Internet Radio Receives Death Blow from Las Vegas Judge

According to the AP, In Las Vegas today a judge dealt what could be the death blow for small Internet radio broadcasters and non profits like NPR which broadcast music and a good portion of their programming on the Internet. A panel of copyright judges refused to consider requests to reconsider a ruling that hiked the royalties they must pay to record companies and artists, effectively tripling the costs for small businesses, independent broadcasters and others who specialize in providing free Internet radio streams.

A group of public and private Internet broadcasters, including radio stations, small startup companies, and National Public Radio had objected to the new royalties set March 2, saying they would force a drastic cutback in services that are now enjoyed by some 50 million people. Most consumers don't pay for Internet radio, broadcasters pay royalty and licensing fees out of their own pockets and recoup expenses through advertising or other merchandise rather than from a paying listening audience.

In today's ruling, the Copyright Royalty Board judges denied all motions for rehearing and also refused to postpone a May 15 deadline by which the new royalties will have to be collected.

However, they will allow the Webcasters to calculate fees by average listening hours, as they have been, as opposed to the new system where broadcasters will be charged a royalty each time every song is heard by an online listener. They will be allowed to continue calculating fees the old way until next year and will not be charged retro-actively for last year. After that, the new per-song, per-listener fee structure goes into effect.

Most Webcasters say the sharply higher royalty fees will put them out of business. Discussion about the ruling dominated a one-day meeting of Internet radio broadcasters being held in Las Vegas alongside the annual conference of the National Association of Broadcasters, a group representing local radio and TV stations.

N. Mark Lam, the CEO of Live365 Inc., a privately held company that aggregates audio streams from thousands of radio stations and other small Webcasters, said that under the new royalty rules, "there is no industry." Live365 is one of the biggest sources for Webcasters who pay a monthly fee to Live365 to cover the licensing and royalty obligations and stream their audio content through the Live365 site.

Lam, who joined the venture capital-backed company about two years ago, said Live365 just barely broke even last year and had about 4.5 million unique listeners every month.

David Oxenford, the lawyer representing a group of Webcasters who are fighting the new restrictions, said the next step is likely an appeal to the U.S. Court of Appeals for the District of Columbia Circuit, but he noted that process could take at least a year. Meanwhile, he said, the prospects of successfully getting a court to block the decision of the royalty board judges is slim.

Smaller broadcasters who don't have lobbyists or the relationships with government that bigger broadcasters like Yahoo and AOL have will just be out luck. Many will be put out of business within a few months, reducing the number of Internet radio stations. The legal wrangling is the latest battle between the music industry, whose dropping sales have caused record companies to close ranks and fight for every dime they can make and independent artists and DJ s who have harnessed the power of the Internet to go around the traditional music company protocols to distribute their music.