The Internet Radio 'Death Watch'
August 21, 2008 at 5:31 AM (PT)
PC MAGAZINE's DAN COSTA writes about the situation Internet radio finds itself in regarding royalty fees to play music. He writes, "Internet radio may be on the way out. PANDORA RADIO is the canary in the coal mine. With about a million listeners every day, PANDORA is one of the most successful Internet radio stations on the Web. It generates revenue, perhaps as much as $25 million this year alone. But that isn't enough to pay the royalty fees."
COSTA continues, "Last summer, THE COPYRIGHT ROYALTY BOARD doubled the fee that Internet radio stations have to pay to broadcast a song. The royalty structure is pretty straightforward. In 2008, Internet broadcasters have to pony up $.0014 to stream one song to a listener. That fee is scheduled to climb to $.0019 in 2010. PANDORA RADIO Founder TIM WESTERGREN claims that his company may have to shut down because of royalty fees. WESTERGREN estimates that PANDORA will have to pay $17 million this year. PANDORA may be adding new listeners every day, but that's just driving up its costs. And if one of the largest, most successful stations on the Net can't get ahead of this curve, who can?"
Terrestrial radio stations pay nothing to broadcast a song. Satellite radio pays a percentage of their revenue. The real numbers are hard to come by, but satellite radio mashup SIRIUS XM is thought to be paying about 6 or 7% of its revenues in royalty fees. By comparison, paying per track will cost PANDORA about 70% of its revenue, writes COSTA.