Online Radio Facing Possible Extinction

By | February 23, 2002 at 12:00 AM

Conventional radio stations have long paid for the right to broadcast artists’ music. A system for Internet radio stations to do the same has been fought over for some time now, and while a government panel’s recommendation that online radio broadcasters pay royalty fees to recording companies finally gives artists some coin for their worldwide works, the ruling could also spell the end of some Internet broadcasters.

A Copyright Arbitration Royalty Panel (CARP) filed a report to the U.S. Copyright Office on Wednesday, suggesting that conventional radio stations that stream their broadcasts online should pay 0.07 of a cent per song per listener, while Internet-only stations should cough up 0.14 of a cent per song per listener, according to David Carson, general counsel with the U.S. Copyright Office. The new fees would be evenly split between the labels and artists and would be retroactive to October 28, 1998.

The proposed rates give labels and artists a new form of income, estimated by the Associated Press to be in the millions annually, while also serving as nails in the coffin for some online radio stations, many of which, such as,, and, are independently owned and don’t charge their listeners a fee. Some stations already have separate deals with the labels that allow them to play selections from their catalogs online for a fee, though many others do not, forcing them to rely on advertising – which, as at most other dot-com companies, is meager – or charging their listeners a subscription fee. And if paid subscriptions are instated by the stations, they would be subject to as-yet-undetermined royalty fees. Another CARP would need to file a separate report for subscription-based online stations, Carson said.

The costs for broadcasting non-commercial radio stations, such as National Public Radio, over the Web would be lower: 0.02 of a penny for streaming non-commercial brick-and-mortar stations, and.05 of a cent for non-profit, Internet-only organizations.

Conventional radio stations don’t pay royalties to labels; instead, they pay licensing fees directly to songwriters and music publishers via such organizations as ASCAP and BMI. The CARP’s decision that would now force them to cough up cash directly to labels for their online component goes against the long-held belief that radio airplay is promotion for the artist and their recorded music and therefore a royalty fee would not be applicable.

The CARP has only recommended these rates. For the ruling to be law, they must first get approval from the U.S. Copyright Office, then the librarian of Congress, who has until May 21 to decide. The librarian can also reject the CARP’s rate and establish its own, which it must file 30 days after receiving the report.

Even though the proposed rates fall somewhere between what the Recording Industry Association of America (RIAA) and the Digital Media Associationthe organization representing the online companies – would have preferred, neither party is exactly overjoyed.

The RIAA had hoped for a rate closer to 0.4 cents per song, though the organization’s president, Hillary Rosen, said in a statement that she was nevertheless pleased that the artists and labels who have supported online ventures with their music are one step closer to getting paid for it.

Conversely, the DMA wanted a rate closer to 0.014, according to a spokesperson, which the organization said would more accurately reflect the listenership of the online radio marketplace.

Even the conventional radio stations aren’t completely content with the ruling. Since they’re already paying a licensing fee for their on-air broadcasts, they’re claiming they’re being pinched twice for songs they’re actually only spinning once, the Associated Press reported.

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