It's bad enough that increased royalty rates are threatening the very existence of Internet radio, but Internet music streamers will also have to pay an additional "administrative fee" to the music industry that is estimated to cost $1.15 billion for Yahoo, RealNetworks, and Pandora alone. As my Business 2.0 colleague Chris Taylor reports:
Tucked into the record industry's request for a fee hike was a suggestion, offered without explanation, that webcasters should cough up a minimum $500 "administrative fee" for every channel they broadcast online.
Attorneys for the webcasters thought this was such a patently ludicrous idea that they didn't even bother to respond to it. After all, "channels" don't mean the same thing online as they do in the old broadcast world.
I can go to Pandora right now and set up a dozen or so channels in a minute, each one based on a favorite artist or song. . . . the possibilities are practically limitless. Last year, for example, RealNetworks' Rhapsody service streamed more than 400,000 channels.
The webcasters' lack of response was a huge mistake. The three-judge panel accepted the administrative fee without question, backdated it to January 2006, and have since flatly refused to return to the subject. The fee goes into effect July 15.
The only thing that can save Web radio now is if Congress passes the Internet Radio Equality Act, which seeks top set royalty rates at the same level that satellite radio pays.