty Board has announced its decision on Internet radio royalty rates as well. And the decision could spell doom for most webcasters, and be a sign of bad things to come for XM/Sirius' own negotiations.

The Copyright Royalty Board has basically adopted the proposal as presented by SoundExchange (a digital music fee collection body created by the RIAA). This is the same board that will rule on satellite radio royalties.

The ruling is on a "per play" basis - so Internet radio stations will have to pay the cost of one song to one listener - effective retroactively for 2006. There's also an additional fee of $500 per channel per year - but there's no clear definition of what a "channel" is (which could mean big problems for a service like Pandora which creates custom playlists for listeners).

The rates to be paid are:

2006 - $.0008 per performance
2007 - $.0011 per performance
2008 - $.0014 per performance
2009 - $.0018 per performance
2010 - $.0019 per performance

Note the rapid increase from 2006 to 2009. RAIN estimates that the royalty rate decision (for the performance alone, not even including composers' royalties!) is in the in the ballpark of 100% or more of total revenues. 

The ramifications of this decision are astounding:

  • Internet radio as we know it will likely disappear (at least for those based in the US). Pandora and Live365 will be driven out of business, and Yahoo! and AOL Radio will be constrained severely.
  • Smaller terrestrial radio stations will probably abandon online streaming as they'll be paying more for online streaming then they will for regular broadcasts (and for far less of an incoming revenue stream). This applies just the same for HD2 streaming.
  • While there's no word on how this affects XM and Sirius' own online streaming, the decision by the CRB does show how they're leaning in decisions with SoundExchange, since they accepted the proposal at face value (despite the arguments put up by webcasters).
  • The death of Internet radio, and the damage done to HD Radio, could affect federal regulator's decision for the merger and the definition of the relevant market.
[More analysis from RAIN here.]
Thanks Levi!



These fucking crooked bastards are at it again. Its just not fair....................

So the RIAA wants to wipe out everythinb but terrestrial radio, where the vast majority of artists cannot be heard or discovered, which leads to poor CD and download sales. Good move.

I have discovered many artists on XM I NEVER would have discovered on terrestrial radio. I have purchased many songs online and CDs (both download and hard copies) because of XM. If the RIAA drives out internet radio, and hurts satellite radio, they are doing a disservice to the artists.

Wonder how this impacts Siri/XM internet streaming? based on this prices would have to increase.

Could be good news as stations become very limited and only large commercial entities can stream. 10x as many comercials...could be good for the Sat industry

..and you are worried about the merger raising prices, if this is a reflection of the future cost for XM/Siri you can bet on a price increase because of it

Is this really better for the music industry? I'm not sure I understand why they would want to shut down people streaming their music.

As for the online streaming, it appears that SIR and XMRO (at least as far as broadcasts to subscribers, and probably also the 3-day previews are concerned) are covered by their satellite agreements.

XM on AOL Radio etc. probably has the non-XM party paying the royalties. However, I doubt that these agreements will be affected. AOL will cut less-listened-to, more specialized streams, as each stream now has to generate at least $500 a year in revenue to make sense. Most of the XM streams are among the more highly rated on AOL (with 7 of the top 8 all being XM: The Heart, 20 on 20, The Blend, Flight 26, HitList, '70s, and '80s). Channels like 69 Sexiest Songs, Acoustic Blues, Anime Radio, Black Metal, and Bollywood will be the ones that get axed.

How will these Internet Radio guys respond to this nonsense ?


Pirated Music is now on a comeback! Thanks to the RIAA, CRB, and SoundExchange, they have just caused listeners to go back to peer-to-peer networks and start sharing music again. With the death of internet radio, costs skyrocketing to provide music online, and 5 commercials for every one song, people have decided that taking the chance at being sued for thousands of dollars is better than listening to this bullshit!

Damn, should the merger go through, the online version of XM/Sirius may be $14.95/mo.

Although a big time concern for the upcomming increased costs at both XM and Sirius, It is actually a small victory as well. The biggest fear and threat to Sat Rad was never Terestrial rado or the efforts of the NAB but upcomming technoligies such as WiFi and Wimaxx along with any other method of gaining mobile internet acess. This restriction and cost putting Internet radio out of bizz eliminates some if not all the major upcomming competing technoligies. So.. XM and Sirius pay more but with less compition is good..

And better yet... a reason for the merger to be blocked.

I guess the RIAA does not want anyone to hear new music. There are a lot of us satrad listeners who would never go back to FM. An I-pod loaded with MP3s from CDs I currently own would be my new music of choice.

Should be a boon for satellite radio.

This may actually backfire on the RIAA because if satellite radio is forced to commit to a price freeze, XM and Sirius can go back to the feds and tell them that the RIAA should also be forced to a ceiling. I'd bet that Mel has all of this mapped out!

PSSHHH i'm definetly not paying no matter what anybody says. I've paid for all my music and that was enough. The goverment has go way to's time that Internet Radio Stations stand and and fight back. I say..FORGET THE GOVERNMENT! I'm still gonna be streaming and there's nothing they can do about it. So *sticks tongue out* in their face.

Well the good news if anything, is that small Webcasters have seen what's at stake and are now gearing up to form an industry trade association to combat this injustice.

Let's just hope it's not to late to affect some change in this whole ordeal.

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