Wade Armstrong

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Bye-Bye Radio

Posted Wednesday April 18, 2007 in Business

I wrote a few weeks ago about how music publishers had won a ruling increasing drastically the royalties paid by Internet radio. An appeal of that ruling by broadcasters was struck down today. With this ruling, look for Internet radio stations to start going dark. Go to SaveNetRadio.org and write your legislators to stop this from happening!

What’s the Effect?

Internet radio businesses threaten immediate bankruptcy — which is, sadly, about accurate. The ruling sets rates retroactive to last year, so Internet radio stations can’t just shut down — they have to pay back royalties. From a business perspective, this is ridiculous; the broadcasters might have chosen not to broadcast had they known the rates would be this high. Now, it’s too late to do anything about past broadcasts. Hopefully, legal challenge will be possible on this point.

Players outside of Internet radio are likely to get hurt as well. Many over-the-air stations — particularly some NPR affiliates — have streamed their programming. These broadcasters will have substantial costs, although they also have ability to pay (perhaps with the exception of those NPR affiliates).

Why?

It’s not clear why the music industry wants these royalty rates; since the negative effects are pretty obvious, we have to assume that publishers actually want to put Internet broadcasters out of business.

Perhaps the music publishers are hoping that broadcasters will transfer their technology in any bankruptcy liquidation, although it’s hard to imagine what the publishers would do with that technology, which is sure to be pretty immature this early on in the industry’s development.

Perhaps also the publishers are trying to send a message to Apple, which just upset their business model by starting to offer DRM-free music. Apple has been defying the music industry by actually selling music, rather than renting it, for years now. By selling to consumers a product that they’re used to, rather than trying to force a new model on them, Apple has come to dominate the online music distribution channel. Everyone always predicts that Apple will add subscription-based music sales to iTunes, but they never do and almost certainly don’t plan to anytime soon. The music industry could be trying to send a message that they can shut down a channel anytime they like, and that Apple should play ball.

Is it as Bad as it Seems?

So long as Internet broadcasters can more than double their ad rates and sell just as many ads, everything will be fine. Pretty much, if you like Internet radio you’re screwed. They sure make it hard to find new music legally, these days. If you’re as mad about this as I am, visit SaveNetRadio.org and write your congressman. Also, give Edgar Bronfman a wedgie if you run into him.