Whither Internet radio?

I have listened to a fair amount of Internet radio over the years. When I have a computer on and am connected to the Interenet, it's very convenient, reception is never a problem and the sound quality is always high. Most importantly, the variety of formats available over the Internet far exceeds that of over-the-air broadcasting.

In the Fall of 2005, I noticed a problem. My favorite radio station was counting down the top 885 albums of all time, both over-the-air and on the Internet. They played two tracks from each album numbered 885 - 501, three from each of 500 - 26 and the entire album for each of the top 25. I was listening as much as I could at work, over headphones. But due to certain provisions of the Digital Millenium Copyright Act, WXPN was not permitted to broadcast more than three songs from any one album—or was it from any one artist—over a certain period of time (one hour I think). So for each of the top 25 albums, I got to hear only three tracks. They played some other filler over the Internet for the rest of the time.

Then on June 26, WXPN joined thousands of other US-based webcasters in a "Day of Silence" to protest a retroactive royalty rate increase imposed by the Copyright Royalty Board that goes into effect tomorrow.

Two days ago, a Federal appeals court denied a petition from many of these Internet ratio stations to delay the rate increase, saying it could kill the medium. For an idea of how significant this increase is, consider this: "the six biggest Internet radio stations—Pandora, Yahoo, Live365, RealNetworks Inc., AOL and MTV Online—will pay 47 percent of their anticipated 2006 combined revenue of $37.5 million in performance royalties" (from Reuters UK, "U.S. court denies Webcasters' stay petition" Thu Jul 12, 2007 2:15 PM BST144).

I tried, but failed, to find the actual ruling by the Court. If you want to know more, there's some interesting discussion on this topic over at Slashdot. There's also SaveNetRadio, a coalition artists, labels, listeners, and webcasters that "believes strongly in compensating artists," but thinks that "[t]he recent ruling by the Copyright Royalty Board to increase webcasters' royalty rates between 300 and 1200 percent over the next 5 years jeopardizes the industry and threatens to homogenize Internet radio."

[Thanks to Michael Geist's Internet Law News from 13 July.]

15 Jul 2007 12:55 Eastern time UPDATE:

I left off one of the most important points I wanted to make in my original post: that there's no reason to believe the future of Internet radio isn't bright—it just won't happen here in the US.

Furthermore, it now appears that there is still some hope of averting disaster here. According to Eliot Van Buskirk, writing in Wired:

SoundExchange, a group responsible for collecting music broadcasting royalties, on Friday confirmed it has proposed new terms for internet radio that could lower fees for some webcasters.

While limited in scope, Thursday's proposal offers a partial reprieve for smaller sites facing the axe Sunday when a payment scheme approved by the Copyright Royalty Board, or CRB, is set to take effect....

Under the new proposal, which must be implemented by the CRB, SoundExchange would cap the $500 monthly per-channel minimum fee at $50,000 per year for webcasters. In exchange, webcasters would be required to provide more detailed data on the music that they play and make an effort to stop unauthorized copying....

In addition to the minimum caps proposal, Webcasters were given assurances that negotiations would continue to work out breathing room for small and non-commercial broadcasters.

[Thanks this time to a posting on Dave Farber's IP list.]