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Independent Internet Radio Still Imperiled

Internet radio expert Kurt Hanson declared January 31 to be Sunday Bloody Sunday for the medium. Most significantly, that was the day that Live365 turned off 5000-some internet radio streams it hosted for broadcasters large and small. The shutdown comes after several other internet stations announced their closure, and countless more quietly went away. The result is a vast reduction in the diversity of American Internet radio.

The big culprit for this great silencing is a new performance royalty rate that small and medium sized webcasters are obligated to pay for playing musis on their streams. Live365 was done in by the confluence of these new rates and a loss of significant investors.

These new rates officially went into effect January 1, and it’s taken some weeks for the reverberations to be felt, in part because they were only decided upon in mid-December. On episode 31 of our podcast we talked with Paul Merrell of, which offers a service to webcasters to bundle their royalty payments into a monthly fee. Merrell said that his company is slowly raising rates for small broadcasters with the hope that a new reduced rate deal will be reached soon enough to provide relief.

But at the monent no such deal has happened, and there’s no indication that one is in the works. It is the case that rate reductions for small and mid-sized webcasters have generally come at the 13th hour–after new, prohibitively expensive rates have already gone into effect. However, with the loss of Live365 there’s never before been this kind of mass extinction of Internet radio stations.

There is some organizing happening with the goal of forging music royalty rates that will allow small and midsize webcasters to keep broadcasting in the US. The Future of Music Coalition put up a site called to begin gathering people together for the effort. While FMC advocates on behalf of musicians and has supported higher royalty rates for the likes of Pandora and Spotify, the organization recognizes the value that small webcasters contribute by exposing listeners to a wide array of artists who don’t receive attention from iHeartRadio and other major station groups.

There are two petitions urging Congress to act on the issue: one at GoPettion with over 5500 signatures. I also understand that there is some organizing going on amongst some mid-sized webcasters, behind the scenes.

One of the complications with music royalties is that it is the domain of the Copyright Royalty Board to set rates, and those are now already set for the next five years. A change in those rates requires action of the CRB, or Congress has to authorize another party to negotiate those rates on behalf of musicians. In 2009 the Webcaster Settlement Act gave that authority to SoundExchange, the independent non-profit that, by law, collects royalty payments on behalf of musicians. However, it’s not clear that SoundExchange can independently pursue revised rates without that nod, although the CRB could possibly authorize such an agreement made by SoundExchange.

So, nothing much has changed since January 1. Situation normal—all f’d up.

Small and medium-size webcasters are still in a holding pattern. They face the decision to bet on the hope that a new lower rate will be negotiated soon and keep broadcasting, or deciding to hedge that bet by shutting down until and unless new rates come to fruition. Internet radio listeners face the real possibility that there continues to be a slow and steady die-off of stations as the year progresses.

This threatens to be a real blow to internet radio diversity, and a tremendous blow to American radio as a whole.


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