Killing Internet Radio

Copyright death sentence

On March 1, 2007, the U.S. Copyright Office announced a potential death sentence for thousands of Internet radio stations. Thanks to the Digital Millennium Copyright Act of 1998, webcasters must pay a special performance fee each time they play a recording. Under the newly enacted rate structure, those debts will be calculated based not on how much revenue a station earns but on how many listeners it has. In essence, each transmission to each individual listener will be treated as a separate licensed performance.

"It's roughly a tenfold increase," says Bill Goldsmith, co-proprietor of the eclectic rock outlet radioparadise.com, comparing this year's expected fees to the amount he was previously paying. "The rates are too much for any class of stations to pay." Goldsmith's station, for example, attracts around 250,000 listeners a month. Under the new system, it expects to owe about $500,000 this year, well in excess of its income.

These fees should not be confused with the royalties that Internet stations, like AM and FM stations, pay to songwriters. Those have been in place for a long time, and they are calculated on a much more reasonable basis. (Goldsmith's station pays songwriters about $2,000 to $3,000 a year.) The new payments go to the owners of the performance rights, which usually means the record company. And only Internet stations have to pay them. AM and FM stations are exempt—unless, of course, they want to stream online.