Trying to Save Internet Radio and is it Really in Jeopardy?

In the ever changing world of the Internet, music and copyright law there is apparently a new issue: royalties paid by Internet radio stations to play the songs. A recent ruling has scheduled a drastic increase in the royalties paid by Internet Radio for July 15th 2007 that will be retro active to Jan 1st 2006. This royalty increase will cause millions to be paid out and might easily jeopardize the entire industry of Internet radio and end up being far more harmful to the artists than helpful.

Save Net Radio is an organization trying to act against this royalty increase and save Internet Radio.

I have been following this story for a while, have been reviewing some of the details recently and decided it was time to discuss it as the deadline approaches and sides take action. It can be awfully hard to determine which side is right at times though as the issue is quite heavily debated. Read these quotes from a piece written for

"'Before [the CRB's decision], the vast majority of webcasters were barely making ends meet as Internet radio advertising revenue [was] just beginning to develop," it said in a statement. "Without a doubt, most Internet radio services will go bankrupt and cease webcasting if this royalty rate is not reversed.'

The coalition said the new royalties were so high that 'even the biggest Internet-only radio services -- including Yahoo, AOL, MTV and RealNetworks -- will pay a combined 50-plus percent of their revenue for only this single royalty'.

'The only way to make a profitable, scalable business will be to attract the largest audience and advertisers while reducing overhead and innovation,' the group argued, saying this would lead to an end to the diversity characterizing online radio...

John Simson, the organization's executive director, was optimistic about the industry's future under the new royalty regime. 'Not only is Internet Radio not going to die," he said, "it's going to continue to flourish. The statistics show that it is a vigorous business dominated by large businesses that can easily pay fair market rates while also having room for small webcasters and niche services.'

SoundExchange accused the Save Net Radio coalition of being a front for large webcasters such as Yahoo! and AOL, which it said 'paint a highly distorted picture in an effort to maintain extremely low rates and high profit margins..'"
-- Quoted directly from Online Radio Stations Unhappy About Royalty Rate Hike by Evan Moore Correspondent

It is important to take a look at all the arguments, as there is probably some truth to both sides, but my decision on which to support is made. I believe in supporting the artists wholeheartedly including upholding copyright laws and paying royalties, but I'm supporting the Save Net Radio organization for the following reasons.

1. If Internet radio dies thousands if not millions of independent artists will no longer have such an easy avenue to use for promoting their music. Reaching the audience is everything and having an easy way like Internet Radio stations bother varied and targeted can be a great way for up and coming artists to reach their audience. Internet radio should of course have to pay royalties, but tripling those royalties might cripple the smaller stations and limit artists significantly in where they can have their music played.

2. If you purchase a significant amount of music I'm sure at some time in your life you've been in a Best Buy store and browsed the collections... I have many times, but usually came away not finding some of the music I was looking for. When I was in college we also had a store on campus that was not a Best Buy or other chain, but an independent store. Buy comparison, the variety of music, mainstream, underground, current and old releases, between Best Buy and the independent store, the independent store won hands down for supplying a far greater variety of music from all genres, while Best Buy mainly had multiple copies of the highest selling albums of the time.

This is what I refer to as the "Best Buy Effect". Best Buy, with their thousands of stores cannot afford to stock as many indie artists and such a variety of music as the independent music stores simply because they are so huge and the cost to stock the stores with such a variety of albums that might not sell would be to great. Instead, they stock large numbers of the albums they believe will sell in order to guarantee that their inventory sells. Stores like Best Buy have actually put the independent music stores, including the one that was on my college campus, out of business with this model as it allows them to price the albums they know will sell for less choosing quantity over selection.

I believe that this royalty increase might cause the "Best Buy Effect" to happen in the industry of Internet radio. With the higher royalties Internet radio webcasters are going to have to choose what to play for what they're spending. The cost might be so high that they will have to stick towards those artists that they know will bring in the larger audiences needed to have them make a profit and continue. This is basically the same concept as what Best Buy chose to do. These Internet radio stations would have to choose between quantity and what they know will sell, and quality of selection from a variety of artists and eventually many of the ones that choose quality of selection will be put out of business due to the higher royalties just like many of the independent music stores were put out of business but having to compete with Best Buy's lower prices.

This could devastate the variety of music that is available on Internet radio and make it as difficult for unknown artists to get exposure through Internet radio as it is for unknown artists to walk into Best Buy and get their albums on the shelf.

Both of these reasons make this royalty increase not seem worth the risk for whatever additional money might actually go to the artists. Limiting an artists audience either by having the number of Internet radio stations decrease, by having the variety of what these stations play decrease, or both, will end up being a huge detriment against independent music and hurt the artists tremendously.

As I said, I'm supporting the Save Net Radio organization and think that most music enthusiasts should too. Still, take a look at multiple sources and decide for yourself what you think is the best course of action for Internet radio.

You can read the entire article I have quoted here at

If you'd like to support the Save Net Radio cause, they are having an Internet radio day of silence June 26th to raise awareness. You can find a whole bunch of different sources about this debate on their site as well as information about how you can support the foundation by raising awareness and calling our congressmen. Remember, we only have till July 15th before the new royalties go into affect.

If you're a music blogger, cover this story yourself so that your readers are aware and you can get banners to help promote the cause from the organization's site as well.

You can find the Save Net Radio site by clicking the banner below.


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