Internet Radio Lives to See Another Day

Okay, this entry is about Internet radio, not video. But if you’re interested in getting video and movies over the Internet, this is an important issue because it gets at the thorny issue of who pays what for content on the Web.

Internet radio stations got hit with a decision last March that imposed royalty fees to music writers and publishers on works that are broadcast over their service. According to the head of Pandora, a popular Web music site, the fees would amount to more than 70% of the company’s gross revenues. That would be financially impossible, and the service would have to shut down. Pandora and other Internet radio services have been in negotiation with the Sound Exchange, which is the organization charged with tracking and collecting the royalty fees. The clock has been ticking on the negotiations, and without Congressional action, a settlement would have to get Congressional approval. But Congress is about to adjourn for the year. So this week’s action by the House and Senate to extend the deadline to February 15 is good news. If signed into law by the President, this will give the Web radio group and Sound Exchange extra time to come to terms. National Public Radio already has reached an agreement, and Sound Exchange is reportedly close to an arrangement with a group of larger Web radio stations.

Internet radio is a popular part of distribution of entertainment content on the Web, and so a lot of consumers will be affected by the Sound Exchange negotiations. (Interestingly, AM and FM broadcast radio do not have to pay these copyright royalty fees.) It takes money to create the content on the Internet — even if we can get it for free — and the question of who pays to create that content is one that has serious implications for both audio and video programming.