The Storm Brewing on Internet Radio

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This is Celia Hirschman with On the Beat for KCRW.

Last Friday, Internet radio stations around the country were delivered a stunning blow. The Copyright Royalty Board, (otherwise known as CARP) is a panel of three judges appointed by Library of Congress. CARP set down a ruling that all Internet radio stations are now responsible for paying specific royalty rates for streaming music. The royalty rates were published and will be retroactive to January 1, 2006.

The CARP decision was based on months of lengthy hearings with all different types of broadcasters, publishers, music labels and rights organizations. Each concern presented their ideas of how the royalty structure should be based, though the final decision was up to the CARP judges.

It was a complicated decision, outlined in 150 pages of text and the implications of these new rates will be different for each station. Not only is the amount of music streamed relevant to the royalty rate charged, but the size of the listening audience is taken into consideration as well.

And, here's the real stunning part. The royalty rates just published may force an end to the larger non-commercial Internet music stations on the web.

In the hearings, non-commercial radio groups argued that their audience was different from that of commercial radio's audience. That their mission meant they recycled their revenue back into the development of educational and cultural programming. Their job was not to make a profit. The Royalty Board agreed, to a point, but felt that successful non-commercial stations would cannibalize the web-casting market, and thereby affect the value of the digital performance right. So CARP built rates that were minimal for small non-commercial outlets, and far more substantial for larger ones. In fact, the larger non-commercial radio stations will be forced to pay the exact same royalty rates as all the commercial radio stations in America.

This makes no sense to me. Commercial radio stations sell advertising, in a competitive market where profit is the guiding force. Their programming is based solely on their ability to generate top income from advertisers, so their programming is directed by their profit margin.

Non-commercial radio serves a completely different agenda. Their programming is based on a social, cultural and educational imperative. Listen to music on stations like KCRW, or KEXP and you'll hear songs you can't here anywhere else on the radio. In other words, these stations answer a much needed cultural demand that the government has long understood is necessary for the good of an evolved society.

But the new royalty rates for these larger non-profit stations are way too expensive, and may force them to shut down their Internet music streaming. CARP's argument is that because they are so successful, these non-profit stations should be able to generate substantial web advertising. That's just not accurate. Web advertising for non-commercial radio has barely begun. These stations have made an investment in the future, but the present income is far from sufficient to be self-supporting. So it would seem these new royalty rates are economic punishment for a non-profits' job well done.

It's is a serious backwards step for the American public.

This is Celia Hirschman with On the Beat on KCRW