The vast potential of Internet radio is in jeopardy


I often write on this blog about the fabulous things I come across in the wonderful living networks in which we exist. In this case, I have to write about something that sucks real bad.

From back in the mid-1990s I have thought that one of the most awesome applications of the Internet is for everyone to be able to listen to any radio station on the planet. Back in the bad old days of crude electronic distibution technologies (AM and FM radio), we could only listen to high-quality radio from stations in our immediate locality. As soon as the first internet streams were made I started listening to radio stations in the Netherlands, LA, Nigeria, New Zealand, anywhere where there was an early desire to gain listeners farther afield. How fantastic to be able to listen to them all, finding unique DJs and hearing local news from across the globe! I envisaged that soon anyone would be able to find and listen to their very favorite radio stations from the tens of thousands across the planet.

Since then a whole new space has arisen, with not just existing radio stations streaming their sounds onto the net, but a whole new cadre of internet-only radio stations. Soma.FM, out of San Francisco, is my very favorite DJ-selected station I’ve found. Listen to their Groove Salad station – I love it. In addition, an entirely new offering has arisen, in which technology enables us to listen to personalized music. I have written many times before about collaborative filtering music stations like Last.FM and Pandora. Other interesting ones I’ve discovered lately include Finetune and Musicovery.

Now all of this may disappear. In a shocking decision last Friday, the Copyright Royalty Board announced new Internet radio royalty rates, doing exactly what was suggested by the RIAA’s lobby body, effectively tripling the cost of streaming music, effective retroactively from the beginning of 2006, and increasing every year until 2010. Bill Goldsmith of Radio Paradise, a leading Internet radio station, does the math, working out that he will now have to pay out around 125% of his revenue, meaning he immediately has to consider closing down. Mark Cuban says “goodbye to webcasting.” Om Malik asks “Last.FM, Pandora KO’ed by new royalties?” Mike Masnick talks about “internet radio royalty rates designed to kill webcasts.” Indeed, there some bad craziness in the business logic here. In the first instance, putting music webcasting stations out of business isn’t going to increase revenue. Secondly, recording companies make the majority of their money from hits, and hits happen because people hear them. There is massive investment in promoting music to traditional radio and music TV stations, yet for no good reason the opposite attitude to online music streaming.

Now this isn’t to say that Internet radio will die completely. Those with big pockets or associated business models may still do OK. Indeed, new business models will be found. But it is an extraordinary pity that innovation in how all of us discover and listen to music is being stymied. It would be criminal if Last.FM and its peers were forced to close down, leaving us all impoverished. I hope that sense will prevail and this decision will before too long be changed.

[UPDATE] A few resources: Save Our Internet Radio, Save Internet Radio, Online petition to US Congress, email your Congressman about this, and Bill Goldsmith’s blog post about it.

2 replies
  1. David
    David says:

    I agree with everything you said, but I’m not quite sure if this decision really came as a “shock,” when you look at the RIAA’s past. Even in 2002, SomaFM had to close for a while, after the DMCA CARP ruling, and Soma was asked to pay royalties of about $1,000 per day to continue broadcasting. Rusty Hodge actively helped get Congress to pass the Small Broadcasters Amendment Act, making the RIAA’s royalties more reasonable.
    Like you said, The RIAA has a strong lobby body, and everyone, including myself, complains about their “injustices,” but until we take further action, nothing is really going to change with this cold-blooded organization. Eventually, I think their rampage will lead to their downfall, and Congress will put more restrictions on the RIAA then they currently have. It’s unfortunate that they don’t even attempt to work with their customers instead. Thanks for the post!

  2. Ross Dawson
    Ross Dawson says:

    Thanks David for your further insights. I would like to know specifically what action we can take that will bear results, as RIAA is essentially unaccountable. Probably, as you suggest, lobbying Congress is the only route with any real potential, though there has to be some real focus to the efforts. I’d certainly prefer not to sit idle if there’s something useful to do.

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