Online Music Hushes in Face of Money Fight

June 26, 2007 — -- Silence speaks volumes for Internet radio stations today as they protest new fees and royalty rate hikes that could mute many of them permanently.

The day of silence by webcasters marks the latest jab in a legislative battle to roll back new fee structures put in place in March by the federal Copyright Royalty Board. The major note of contention stems from an annual $500 per channel minimum royalty payment set to go into effect next month and retroactively bill Web sites millions of dollars for the previous year. The new fees are scheduled to take effect July 15.

Announcements about the protest action by major providers like AOL, MTV Online and Live365, as well as small local and niche stations, will occasionally interrupt the gray noise. The hundreds of thousands of personalized digital radio streams built by sites like Pandora, Rhapsody and Yahoo will all unify in the Zenlike quiet.

Opponents say this fee clashes with the new media landscape where many outfits offer listeners a wide array of channels, each of which would be eligible for the $500 charge.

"It's going to be a disaster," said Tim Westergren, founder of Pandora, whose user-generated, multichannel model represents the entrepreneurial ventures threatened across the Internet. "If this goes through, even more pirate radio is going to pop up all over the Web. The innovation you're going to see is people getting around this law."

At least 52 million people listen to Internet radio monthly. This group includes desk workers who often tune in all day long and young people. Almost half of listeners make up the desirable 18-34 year-old demographic, according to industry research.

Music drifted from the Capitol building earlier this month during a recent concert of a coalition of artists singing support for a bill that would turn back the board's impending fees. Rep. Jay Inslee, D-Wash., took the stage and quoted Bob Dylan's "Time They Are A-Changin.'" He was joined by co-sponsor Rep. Donald Manzullo, R-Ill., who admitted to being a "rock 'n' roll freak."