Saturday, May 05, 2007

The Death of Internet Radio?

It is five minutes to midnight on internet radio's digital clock. Time is ripening to its doom it would seem. I'll give you the short version and let you decide for yourselves what you want to do about it. First let me give you a short marketing lesson. The general formula for selling records (for the commercial music business) traditionally goes like this: Make a bunch of CDs, distribute them everywhere, use financial leverage to get commercial radio to play them nonstop and the result is that brainwashed (or earwashed) consumers will buy them by the truckload. But something happened and changed everything. The digital revolution happened.

First of all the digital revolution made it easy for independent artists to record their own music. They no longer needed financing from the record industry. Next it gave them a method to sell their music. As you know, independent music gets sold from artist websites (like chrisjuergensen.com), internet retailers (like cdbaby.com) and download sites (like iTunes or magnatune.com). No need for carpet bombing methods of distribution anymore.

The digital revolution also gave artists a way to promote themselves through internet radio and podcasts. As we speak (or as I write this) less than 10 percent of music played on FM/AM radio is independent music while internet radio plays close to 40 percent and I imagine if you looked at the statistics for podcasts, you would find that at least 90 percent of the music played is Indie music. This is about all the record industry could take and have come up with a plan to crush us like grapes. To make it worse, they claim that they are trying to protect artists but this is a big facade.

At the request of the Recording Industry Association of America, the Copyright Royalty Board (CRB), which oversees sound recording royalties paid by Internet radio services, increased Internet radio's royalty burden between 300 and 1200 percent and is thereby jeopardizing the industry’s future.

The rate is only increasing from 7/100 of a penny per song streamed to 19/100 of a penny per song streamed over a 5-year period which may not seem like much but take a look at the other conditions:

No Revenue based Royalty Option - Prior to this decision all small webcasters and some large webcasters had the choice of paying royalties based on a percentage of their revenue that typically equaled 10-12%. But the CRB decision did not offer a revenue-based royalty option for any webcasters.

Retroactive Impact - The CRB decision is effective as of January 2006, so if it actually becomes effective for only one day its impact will be immediate as the past due royalties alone will be enough to bankrupt virtually all small and mid-sized webcasters.

Per Station Minimum - The CRB piled on even more, by imposing a $500 per channel minimum royalty that for many services will far exceed the annual royalties that would otherwise be due even after the CRB decision. One advantage of Internet radio is that it is not limited by spectrum capacity or bandwidth capacity, which enables several services literally to offer 10,000 or 100,000 stations and more. By penalizing this innovation and creativity the CRB further ensures that Internet radio will become less creative, less dynamic, less of an opportunity for non-mainstream artists and genres, and will look more like broadcast radio in the future.

Internet radio is like FM radio fifty years ago, DJs pick and play what they like with little regard for what big business has to say. It is refreshing to say the least, honest radio, it sounds like an oxymoron. With revenues shrinking for the big labels they have their sites on internet radio and claim that it is for me, the artist who deserves more money. It will mean less money for me because most of the radio stations that play me will be out of business. They can not be allowed to do it.

What you can do:

Save Net Radio

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