The Death of Internet Radio?

I learnt something cool about the way the economics of Internet Radio work today. Too bad the entire industry had to get into danger (BusinessWeek link) for me to get a chance to read about it.

I picked it up at GigaOM, and then BlogMaverick (the one remaining concern I have about the Dallas Mavericks:)).

So here's the super-distilled version without the actual numbers:

The entity that sets the royalty rates for streaming songs is the Copyright Royalty Board (which represents those much loved people: the RIAA). It upped the royalty rate from $0.0008 per performance to $0.0011 per performance this year, rising all the way to $0.0019 in 2010. The upshot is, given listening patterns and current subscription rates, (or rates available for ads served) there is just no way most streaming Internet radio sites are going to be able to stay in business. This obviously hurts the smaller stations the most, especially since they lost the option of paying as a percentage of revenue (and now have to adopt the pay-per-listen model.)
More (and considerably more eloquent) info here.

Sigh. I hope Musicovery survives; just as it looked like they'd struck up some partnerships (Amazon, iTunes) and put an advertising revenue plan in place (Google). I wonder if thats why they've been tweaking some of the site features since the last couple of days.

Might this be why they got rid of the skip button on the site? Since they have to pay for a song (what is a "listen", 10% of the song? 20%? 50%? 90%?), they might as well make you listen to the whole song. That'll definitely improve your experience and make you want to come back to the site, right???

Someone should talk to them...


shmoo said…
I've been listening to since 1999 and I have donated several times to fight against this CARP (Copyright Arbitration Royalty Panel) stuff. Hopefully something good will happen this time too.

The worst thing of all about this is that terrestrial radio does not pay royalties to the RIAA at all. Nothing. Only to the publishers (ASCAP, BMI, SESAC).
RagsVadali said…
pandora does something very interesting. you can 'skip' a song that they recommend, but try doing it often and out pops a message that you are limited to, if I remember correctly, 5 skips an hour. of course, it works for them because their recommendations are actually quite interesting.

maybe that's what's missing in this debate about the future ... those that take the actual effort to make things worth the while for their customers will overcome these restrictions and win out.

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