Performance Royalty Fees Squeeze Internet Broadcasters
March 14, 2008 at 5:30 AM (PT)
For BARRY CEDERGREN, the decision to stop broadcasting nightclub music over the Internet was a matter of simple arithmetic. Much as he enjoyed playing music online, a big increase in music performance royalties made it too expensive for him to continue operating MOBILE BEAT RADIO, writes THE BOSTON GLOBE. "It was going to cost us tens and tens of thousands of dollars just in fees to play this music," he said.
CEDERGREN launched MOBILE BEAT RADIO from his home city of MINNEAPOLIS in JANUARY 2007, two months before a panel of federal judges approved a big increase in the performance royalty paid by Internet broadcasters every time they stream a song, prompting him to immediately shut down his site.
CEDERGREN's story is the nightmare scenario painted by many Internet radio companies who have claimed that the royalty hike would kill online broadcasting in its cradle. In fact, Internet radio is far from dead. Online broadcasters like PANDORA and LIVE365 still serve millions of listeners. But the higher rates have driven away many small online broadcasters who say they can't afford to stay in business. And even industry leader PANDORA says it's in trouble. "We're at the very end of our tether," founder TIM WESTERGREN said. "There's a very good chance that we will shut down."
But so far, the company hasn't begun paying the higher rate set last year. LIVE365 and other Internet broadcasters are in negotiations with SOUNDEXCHANGE, the recording industry group that collects performance royalties, in hopes of settling on a lower rate. While some Internet broadcasters are paying the higher rate, LIVE365 has withheld payment until the negotiations are complete. A SOUNDEXCHANGE spokesman said his organization is entitled to the money and will collect it retroactively.
Floater said many small subscribers, afraid that these retroactive fees will bankrupt them, are shutting down their LIVE365 music streams. Others have cut back the number of music streams they offer or the number of Internet users who are allowed to tune in. Because they must pay a royalty every time an individual listens to a tune, some Internet stations now drive away listeners to keep their royalty bill down. As a result, LIVE365 now broadcasts 15 million hours of Internet audio every month, compared to 25 million hours a year ago.