Even though Internet radio has a collective audience of 54 million listeners, it has been put under constant threat from the Recording Industry Association of America (RIAA) and other trade group organizations.
Pandora, an Internet radio company based in the San Francisco Bay Area, is the latest high-profile radio service under threat by the RIAA. The online service has become an instant hit among Apple iPhone owners looking for ways to listen to streaming music through their phone.
Pandora representatives said they openly support paying royalties to the musicians and RIAA, but believe the current pay structure is unfair to online music streamers. The site is close to closing down because of the "unfair" pay structure, with 70 percent of the company’s $25 million in revenue going to the music trade industry.
As it currently stands, each online radio station paying royalties pay the money to SoundExchange, the organization responsible for collecting all money for the RIAA. The broadcasters pay royalties based on each song for each listener who is listening to the station. Although this number was acceptable, the rate will soon increase from 8 one-hundredths of one cent to 19 one-hundreds of a cent in just two years.
Along with Pandora founder Tim Westergren, other broadcasters have said it’s becoming too difficult for them to make a profit because of the drastic increase in royalties that looms on the horizon.
AccuRadio, a smaller, independent radio station, has to pay around $67,000 per month in royalties, except the site only makes $40,000 to $50,000 per month.
The RIAA and radio broadcasters are going to continue to battle one another while Internet radio continues to have a possibly bleak future even with record numbers of listeners.
8 Comments
Most internet radio companies are going to close down by 2010 if the fee structure isn't changed. Talk about shooting yourself in the foot. Internet radio attracts millions of users, many of whom discover new artists (especially on Pandora) and could then go out and buy new songs. Instead, Sound Exchange/RIAA is forcing these awesome tools to shut down due to their greed.
The article also failed to mention that terrestrial radio pays ZERO fees per played song and Satellite radio pays less than what they are charging internet radio. It's all complete bull and greed by the Music Industry cartel.
It's even a bigger shame that a lot of smaller sites have already been knocked offline by the RIAA.
I'm not trying to say they shouldn't get paid, but it is getting kind of ridiculous... 1. They ask a reasonable royalty fee and make money.
OR
2. People will setup off-shore international stations and the RIAA will get nothing.
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