Internet radio deals about to be made

Posted by Mark Raby

Washington (DC) - The pieces of the legal puzzle surrounding Internet radio are finally sliding together as regulatory guidelines may soon be set.

The newest, and what could be the most expediently resolved issue of digital copyrights is directed at online radio stations.  Sites like AOL and Yahoo, along with innumerable independently owned operations, have been running legitimate radio broadcasts exclusively on the Web for years.  The terms are perfectly legit because the virtual broadcasters would pay royalties and other fees to SoundExchange, a group assembled for just this purpose.  This was all good until 2005, when the group's contract expired for virtually all online radio stations.

For about a year things were in limbo as new terms were considered.  Earlier this year, threats of highly excessive fees led to fear that more than 75% of affected online radio stations would need to fold.  In some cases, the amounts SoundExchange sought would equal more than twice the total revenue of the stations.

After complaints and heavy lobbying from the National Association of Broadcasters, SoundExchange agreed to cap some of the fees that Internet radio stations would need to pay.  However, the issue still unresolved is how much to pay for royalties.

The legal and judicial consensus is that Web-based broadcasters should pay more royalties, assumedly because it's easier for users to download over-the-air songs from them than it is from traditional radio stations.

Industry analysts and media reports suggest that terms may be finalized in the next several weeks.  SoundExchange leader John Simson was quoted as saying, "It takes a fair amount of work, and we've been doing the due diligence."