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R.I.P. small Webcasters

The new rate per song streamed from Webcasters will leave the industry in the hands of the portals.

I love radio. Though I grew up in the TV generation, my primary medium for entertainment in my formative years was radio. I probably would have watched more TV in my youth if my dad had not placed strict limits on viewing. My parents grew up when radio was all there was. Consequently, they were attuned to the value of radio. As I listened with them to “Radio Mystery Theater” and “A Prairie Home Companion” instead of watching TV, I too discovered its charms. And radio has considerable advantages over TV. Just as it’s often more enjoyable to read a novel than watch the subsequent movie, radio engages the imagination in ways TV cannot. And, of course, it allows listeners to be productive rather than passive.

Radio also was the main way I found out about new music while growing up. Back in the late ’60s and early ’70s, every day there was a new song or a new artist on the radio. As soon as we heard that cool new song, we hopped on our bikes for the neighborhood record store to spend our last few paper-route dollars on the vinyl record before someone else bought the last copy.

Sadly, radio is not what it was in the glory years after payola was banned. Consolidation in the radio industry has left a handful of companies running nearly all the stations in the United States. Though outright payola is no longer practiced, record labels do pay for certain artists to be played on the handful of radio media outlets. They do this through gatherings in which labels must pay exorbitant entrance fees to get the ears of programming consultants. The labels will only pay these premiums for artists with proven track records. Aside from a couple of low-power independent stations and public radio, indie labels have very little chance of getting their artists on the air. They don’t have the money to, in essence, buy air time. The result is that a few dozen of the most mainstream artists get air time and thousands have no forum for their music, outside of the Internet.

The promise of the Internet is to explode conventional media hegemony. For example, Weblogs, or blogs, are causing a shift in the way people think about world events divorced from staid press coverage. (BTW, I think of this column as a hybrid blog that draws from conventional media news feeds with a heavy dose of my own world view mixed in.) Just as bloggers are making a dent in the established press, Webcasters have had an impact on radio. Music lovers who are tired of the white bread and Miracle Whip offered by the big radio companies have a new channel for indie labels. Just as independent stations are more likely to offer varied fare, small Webcasters are more apt to stream quirky garage bands than are the big portals like Yahoo.

Because of pressure by the major radio stations and the recording industry, Internet radio will soon resemble conventional radio. Radio stations don’t have to pay labels to broadcast songs, beyond the royalties (4 percent of revenue) they pay artists and composers. Labels view the promotional value in getting air time for their artists so strongly that they pay stations for programming influence. One would think Webcasters would be allowed to play by the same rules. And they have been since 1998. But the recording and radio industries want Webcasters to pay for each song streamed. Their reasoning is that Webcasters don’t get much revenue–4 percent of nothing is still nothing. Of course, the real reason is control; labels want influence and radio stations want the revenue that influence brings. Neither want to lose any control of the listening audience to Webcasters.

The Copyright Office has already ruled that Webcasters would have to pay for songs; the question in the last year has been at what rate. They have haggled over the rate for some time, but now the U.S. Copyright Office has handed down the ruling of James Billington, librarian of Congress–.007 cents per song will be paid out to the recording industry for each song Webcasters stream. That may not seem like a lot until you consider that even small Webcasters would have to pay for millions of songs streamed since 1998. While conventional radio stations only pay 4 percent of revenues gained from the few songs they broadcast to millions of listeners, Webcasters have to pay for the millions of songs they narrowcast to each listener. It doesn’t take a mathematician to figure out that the fees would overwhelm their revenues. While the likes of Yahoo can afford the fees based on the conglomeration of all that they do, small Webcasters will have to declare bankruptcy to pay for past radio streams. With the small independents out of the way, the recording industry can concentrate on buying influence from the few Webcasting music portals left. If the ruling is not appealed, it won’t take long before Internet radio is just like its older cousin–white bread and Miracle Whip. Just another reason for me to go for XM Satellite Radio.

James Mathewson is editor of ComputerUser magazine and

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