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Web Radio Gets A Smack Down


By: Spacelab Research Staff
In a decision that's sure to shake up the web radio world, new royalty rates for SoundExchange for 2006 through 2010 were approved last week by Congress. The new rates add on the amount paid for the use of music, based on how many times a song gets played. Previous to the decision, it was based around paying a portion of the money earned on the broadcast.

The bottom line is that the royalty rate is set to double during that timeframe, which will leave some established stations like Soma.FM and Radio Paradise to either change their direction or possibly go out of business.

"Artists have earned the right to be fairly compensated for the performance of their work by webcasters who benefit—financially or otherwise—from their talents. Without these royalty payments, these artists would, in many cases, be unable to continue contributing to the music world," said press release issued by SoundExchange on the decision by the Copyright Royalty Board.

I don't think anybody is saying that royalties shouldn't make their way to artists, but questions are being raised around how heavy handed the increase is. There are possibilities for appeal, and a lowering of the rates to something that will allow webcasters to stay in business while still compensating artists, labels, publishers, etc. What good is a rate hike if you squeeze out the stations that are paying you royalties?

Which is an interesting angle, if you think about it. Could this be a way to narrow down the playing field at at a time when more established FM and satellite radio stations are looking to the web for the future? As they get online, their slowness to act means that they're entering an area that's already populated with lots of exisiting stations.

The things that keep CNN staff awake at night is how bloggers peel eyeballs away from CNN. Not any one blog in particuliar, but collectively, they take away a chunk of the potential CNN audience. FM and satellite radio stations face that same obstacle as they enter the web game.

It could also be a strategy for an ailing music industry to try to get revenue from another source. The music industry, as far as the RIAA players go, seems to be suffering from a lack of any plan to move into the future, and running out of scapegoats to blame their demise on. They need revenue, and the emerging streaming market seems like a good place to tap into.

This issue is just starting to heat up.

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