Regulating online radio

The future of internet radio hangs in the balance in the US as regulators temporarily postpone a ruling that could shut down many small-scale stations.

Internet radio may be a misnomer for the type of stations that are at the centre of this particular controversy. They are radio stations, but not in the same way that the traditional terrestrial broadcasters are stations. They take different forms, but a common model is one in which listeners pay a subscription to a “station” which allows them to pick a genre, music from a local area, a single musician or even different versions of a particular song. The station (or webcaster) then sends a stream of this music to the customer over the internet, effectively creating a personalised radio station for each listener. 

Money is made through subscriptions, advertising and the selling of optional downloads or physical recordings of the songs played, often through established sellers like Amazon. Listeners can also control the station to a degree, by stopping a song or skipping forward or back a few tracks. It is also possible to listen to the stations for free in many cases. In the US, 34.5 million people use internet radio while in Europe the numbers are even higher at 49.5m, according to market research company comScore. Many of the webcasters that stream music through the internet to customers around the world are based in the US. 
Until recently they had to pay a percentage of revenue in performance royalties for music streamed in the US to the industry approved association SoundExchange, which collects and distributes royalties in the same way as IMRO, the Irish Music Royalty Organisation does in this country. But the US federal Copyright Royalty Board has now decided to restructure the form in which royalties are charged. The changes would mean that the stations are charged each time a user listens to a song, whereas previously they were charged based on the number of songs they played, or the number of hours listeners tuned in. Critics of the bill claim that it is comparable to a conventional station paying a royalty for every listener that hears a song they play. Also under the new bill, webcasters in the US will have to pay increased royalty fees, up to 0.19 cent per song by 2010, as well as a $500 fee per station per year. A specially created lobby group called has engaged in a successful campaign against the bill. The group encouraged users of internet radio to contact their respective congressman to protest at the proposed changes. 
Many did so, and due to congressional pressure and general outcry on the internet, the charges which were to come into effect on 15 July have effectively been put on hold by SoundExchange, who have agreed to not demand full payment until more agreement is reached. SoundExchange have proposed to put a cap on the fee per station at $50,000 in exchange for more detailed information on the music the webcasters play, and on condition that they take steps to stop unauthorized copying from their stations. SoundExchange's suggestions only apply to smaller webcasters, to whom this is a great relief, as some of them have as many stations as they have listeners, but often little revenue, meaning that the bill would force them out of business. Large companies like Yahoo! or AOL still have to pay the new prices. 
But there still remains disagreement on the other aspects of the bill. One of the main webcasters is Pandora, with 6.5m users. Recently listeners outside of the US have been unable to access the site. Company founder Tim Westerberg hopes that many countries will sign up to a newly proposed plan laid out by the International Federation of Phonographic Industry which would make management of music streams more simple. But this agreement would leave rate-setting to each country, meaning that the proposals of 0.19cent (*0.13) per song in the US may become the global benchmark, effectively ending the internet radio industry, save for the media giants that can afford to pay the new prices.