Is the Death of Internet Radio Imminent?
Posted by viechuy in Is the Death of Internet Radio Imminent?
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As with most things in life, any part of it can come to an abrupt end. The recent decision of the Royalty Copyright Board appears to have threatened to remove a part of many thousands of consumers daily lives. Over the last several years the internet radio following has grown significantly in the U.S. It should come as no surprise considering the very nature of the internet. Due to its musical diversity and lack of corporate influence on what it plays and when, internet radio has flourished. But we must first define flourish in this situation. Has it flourished monetarily? No. The vast majority of independent broadcasters not only do not make a profit, they pay their expenses including royalty payments out of pocket. In terms of listeners, yes it has flourished. So much so that during the recent congressional hearing, The Future of Radio, the sirius/xm reps named it as competition and a reason they needed this merger citing internet radios price structure, free.
Doesn't sound like a very good business model for internet broadcasters with all costs and little or no profit. Why do it? The bulk of internet broadcasters is made up of hobbyist licensed through a larger company at a somewhat affordable rate. This allows broadcasters that would not otherwise be able to afford the fees entailed by licensing individually to become an internet radio station channel. This very model is what in essence gives internet radio it's wide diversity of music. Many do not run nor want to run ads or commercials. They extract their payment through the joy of broadcasting and the many listeners that tune in. They merely want to share their interest in music genre with those whom want to listen. Make no mistake, these are usually very professionally programmed broadcasts. These broadcasters take pride in their work.
Some would ask what's the difference between internet radio and any terrestrial am or fm station. The answer would at first seem to be only that one is on the airwaves and the other is on a wire. This is not true. Much of the music found on internet radio will almost certainly never be heard in the mainstream media outlets. Internet radio has embraced the independent and unknown artists giving them exposure previously reserved for only the top 40 or 50 most popular artists. Many of these indie artist have received national recognition due to play time on internet radio stations. This model gives your favorite local band a chance to be heard worldwide. It leads to cd sales and possible record contracts. Indeed it would seem the playing field between the famous and not so famous has been somewhat leveled, at least in the internet community. It's also notable that terrestrial am and fm stations do not pay the royalties in question. They are given a free ride in the name of promoting artists therefore considered a benefit to record companies. Just as notable is the fact that 49.9% of all new songs and artists were heard first on the internet in 2006, not am/fm stations, leading to huge song and cd sales.
So why would the large record companies push for these high royalty rates? That is the question on everyones mind. Why indeed. The internet has proven itself to be a viable outlet for new music sales. One would think the music recording industry would grasp this technology with open arms and welcome it into their already existing media outlets. There seems to be some kind of misconception in the music industry, and even with the recording artists themselves, concerning what internet radio is. It is not peer to peer sharing as has been insinuated. Internet broadcasters neither condone nor accept this method. In reality most stations use special programming to deter and stop this activity from their broadcasts, although as we all know, anyone can record music from their favorite am or fm station using their home stereo system. Internet broadcasters do not intend to give away anyones music. They simply, as any other music medium, let their listeners hear some music. If the listener likes it then he or she is enticed to purchase that music. It is a broadcast, no more no less. Most internet stations have a Buy Now button for listeners to immediately purchase the artists music they are listening to generating instant sales. I don't think am and fm stations, nor satelite radio for that matter can offer the same instant access. The business model is now looking pretty good for the recording industry, and it costs them absolutely nothing. Free advertising, free public exposure to artists, instant purchasing access to the consumer, how much better can it get? Why not embrace it? I am quite puzzled about this line of thinking. The proverbial "Cutting of your nose to spite your face" comes to mind.
Who will be affected if the current rates are not overturned or negotiated to an acceptable rate? The outcry went out from broadcasters all over the U.S. after the subsequent announcement of the new royalty rates. To better understand these rates I'll use the example in a recent article by RAIN. (Radio and Internet Newsletter) the new rates calculate to be to $1.28 per hour per listener taking into consideration an average of 16 songs per hour. This does not include the additional fee of $500.00 per year per channel. Anyone using their calculator can easily see with even a 100 listeners at that rate the costs escalate quickly over a 24 hour period. Again, terrestrial am and fm stations do not pay any of these additional royalty fees. These fees are in addition to other royalties paid to ASCAP, BMi and SESAC. At first glance you would think this affects only internet broadcasters. This is far from the truth. The internet broadcast industry is made up multiple small businesses. The broadcasters are the ones that are visible. Take into account the many stream providers that each station must have to send out their stream. Then you have a host of professional voices standing ready to make your internet station professional station ids, jingles and even news broadcasts. Small companies stand ready to promote your station and help drive listeners to tune in. Software companies that are producing professional grade programs to run your internet radio station while instantaneously keeping you compliant with existing DMCA (Digital Millineum Copyright Act) rules.
These are but a few of the small businesses affected by the rate changes. There is also the listener/consumer that chooses to tune in daily to their favorite internet station. 100s of 1000s of listeners tune in every day. They do so for the diversity and easy access of the music. Perhaps they don't have access to terrestrial am/fm stations. It's obvious that not only are broadcasters affected, but a complete industry in it's infancy would be stifled and/or removed if things do not change. A very significant consumer base would be eliminated. You, I and everyone that enjoys this music medium would be robbed of our musical pleasure. I find it hard to swallow that our congress would allow a complete industry to fall prey to this action and die. Our government openly promotes small business and entrepreneurship. Do the wants of the few outweigh the wants of the many?
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