[atlantaprog] Death of Web Radio

Tiny Web radio stations squawk over royalty fees

Internet radio DJs are replacing their eclectic playlists with a "Day of
Silence" today, a protest against new royalty rates they say could decimate
the fledgling digital broadcasting industry.

Earlier this year, a congressionally appointed three-judge panel drastically
increased the royalty fees the stations must pay for music streamed over the
Internet. Critics say the rates, which would be retroactive to 2006, will
make it impossible for small stations, public broadcasters and specialty
startups that cater to the industry to stay in business. The new rates are
scheduled to go into effect July 15.

"For us, the royalties went from $20,000 to $600,000 per year," said Rusty
Hodge, whose 11-channel SomaFM Web site was launched in 2000 and operates in
San Francisco's Mission District. "That's about three times the total income
we made in 2006. We're not getting rich off of this."

The move would have a particularly strong impact on the Bay Area, and not
just because of the region's large number of local DJs who broadcast
Internet radio shows to a handful of fans. Live365 Inc., which claims to be
the world's largest Internet radio network with thousands of stations and 4
million listeners per month, is based in Foster City. Pandora.com, a rapidly
expanding service that lets users create radio stations that cater to their
likes, was founded in San Francisco.

Today's protest comes after a decision in March by the Copyright Royalty
Board, which ruled that starting July 15, Internet radio stations will be
charged based on the number of their listeners. Previously, the stations
paid a percentage of their revenue. Internet radio providers are governed by
different rules than traditional radio stations, which don't pay royalties
to performers or publishers -- except when they broadcast over the Internet.


The "Day of Silence" was created in support of the proposed Internet Radio
Equality Act, which was introduced in Congress in May. If passed, the bill
would overturn the royalty board's decision and restore rates as a flat
percentage of revenues.

The royalty board's decision was hailed by SoundExchange, a music industry
organization that says the new system is better for performing artists, who
weren't fairly compensated under the old system. After Internet broadcasters
protested, SoundExchange said it is trying to negotiate a compromise with
representatives of smaller broadcasters that would give them a break.

"It's pretty much a moot point," said SoundExchange spokesman Richard Ades.
"SoundExchange has made an offer to small Webcasters to give them pretty
much the same (rate) that they had before."

But the battle lines still haven't moved. The Internet broadcasters say any
discount would only protect them temporarily and that the "small
broadcaster" definition would set revenue caps that would punish success. It
has become common to find Internet radio sites embedded with form e-mails
that are pre-addressed to local congressional representatives.

SomaFM is a midlevel player, with about 500,000 unique listeners per month.
Music adventurists who tuned into SomaFM on Monday might have heard Lunatic
Asylum, Not Your Average Hippy and 100 other bands that aren't getting much
airplay on commercial radio. One of the stations is called Secret Agent,
composed entirely of theme music for the 21st century spy.

The royalty battle has created some strange allies -- larger Internet-based
companies such as Time Warner have sided with the Internet radio DJs, many
of whom are broadcasting out of their bedrooms.

Ted Leibowitz is the poster child for the latter category, turning San
Francisco indie rock Internet station BAGeL Radio from something to
entertain a few of his friends into a station with 40,000 listeners per
month and an international following. (He still runs it from the spare room
of his Richmond District apartment.)

Leibowitz said his site is artist-friendly, populated by listeners who are
looking for new sounds and are likely to buy an album or attend a show. His
point is proved two minutes into an interview, when he's interrupted by a
local band member knocking on his door to drop off some new music in hopes
of airplay.

If the royalty board's decision stands, Leibowitz says it will do a huge
disservice to artists and listeners.

"Let's say right now you have cable in your house with 125 channels, and
then the cable suddenly goes out, and all you have left is the networks that
you can get with rabbit ears," Leibowitz said. "It will look like that,
except 100 times the scale."

While the Internet DJs try to get the word out, SoundExchange is mounting
its own campaign, trying to rally artists and filling its site with news
stories with headlines such as May 11's "Recording Artists Outraged at Money
Grab by Corporate Webcasters" -- with quotes from the national director of
the Recording Artists' Coalition.

The Internet radio hosts are determined to get their say as well. The "Day
of Silence" will be anything but, because most of the stations will
broadcast public service announcements and other programming to explain
their side of the argument. Hodge and another SomaFM disc jockey spent much
of Friday recording spots that focus on the controversy.

"We went down to BART and recorded some sounds, just to give a San Francisco
air to what we're doing," he said.
------------------------------
What is Internet radio?

Internet radio broadcasts, often called Webcasts, are received through a
computer, not a standard radio. DJs set up Web sites and devise their own
playlists, which are broadcast over the Internet and sound like regular
stations -- in most cases minus commercial breaks and mainstream playlists.
The first Internet radio stations emerged in the mid-1990s.

*E-mail Peter Hartlaub at phartlaub@xxxxxxxxxxxxxxxx*

This article appeared on page *A - 1* of the San Francisco Chronicle

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