Internet Radio’s Royalty Misery

Webcasters and the recording industry are still at odds over royalties when it comes to Internet radio, with many Web streamers hoping for a last-minute deal brokered by Congress to save the day.

The basic issue hasn’t changed much from last year when the Copyright Royalty Board ruled that Webcasters must pay .08 of a cent per song for music played in 2006, .11 of a cent for 2007, .14 of a cent for 2008, .18 for 2009 and .19 for 2010.

As has been the recording industry’s mantra when it comes to inducing payments, the labels say their artists must be paid. In response, Web streamers have been trying to arrange some kind of rate based on a percentage of revenue instead of spins.

What makes Internet radio so enjoyable for listeners is also what is making the royalty issue such a hot-button topic. Unlike terrestrial radio playing one song at a time, or satellite radio playing one song at a time per channel, Internet radio produces multiple unique streams for each individual listener, thus making that .14 of a cent per song add up to real money real fast.

Webcasters at odds with the new rates have claimed the royalty hike will drive them out of business. Now, it looks as if one player – Pandora – may actually have to close its doors.

Pandora founder Tim Westergren recently told The Washington Post the new rates will amount to 70 percent of its projected revenue of $25 million. He said his company may have to shut down.

“We’re losing money as it is,” Westergren told the Post. “The moment we think this problem in Washington is not going to get solved, we have to pull the plug because all we’re doing is wasting money.”

Westergren and other Webcasters are hoping that Rep. Howard L. Berman (D-Calif.) will succeed in brokering a last-minute deal that will appease all players. However, it appears money is the sticking point that will cause Web radio to come unglued.

“Most of the rate issues have not been resolved,” Berman said. “If it doesn’t get much more dramatic quickly, I will extricate myself from the process.”

There’s also the underlying suspicion, first voiced last year when the CRB announced the new rates, that the music industry does not want to see Internet radio thrive. Or that it doesn’t want to see as many players as the field contains, and would prefer a smaller, more robust Internet radio industry.

The current Internet radio field, where small players compete on a somewhat level field with major companies like AOL and Clear Channel, gives listeners a much wider variety of music from which to choose, thus allowing that garage band down the street to compete against major-label recording artists. A “thinning of the Internet radio herd” could result in more major-label music being streamed over the remaining Internet stations to the detriment of artists on independent labels.

Of course, the labels are saying it’s all about their artists getting paid. However, if the new royalty rates do nothing but stifle Web radio, then no one is going to get paid and the labels might discover that they really have chopped off their noses to spite their corporate faces.


China’s Totalitarian Syndrome

The Olympic Summer Games in Beijing was supposed to be China’s opportunity to show the world its brand of totalitarian Marxism can coexist in peace with the rest of the world, but the largest communist country on the planet has stumbled yet again as it tries to portray itself as a modern international leader.

This time, it’s not about a little girl lip-syncing to another little girl’s vocal performance that shows the country still has a lot to learn about public relations. Instead, China has done something a little more drastic than portraying all its children as cute and cuddly. This time it blocked access to one of the most popular music sites on the Net.

That’s right. China blocked access to iTunes.

The iTunes blockade is a result of China trying to discourage dissent within its borders regarding Tibet. The decision comes apparently after officials learned that Olympic athletes were downloading the album Songs For Tibet featuring performances by artists including Sting, Moby, Suzanne Vega and Alanis Morissette and produced by The Art Of Peace Foundation.

It turns out the foundation had provided free downloads of the album to Olympic athletes, encouraging them to download and listen during the Games as an act of subtle protest.

It may have taken a while, but China’s powers-that-be eventually heard about it. Starting August 18, some iTunes users in the country experienced technical problems when attempting to access the music download store, according to the Sydney Morning Herald.

Ironically, the cyber blockade started within 24 hours of the International Campaign for Tibet announcing on its Web site that “over 40 Olympic athletes in North America, Europe and even Beijing ” had downloaded the album, thus showing that China, while still not clear on the free speech concept, does have impeccable timing.


How To Dismantle An Internet Leak

U2 manager Paul McGuinness has been getting his fair share of press lately, mostly for accusing Internet service providers of “turning their heads the other way” in regards to music piracy. But the man who has guided U2 through its remarkable career didn’t have to look very far when a few tracks from the band’s upcoming album appeared on the Net.

All he had to do was talk to Bono.

Apparently the U2 frontman was listening to the tracks in his holiday home in the south of France. And, just like the amplification at one of the band’s shows, he likes his music loud.

So loud in fact that a fan, upon hearing the tracks blasting from Bono’s villa, was able to record the tunes on his cell phone and post the unreleased tunes on YouTube, according to Reuters.

Although the sound clips – described as poor quality and containing sounds of waves and seagulls in the background – were removed from the video Web site, the tracks continue to circulate on the Net as another example of not being able to stuff that genie back into the bottle.

On the other hand, the unplanned viral distribution of the songs will no doubt further fans’ interest in the upcoming release, thereby proving that sometimes you really can have it both ways.