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Increased royalty fees may force some internet radio stations to shut down

Over the last year, the online music industry has been in what many call as a major shakeup. Music artists and labels represented by SoundExchange say they are being treated unfairly, receiving less than a fair amount of money being generated by online radio stations. SoundExchange has been lobbying Congress over the last year to force online radio stations to pay for or pay higher royalties for songs played.

Working closely with Congress, SoundExchange has successfully convinced the industry that increased royalties are a necessity. The D.C. Circuit Court of Appeals has declined to put a stop on increased royalties. This Sunday, Internet radio stations will be slapped with a bill forcing them to pay higher royalties going forward and pay for music aired in 2006. By 2010, royalty rates will nearly triple what stations currently pay. Stations will also incur an annual fee of $500, but the annual fee hasn't been fully worked out. SoundExchange is unsure if it wants stations to pay $500 per station or per channel.

"This is just about the artists getting paid fairly. Artists and labels just want a fair share of the pie," said Richard Ades, a SoundExchange representative.

Late last month, many online stations banded together for a single day of silence, marking their stance against SoundExchange and its demands. Called "Day of Silence," the move created public awareness about how damaging the new proposed royalties could be. Despite the demonstration, SoundExchange chief executive John Simson said, the "rates are fair."

Tim Westergren, founder of Pandora, one of the largest Internet radio companies, said, although his company is able to pay for the new royalties he and his company would not go down without a fight. Pandora along with Yahoo, Rhapsody and Live365 represent the four largest Internet radio companies today. Whether large or small, all types of broadcasters will be affected. SoundExchange said it has taken this into account. Small and non-profit broadcasters will have a royalty cap of $50,000 per year -- still a very large amount.

"Nobody wins when Internet radio gets shut down, including artists who ostensibly are being represented by SoundExchange, the organization pushing for high rates. It's ironic. If SoundExchange gets their way, it means less money for musicians because people will cease to pay royalties all together," Westergren said.

Even with the cap, small broadcasters are still in distress. Michael Clark, owner of two small stations said that after Sunday, he would owe roughly $14,000 USD just for the holiday season of 2007. As for all the music that his station broadcasted during the 2006 year, Clark will owe $8000 on Sunday. One of Clark's stations already closed down because of the new changes and he was unsure of what to do after Sunday, he said.

Jake Sommers, owner of a similarly small station that plays jazz faced similar decisions and consequently closed down his station. closed on April 30th of this year when Sommers realized he would have to pay $2000 per month to keep his station of 20,000 listeners afloat.

"We never made a dime. It was a labor of love. Everything we made we put right back into radio station. It was a bunch of trumpet geeks playing music for other trumpet geeks," Sommers said.

As Patty Smyth once sang, "sometimes love just ain't enough."

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RE: Chicken little
By peritusONE on 7/15/2007 11:51:33 AM , Rating: 1
Next they will tell you to die and ride the comet. Will you comply?

A bit of an extreme comparison to paying an extra $1.20, dontcha think?

The simple fact of the matter is that people own the rights to the product you are broadcasting. Regardless of what you think, they have the right to charge more for said product, and you must comply. This doesn't come down to good government or bad government, it comes down to current law. It seems to me that since internet pirates (and on the other hand, those who want to pay for music, but just at a severely discounted price) have been argueing about this for the past 7-8 years now, that you guys would figure out a different arguement. You are not going to stop the big record labels, so why not come up with something on your own? It's a big enough community of you guys, use your brains instead of whining all the time.

RE: Chicken little
By RaisedinUS on 7/15/2007 12:10:20 PM , Rating: 3
The simple fact of the matter is that people own the rights to the product you are broadcasting
You totally miss the point. We PAY the license fees that we are required by the RIAA to pay.
Same as you going to buy your favorite brand of CPU and realizing it's now $3000. And next year without notice they will charge you an additional CPU cycle charge of $.10 per CPU per machine.
The point is a FAIR charge not this BS charge they are trying to get through. This is really about shutting down internet radio. If you can't see that, you are blind.
use your brains instead of whining all the time.
Nice, but you came in and whined about: A bit of an extreme comparison to paying an extra $1.20, dontcha think?
But that's ok. If the RIAA rams this bill through, every internet user will suffer in the long/short run. This will leave the door wide open for more taxes on the internet and all your purchases from New Egg. It can't happen? Watch and see.
It seems to me that since internet pirates (and on the other hand, those who want to pay for music, but just at a severely discounted price)
It seems you are implying all internet radio stations mooch music. I have a huge CD collection I have built since CD's first came out. Yes, I actually BOUGHT them and I pay the license fee each month to play them. I think you need to remove your rose colored glasses for a bit and see what's really going on. But, you do have blurredvision.

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer

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