Adios, Internet Radio

eNews and Views: One-sided legislation would impose huge fees that would force most broadcasters to shut their doors.

Im a fan of Stardog, personally. Maybe you like CelticGrove or BlueCityJazz. Doesnt matter. In a few weeks, listening to music on Internet radio will be dead as a mackerel.

Shame really. The Internet radio business has been growing at something like 100 percent annually and is thriving in genres underrepresented on FM stations, such as classical, blues, jazz and gospel. Doesnt matter. The government, acting once again in the special interest of the music industry, is about to crush the idea.

In the latest example of groundless regulation and greed interfering with free commerce, the U.S. Copyright Office is considering a proposal that would force Internet radio stations to pay exorbitant royalties to record companies and performers, something their over-the-air counterparts are not required to do.

Where AM and FM radio stations pay a small fee to music composers, Internet radio stations are facing fees of up to 14 cents per listener per song. That fee would bankrupt nearly all of the Web broadcasters operating today, according to the group

Copyright officials have until May 21 to make the call, but considering that the recommended shakedown came from the advisory group they created—the Copyright Arbitration Royalty Panel (CARP for short)—its clear the rubber stamp is warmed up and waiting.

How did we get to this point? Even if you thought Napster and others of their ilk were the bad guys, how did Internet radio become to the target of the Harry Fox crowd? It began in October 1998, when Congress passed the "Digital Millennium Copyright Act" (DMCA), which gave record companies the green light to collect royalties when music was played via "digital media" such as Internet radio.

Its an interesting departure from a music industry standpoint. Record companies and performers dont get royalties from AM and FM radio play because the copyright folks consider the promotional value of the airplay payment enough. So why the switch for the Internet? The theory bought by Congress is that Internet listeners can make "perfect copies" of the songs being streamed, and those copies could hurt CD sales. That would be a good argument, except that, as anyone who listens to Internet Radio knows, you cant make "perfect copies." You cant easily make copies at all. And if you can, they are of too low a sound quality to be useful in creating your own CDs. What you get sounds pretty much like those cassette tapes you used to make off the FM radio. Not great.

Never ones to let facts stand in their way, the solons assigned to the CARP published their recommended royalty schedule in late February. As the basis for the outrageous fee schedule, the CARP report cites a $5 billion deal between Yahoo! and The result was a figure that would leave most Internet broadcasters, who have attracted precious little advertising, liable for between 200 and 300 percent of their gross revenues. And, oh, by the way, the fees are retroactive to October 1998. According to Internet radio industry figures, a midsize independent Webcaster with an average audience of 1,000 would owe $525,600.

See you later Stardog. It was nice knowing you.

E-mail eWEEK Deputy News Editor Chris Gonsalves