Tuesday, March 06, 2007

Radio No! (Part 2)

As you can imagine, the web is buzzing with news and opinion on the future of Internet Radio after last weeks announcement on the new royalty rates. In fact, Om Malik has a quote from Tim Westergren (founder of Pandora) in which he says, "left unchanged, it’s over for us and every other internet radio service, period. Makes it un-viable. We’re staying online because we’re hopeful that sanity will eventually win out. This is a ludicrous ruling.”

If you agree (as I do), then you should check out:

http://www.save-internet-radio.com/2007/03/02/save-internet-radio/


Whether you don’t want to see your favorite internet radio station go off the air, whether you just hate the RIAA, whatever the reason: please, help us get this senseless, greedy policy designed to do nothing but line the pockets of the record industry overturned. Write to, or better yet call, your representative, your senators, and the Copyright Royalty Board. Tell your friends and family, write on your blog, digg this - help get the word out and help to Save Internet Radio!


They also have a nice walkthrough calculation where a small webcaster with 1000 listeners on average could easily rack up hundreds of thousands of dollars in royalty obligations.

Also, David Porter (formerly of Live365) has his own calculation on what that means to the amount of advertising a station would need to have to just break even.

So if we assume an average CPM of $5 for audio ads - probably a bit aggressive, at least at this stage - the webcaster would need to run at least 6 ads per hour in 2010 to cover the required SoundExchange payment. Again, to say nothing of composition royalties, bandwidth, contribution to overhead and profit.


And Rags Gupta (also formerly from Live365) has some thoughts on the implications to the industry.


  • There's greater certainty for Webcasters as they've been waiting to know these rates for a while, which may have had a chilling effect with respect to their getting funded (I've counseled at least a couple of VCs looking at webcasting companies to wait until the rates have been set).
  • It may also impact any M&A activity that may have been swirling (like the Last.fm/Viacom).
  • Some services that allow a greater form of interactivity, like Last.fm or Pandora, may well be subject to higher rates keyed off the statutory ones based on any deals they've negotiated directly with the labels.
  • Webcasters will need to respond by either upping the ad frequency, finding other revenue streams (as some have already done by inserting video ads). Some may have to use webcasting as a loss-leader to acquire users that they monetize via other means.
  • Finally, if these rates do stick and streaming volume stays the same or goes up (ie companies don't fold their webcasting operations), this will mean greater revenue for labels and recording artists, who are looking for additional revenue sources under every stone these days.

There is still some hope in that these rates can be appealed. Let your voices be heard.

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