Online Radio Lives

Remember when Internet radio operators were claiming new royalty rates would drive them out of business? Looks like that’s not going to happen. At least for now.

The nonprofit organization tasked with collecting royalties from online radio – the SoundExchange – has reached an agreement with webcasters calling for large Net stations to pay whichever equals more money: 25 percent of revenue or a per-performance rate that is lower than rates previously set by the Copyright Royalty Board.

Smaller stations will pay fees based on revenue or expenses. The SoundExchange defines small stations as those taking in $1.25 million in revenue or less. Right now three small webcasters are on board – radioIO, Digitally Imported and AccuRadio.

The new agreement extends to 2014 for small stations, one year later for major companies and applies to “pure-play” or Internet-only outfits. Earlier this year the SoundExchange reached a new agreement with the National Association of Broadcasters, National Public Radio and other terrestrial broadcasters that beam their on-air signals over the Internet.

Back in 2007 the Copyright Royalty Board set royalty rates for Web radio based on individual spins, which pleased the labels but drew nothing but criticism from Internet broadcasters. With claims the royalties would result in payments amounting to more than what stations earned, many Net radio chiefs predicted an end to a fledgling industry.

One of those doomsayers was Pandora chief Tim Westergren. Saying his company would sign onto the agreement, he described the new structure as a somewhat positive step.

“For us, it’s hard to overstate how significant this is,” Westergren said. “It was either this or an ugly alternative.”

If you’re looking for another sign that this is a major step forward for Internet radio stations, consider that SoundExchange executive director John Simson also praised the new royalty structure. For the past two years Westergren and Simson have been on opposite sides of the argument and have rarely, if ever, agreed on how royalties should be calculated.

“More than two years in the making, this is an agreement we’re proud of because it shows that both sides can address the business concerns of the webcasters while giving artists and copyright holders the potential to share in the revenue growth of webcasters,” Simson said in a statement. “It’s a creative, groundbreaking approach that we wanted to try, and we hope it will work well for everyone involved – the artists, labels and eligible webcasters.”