New Internet Radio fees will kill innovation

A new internet radio licensing agreement that is being hailed as a victory of sorts for providers such as Pandora will kill innovation and smaller providers.

While the compromise on fees is welcomed, the devil is always in the detail, and the detail comes at a hefty price for small sites. To be precise, the new scheme dictates a minimum annual fee of $25,000 for “pureplay webcasters.” The $25,000 is counted towards the revenue split (itself a staggering 25%) or the per play count, but it’s the mandated minimum fee that’s the killer.

$25,000 may not sound a lot for bigger online radio stations, or similar services such as Pandora, but for the small indie online radio market, it will be a killer because many would be fortunate enough to make $25,000 a year to begin with, but even if they did make more, $25,000 out of a profit of $30,000 or even $50,000 (profit before the royalty payment) is a massive burden.

Existing players aside, the imposition is even greater on new internet radio stations. Innovation often comes from below, and new stations (not unlike blogs) take time to establish an audience, and even longer to earn money. The innovation we’ve seen in content through blogging started from the ground up, but in online radio that’s now no longer affordable unless the station takes funding, but even there the fees impose an artificial constraint of funding upfront to innovate.

The continuing hypocrisy in the debate around internet radio fees continues to be the double standard between the treatment of radio and internet radio. Traditional radio in the US doesn’t pay anything to play music, and yet internet radio is expected to pay 25% of turnover. I’m not suggesting that either internet radio or traditional radio shouldn’t pay something, but both should be treated equally, with royalties charged at a reasonable rate based on profit without a minimum annual payment.