Internet Radio Slowly Closing Down

Sound_exchangeIts been quite a while since I let loose with a "the-Recording-Industry-is-too-dumb-to-live" rant.

Well, I’m overdue:

Thanks to the newly implements royalty rates, several major web broadcasters are on the verge of shutting down, including Yahoo and Time Warner’s AOL. (Yahoo’s Launchcast is the largest Web radio site.)

The 38% percent increase in royalties
to air music was simply too great to allow broadcasting to continue.

Bloomberg had the scoop:

"Yahoo and AOL stopped directing users to their radio sites after SoundExchange, the Washington-based group representing artists and record labels, began collecting the higher fees in July. Those royalties may stifle the growth of Internet radio, which increased listeners 39 percent in the past year, according to researcher ComScore Inc. in Reston, Virginia.

As a result, the number of people using Launchcast fell 11 percent
to 5.1 million in October, according to ComScore. AOL Radio users
declined 10 percent to 2.7 million from 3 million. Radio sites
attracted 51.2 million U.S. visitors last month, more than a quarter of
all U.S. Web users.

Radio sites have been "dealt a severe blow,” said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York. "It seems very unlikely that at this stage a solution will be reached.”

Wired previously reported that:

The US Court of Appeals for the District of Columbia has set dates for the first part of the appeals process initiated by DiMA, NPR, IBS, AOL, Yahoo, the National Religious Broadcasters Noncommercial Music Licensing Committee, and other webcasters; Various groups of webcasters who filed appeals will have to submit their first briefs to try to convince the court why an appeal is so necessary by February 25, 2008.

You can see why the industry would want to raise fees: With terrestrial radio dying, and CD sales on the downslide, its important to prevent any additional promotion of the products.

Here’s a suggestion: Why don’t the artists not affiliated with major labels (Eagles, Radiohead, Pearl Jam, James Taylor, etc.) as well as Indie artists undercut the labels, and offer web broadcasters a cut rate?

Perhaps a little competition might be good for everyone . . .


Yahoo, AOL May Abandon Web Radio After Royalties Rise
Meg Tirrell
Bloomberg, Nov. 28 2007

Webcasters’ Appeal of Royalty Rates to Begin in February   
Eliot Van Buskirk
Wired, November 20, 2007 | 3:35:45 PM

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What's been said:

Discussions found on the web:
  1. mhm commented on Nov 28

    Sometimes I think these people at RIAA have a reserved place in hell… but then, they will be just back at home…

  2. Bob A commented on Nov 28

    one of my favorites and still goin strong:

    works great in the car on my sprint touch fast evdo connection

  3. halbhh commented on Nov 28

    In the U.S. and many countries you have a right as a citizen to enter into contracts.

    I don’t think it’s ok to single out musicians and take their product, and deny them the equal right to enter contracts and sell their work (for a fee, etc), like any other citizen can.

  4. JBH commented on Nov 28

    thanks barry. this is good to know. i agree completely that this is an opportunity for indie artists to skip the middleman. in addition, i’d like to see itunes and other music etailers make it seamless for artists to sell without a record label. this could be the beginning of a rennaissance in music and far more profitable for the artists. 52M consumers are not going to switch back, we’re all ears for new sounds.

  5. Francois Theberge commented on Nov 28

    Question: What % of the fees goes to the artist versus the label?

    *evil grin*


  6. raphael commented on Nov 29

    The other thing that’s significant but not mentioned is that ISPs are capping the download traffic of users. For example, HughesNet has a daily download limit f 190MB and Verizon & Comcast & ATT also has implemented limits. And if the limits are exceeded, the user is shut off from the internet completely for a period of time afterwards (ex: HughesNet is a 24-hr period). This all helps drive away listeners.

    Japan on the other hand has taken the opposite approach where they keep giving the user more and charging less. Their internet is now capable of being used for gaming and for performing medical operations by doctors.

  7. Steve Pickrel commented on Nov 29

    Interesting…they start to charge for the music, and no one is willing to pay (else there would be no shutdown). The wild claims of lost profits always bothered me, since there is an infinite demand for free goods. All this is showing is the true market value of the product. Better to keep it free and enjoy whatever promotional value might be in the broadcasts.

  8. hal commented on Nov 29

    This is part of the issues with Satellite Radio which has been paying fees and is exposed to more fees.

    ALso the future issue with Cable TV–

    iot started decades ago as commercial free-then came commercials, then came premium channels to get commercial free–then came sports and then premium package sports–now we have the Cowboy packer game tonight on a premium package within premium package on pay cable tv.

    Let me know when we have to pay for commercials (we do–hsn)

  9. raphael commented on Nov 29


    everyone is already paying for commercials since a 2-hr program on the Dish or cable has about 50% content and 50% commercials.

    they have a license to print money since they get money from advertisers and money from subscribers.

  10. Bob A commented on Nov 29

    they are running announcments on asking listeners to contact their legislators regarding this issue…

  11. jeremiah commented on Dec 1

    Other than myself, is anyone commenting here actually *in* the music business??

    Barry, you are conflating two mediums: air broadcast and web “broadcasting.” The rate increases are for entities rebroadcasting licensed works via the INTERNET, not “radio” as we know it. Webcasters have been paying FAR less than their radio-based counterparts for similar audience shares. These adjustments were meant to bring equity to the two mediums from a royalty perspective.

    Yes, some webcasters will have to change their business model or go out of business. Pandora built a business on cheap licenses, gambling they’d never go up in price (Hello, Countrywide?). Prices increased, and Pandora’s scrambling. While we all love Pandora cause they’re so hip and cool and funky and HIP AND COOL, they may have not have had the business foresight and acumen to create and administer a functional business model given the operational climate.

    The Bloomberg article is biased: it says “Threat to growth” about 2/3 the way through. “Growth” of course is the religious incantation of the business wonk, and anything that threatens it is bad.

    – jeremiah

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