The end of Internet radio?

That's the question some in the music industry are pondering after the Copyright Royalty Board denied a motion by webcasters' yesterday to rehear the new, higher royalty rates the board set for webcasting in March. The three judge panel denied the rehearing on procedural grounds saying the webcasters didn't present any new evidence that would warrant a new hearing.

Small webcasters have bitterly objected to the new rates saying they would put them out of business. Small webcasters will now have to look to the courts or Congress for relief. In an e-mail message yesterday, Tim Westergren, the founder of Pandora, summed up the situation this way:

The new royalty rates are irrationally high, more than four times what satellite radio pays and broadcast radio doesn't pay these at all. Left unchanged, these new royalties will kill every Internet radio site, including Pandora.

The webcasters have formed a group called SaveNetRadio to lobby for lower royalty rates.

It would be devastating to lose small webcasters. With commercial radio sounding the same from coast to coast, small webcasters have been a great outlet for independent music and genres that normally don't show up on the commercial airwaves (say jazz).

The problem is that a "one size fits all" royalty system does not make sense on the web. The Royalty Board should recognize there's a vast difference between a small one man/woman web radio station and AOL. That's why a tiered system makes the most sense: charge the big boys one rate, and the small webcasters a lower rate. This ensures artists get paid and we keep the really great small webcasters on the air, er web.