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New regulations endanger the future of Web radio

July 22, 2007|By JULIE E. GREENE

Radio fans could lose listening options and might miss out on new ones now that the new royalty rate increase has taken effect for Internet radio, industry professionals said.

Royalty rates and the way they are calculated changed July 15, although some negotiations were still going on in an attempt to reduce the financial impact on smaller webcasting operations. Internet radio supporters also have appealed in court and to Congress to change the new rates.

Web radio offers listeners more and diverse listening choices, from talk radio and news to a wide variety of musical genres.

At least two local radio companies, Main Line Broadcasting with stations in Hagerstown and Chambersburg, Pa., and Prettyman Broadcasting based in Martinsburg, W.Va., have been considering offering some of their broadcast stations online, but the increased royalty rates on commercial music could change some of those plans.

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The webcasting royalty rate increase also affects public radio, as local public radio stations will have to make tough decisions to deal with the increased costs, said Michael Riksen, vice president for government relations for National Public Radio in Washington, D.C.

Those stations might choose not to stream their content online, limit how many listeners can connect to the stream at any one time, or make other cutbacks on local service to maintain their webstream, Riksen said.

The royalty rate increase makes it difficult if not impossible to continue WETA's present level of streaming and could affect the development of new online programming, said Dan DeVany, vice president and general manager of WETA, public radio for the Greater Washington, D.C., area.

The old rate was .000762 cents per sound recording per listener, said Richard Ades, spokesman for SoundExchange. SoundExchange, which represents about 20,000 artists and 3,500 music labels, collects and distributes performance royalties. It was this nonprofit group that requested the royalty rate hike, which increases the rate gradually, retroactively from Jan. 1, 2006, through 2010 from .0008 cents to .0019 cents.

Small webcasters, who have $1.25 million or less in annual revenue, pay royalties based on their percentage of revenue from all sources, Ades said. As of Thursday when this Lifestyle section went to press, SoundExchange had offered to extend that deal rather than have small webcasters pay the per song per person rates that would increase their expenses, but a final agreement had not been reached by the two sides.

The rate might seem small, but a large number of people listen to online radio. The estimated weekly U.S. online radio audience is 29 million people, remaining steady from 2006, according to a report by Arbitron Inc. and Edison Media Research.

Listening is becoming the new consumption measurement, Ades said. People are finding more ways to listen to music without buying it, including www.pandora.com, he said. Pandora creates a personalized online radio station based on the listener's favorite performers or songs.

Prettyman had been considering webcasting some of its content, but with the increased rates, their plans for webcasting will have to feature content that is generated by Prettyman.

That means listeners will miss out on another way to listen to their musical radio content, said Norm Slemenda, general manager for Prettyman.

Webcasting Mix 95.1 and WQCM 94.3 would help people listen to those stations when they are in places that can't get the station via broadcast radio, such as metal office buildings that can interfere with broadcast signals, said Rick Alexander, operations manager for Main Line.

What Main Line will do now that the royalty rate increase has taken effect is uncertain.

Prettyman officials have decided to webcast local high school football and basketball games starting with the upcoming football season, Slemenda said.

They are looking into other locally generated content the online station could air without Prettyman having to pay royalty fees, Slemenda said. This might include carrying their live broadcast of the Mountain State Apple Harvest Festival parade online.

Expenses for public radio will go beyond the increased royalty rate because public radio hasn't had the record-keeping set up to track royalty fees under the new rate structure, Riksen said.

Ades said SoundExchange is working with public radio when it comes to tracking the number of sound recordings listened to per person. That information is necessary to determine the royalties due.

Broadcast radio also could face a battle on another front if musicFIRST succeeds in getting a royalty introduced to charge broadcast radio and benefit performers. Broadcast radio pays royalties to songwriters.

MusicFIRST (Fairness in Radio Starting Today) is a group of music industry organizations and artists, including Jimmy Buffet, The Doors, Toby Keith and Celine Dion, according to www.musicfirstcoalition.org.

Main Line's Alexander said musicFIRST's efforts might be motivated by the loss of revenue due to declining CD sales and the ability of consumers to buy individual songs online rather than buy entire albums.

Slemenda said he doesn't like the idea of a performers' tax.

"How would anyone know about any of these performers if the radio stations weren't playing their music?" he said.

To learn more ...

For more information, check out these Web sites:

·The SaveNetRadio Coalition at www.savenetradio.org.

·Copyright Royalty Board at www.loc.gov/crb.

·musicFIRST Coalition at www.musicfirstcoalition.org.

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