Internet Radio Stations Await Royalties Ruling

In a ruling that could make or break the Internet radio industry, a federal official is expected this week to decide how much online broadcasters must pay record labels and recording artists for the songs they transmit over the Web.

The Librarian of Congress has spent the last three months reviewing a federal arbitration panel’s proposed royalties, which critics say are high enough to silence most free Web radio stations. The panel recommended charging commercial Internet-only stations 14 cents a song and over-the-air stations 7 cents a song if they “simulcast” their programs on the Web.

Those fees must be paid for each person who tunes into a Webcast, which means a Web-only station broadcasting 15 songs an hour would owe more than $180 per listener per year. For a popular outlet such as KNAC, the highest-rated Internet-only station in a recent survey by MeasureCast Inc., the annual bill would be about $100,000.

Webcasters and over-the-air stations have urged lawmakers to pressure the librarian to reject the panel’s proposal in favor of lower royalties. In particular, they want to have the option of paying a percentage of their Webcasting revenues in lieu of a fixed fee per song, which would be a huge break for small stations and hobbyists.

The Recording Industry Assn. of America and several musicians’ groups eventually responded with their own lobbying campaign, urging lawmakers to support the panel’s proposal. They argued that Webcasters who build their business around music have a duty to pay a fair royalty to artists and copyright holders, without whom the Webcasters couldn’t attract an audience.

The deadline for the librarian’s ruling is Tuesday.

Jon Healey