BROOKE GLADSTONE: If radio consolidation brought a stultifying sameness to music on the airwaves, the Internet promised a fresh start. Online, nearly anyone could start a radio station and play whatever they liked. What began as an experiment has become a phenomenon, drawing roughly 72 million listeners each month. Among them are a few of our listeners, who told us about a new fee structure to go in effect May 15th, devised by the Copyright Royalty Board created by Congress. It will boost the cost those webcasters play to play a song, and many online DJs say it will drive them out of business.
Attorney David Oxenford has worked to hold down costs for indie Internet radio. He says the upcoming fee hike has not gone unnoticed.
DAVID OXENFORD: Lots of newspapers have been running articles. We've seen petitions with tens of thousands of signatures already on it. We understand that a number of congressional offices have gotten thousands of calls and emails already. We hope that that continues. I think each and every one of the Internet radio stations that's affected by this decision is talking to their listeners right now about the effect. BROOKE GLADSTONE: How do broadcast radio stations pay for the songs that they play? DAVID OXENFORD: Broadcast radio stations pay only for the composition. That's basically money that goes to the songwriters, and that's collected by three organizations called ASCAP, BMI and SESAC. BROOKE GLADSTONE: And so until now, what are the rules that have governed Internet radio? DAVID OXENFORD: Internet radio stations pay not only for the composition, the fees that go to ASCAP, BMI and SESAC, but also a royalty fee that goes for the performance, the actual song that's being played on the air, and that royalty goes to the record companies and also to the artists. BROOKE GLADSTONE: And how much an individual Internet radio station pays is tied, to some degree, to how many people listen to them? DAVID OXENFORD: That's been the way that the royalty has been paid by the big webcasters. For the small commercial webcasters, a special deal was negotiated in 2002, that I was involved in on behalf of a number of small webcasters, where they paid based on a percentage of their revenue. BROOKE GLADSTONE: So now the Copyright Royalty Board, which was created in 2004, I guess, to assess the situation, reached a decision. What did they decide? DAVID OXENFORD: Basically for the big webcasters. The rates are going up two and a half times on a per-song, per-listener basis. Also, the Royalty Board decided that they would not offer a percentage of revenue option for any webcaster, so that the smaller guys, who play lots of songs but aren't bringing in a lot of revenue, end up, under the new scheme, having to pay more in royalties than they bring in in total revenues. BROOKE GLADSTONE: What about if you're commercial-free, in other words, non-profit? DAVID OXENFORD: Well, non-profit radio stations do have to pay a flat fee for up to a certain amount of listening. And once they get above that certain threshold, they have to pay at the commercial rates. So for some of the big NPR stations, some of the big religious broadcasters, some of the big community radio stations, they're going to be paying at the commercial radio rates, about 10 times what they're currently paying. BROOKE GLADSTONE: But The Wall Street Journal said that the fees up until now have been kept, quote, "artificially low to encourage a nascent industry." DAVID OXENFORD: That's not [LAUGHING] really true. I don't know where they came up with that, because none of the webcasters really have been making any money. There hasn't been much advertising revenue, and so this royalty really has been eating up all the revenues that have been coming into this industry. BROOKE GLADSTONE: We keep hearing that the music industry is supposedly struggling. Doesn't it stand to benefit from the exposure they could get from these, you know, at least the popular Internet radio stations? DAVID OXENFORD: No question. The Internet radio stations, especially a lot of the independent Internet radio stations, play all sort of niche formats, exposing people to all sort of stuff that's not played on terrestrial radio. And it's really encouraged people to buy CDs that they would never have heard about unless they had heard it on some of these Internet radio stations. BROOKE GLADSTONE: What's the recourse for the radio stations you represent? Can they challenge this new fee structure? DAVID OXENFORD: Sure. Sound Exchange, the collective that collects these royalties on behalf of the recording industry, can always agree voluntarily to a different set of rates that will allow the independent webcasters to survive. Already some of the congressional representatives have expressed outrage at the royalty rate and what it will do to diversity on Internet radio. We hope that they will actually take some action to preserve Internet radio if we can't voluntarily reach a deal that will help us all survive.
The first royalties under the decision are due on May 15th, and, especially for the smaller webcasters, if there's no relief by May 15th, you may see a lot of them shutting down. If the listeners haven't already gotten the message, they'll get it then when they can't hear the music that they love from these Internet webcasters. BROOKE GLADSTONE: David, thank you very much. DAVID OXENFORD: My pleasure. BROOKE GLADSTONE: David Oxenford is a media attorney with Davis Wright and Tremaine. [MUSIC UP AND UNDER]