Online Radio Stations Strike Royalties Deal With Music Labels

WASHINGTON — The future of Internet radio appears more secure after a handful of online stations reached an agreement Tuesday to head off a potentially crippling increase in copyright royalty rates.

The deal is the product of two years of negotiations between webcasters and copyright holders. In March 2007, a ruling by the federal Copyright Royalty Board dramatically raised the rates that Internet radio stations must pay artists and recording labels _ leading many online radio stations to warn that the new rates would put them out of business by eating up as much as 70 percent of revenue.

At least one popular online radio service _ Pandora Media of Oakland, Calif., which derives much of its revenue from advertising _ said the new agreement will help ensure its survival.

"For us, it's hard to overstate how significant this is," said Pandora founder Tim Westergren. "It was either this or an ugly alternative."

The revenue-sharing deal announced Tuesday is between SoundExchange, a nonprofit that collects royalties for recording copyright owners from digital radio services, and three smaller webcasters: radioIO, Digitally Imported and AccuRadio.

Westergren said Pandora plans to sign on to the new royalty terms too. And Jonathan Potter, executive director of the Digital Media Association, which represents webcasters and other online media companies, predicted some of the association's other members will also join the deal.

Under the agreement, large commercial webcasters will pay copyright owners up to 25 percent of their revenue or a "per-performance" rate that is below the rates set by the Copyright Royalty Board. Smaller webcasters will pay either a percent of revenue or a percent of expenses.

In a statement, SoundExchange executive director John Simson said the deal will give webcasters a chance to "flesh out various business models" and give artists and other copyright holders the opportunity to "share in the success their recordings generate."

Lawmakers also praised the agreement. Congress has already passed legislation making any deal reached between webcasters and SoundExchange legally binding. Because Internet radio companies operate under a government license, these deals need congressional authorization.

Already this year, SoundExchange struck new online royalty agreements with the National Association of Broadcasters and the Corporation for Public Broadcasting.

Traditional AM and FM broadcasters are exempt from copyright royalty rates for over-the-air radio play, because that airplay is thought to provide free promotion for artists and labels. But the broadcasters are subject to the new rates for any songs streamed over radio station Web sites.

Comments

[online-internet-radio]

Online radios are more popular than other paid radios.

[Skyhawk]

Shoutcast.com, Radio Paradise to name a couple are good for me.

[KarateKid]

Most of the cr@p that's on the radio today is not worth paying for.

[frantaylor]

That's why Internet Radio is great. Many stations, everyone can find something they like.

[Gonzo194523]

Got my email from Pandora last night. User's will be capped at 40 hrs. of free listening per month. The email states that while this will not affect the market share of Pandora listeners, that (based upon my listening levels) I would probably be affected. I listen to Pandora quite a bit (more than 1.3 hours per day). And so, I will have to pay. Options include annual subscription at $36 a year, or paying a monthly fee once 40 hrs. is reached.

Part of me understands where the music industry is coming from. The landscape has changed, no one is buying albums anymore, and they are trying to hold on to whatever revenue outlets they can legally grab. But as a consumer, I disagree with this. I would urge the record industry and copyright holders to think more creatively. Give people a product that goes beyond what they can listen to for free or can buy from itunes. What's going to keep us from just buying the songs we like, rather than having to purchase the full album? There needs to be an incentive there. And what about the dozens of songs I have bought on Itunes after learning about the artist through Pandora? Are those royalty dollars not getting back to you?

Forcing me to pay to listen to a single online music station is not going to work for me. Once I exceed my 40 hours, I'll find some place else to listen.

[frantaylor]

There are hundreds of Internet radio stations. Try something different.

[EMacdonald]

Does this mean we can access Pandora in the UK? I just moved here and it's been torture for me!! (Sorry if this was answered earlier)

[NevaforLeadership]

I don't know if this is a good deal, but one that is moving in the right direction, I suppose.

I love on-line music stations, particularly Live365, for which I pay a fee.

Artists, (musicians, photographers and the like) are making a BIG mistake by insisting on huge royalties for digital copies of their work. They have never moved into the 21st century and still envision each digital copy as being equivalent to a new CD, photograph, etc.

They are shooting themselves in the feet.

As far as photography is concerned, they have become so greedy that their photographs lie dormant, unused forever in cyberspace. They are just copies, not original photos. If they were more reasonable -- a lot more reasonable -- they could be earning a lot of passive income. Now they earn nothing or very little for too expensive copies. Many who could have indirectly advertised their work by incorporating it into projects are prohibited from doing so because of the outrageous cost.

As far as on-line music is concerned, the same applies. I have heard so much music on-line that I would never otherwise have heard, which I then purchase. If the on-line music stations had to close down, I would never hear or purchase that music. I am sure there are thousands or millions who can say the same.

Capitalism is good; greed is not good.

[slobone]

I love Pandora, so I'm glad they will survive. Glad to see the recording industry is being sensible for once. Pandora and the other stations undoubtedly stimulate sales of CD's and MP3's, and anyway, aren't they infinitely preferable to P2P?

[stanpan]

Thanks for all the links, guys. Will check them out.

[hegdehog]

This should have happened long ago, but it should have been done by an act of Congress. Same with digital downloads. There's a Congressio­nally-mand­ated statutory rate for mechanicals--why not for digital transmission? It's just stupid that the labels are being allowed to set the terms of this transaction.

[OutsourcedAgain]

What is needed is an internet station that only plays independent artist. Forget the big corporate record companies. Cut them out of the picture entirely. It's not like they've been working in the best interest of the artist. Independents might just make more money by producing their own recordings.

I don't know if ITunes allows independent artist to sell via their store, but that would be a good start. If that isn't an option then independent artist should band together and produce collaborative CD's. Or offer downloads through an internet station's site.

[witz]

Good point. CD Baby sells independent artists like myself -- Jeff Witzeman & The Jealous Housewives, and so does itunes. The good news is that radio io which is mentioned in the article plays independent artists as well. In fact a lot of internet radio does, so that seems to be the place to go nowadays :)

[ibsteve2u]

ummm...do I have to pay somebody a royalty because I read your comment? ;^)

(He says...in jest...so far.)

[NightflyLester]

The entire music business is a dark, dank hole filled with leaches and thugs ripping artists off for years. That said, I haven't listened to commercial radio in ages... Radio Paradise FTW

[xenophen]

I don't know what the costs to independent webcasters like me will be, but it may cost us a bundle. My station, Chakra Chip Cookies http://www.live365.com/stations/tomdijonn), is a not for profit operation, a labor of love. I pay live365.com a monthly fee to webcast my station and they pay the artist royalties. But, if the new agreement jacks the rates much higher, we labor-of-love types will be priced out. Truth be known, I think the RIAA and SoundEx are interested in killing Internet radio altogether. If they do, they'll have succeeded in strangling the goose that lays the golden eggs -- exposure of many artists' work to listeners worldwide who can click through to Amazon or iTunes and buy what they hear immediately. A staggering variety of music from many independent artists is presented every day on Internet radio. You have to wonder who the RIAA and SoundEx think they're representing.

[hegdehog]

Artists do what they do for a living. It's a labor of love for them too, but if they need to work at Burger King to pay the rent, creating music quickly becomes little more than a very expensive hobby. You should seriously consider not feeling guilty about making money doing what you love. There's nothing wrong with getting paid for doing excellent work. Think of ways to commercialize your business by running ads from businesses or ventures you believe in. Whatever. But don't quit doing what you love simply because there's some expense involved. Money is a placeholder. Doing what you love and getting paid for it is the goal.

[schaffermommy]

thank goodness, i love my pandora

[1sparrow]

i always thought pandora was euro based. they have this fuzzy logic to lead the listener to related music... seemed euro. also i enjoy it almost as much as youtube. i don't consider either free cause i pay 47$ a month to receive internet service. any suggestions?

[novatom]

What the heck does "fuzzy logic" have to do with being European? Pandora is based on the "Music Genome Project." I'm a little "fuzzy" on the actual definition of MGP but it appears to be a method of categorizing music based on elements such as similarities in song structure, rhythm, tone, etc.

[frantaylor]

Sounds like like fuzzy logic to me. You can't write hard and fast rules for this kind of stuff.

[700rpm]

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