What's the Deal with the Internet Royalty Rate Debate?

Question: What's the Deal with the Internet Royalty Rate Debate?


Internet radio is an outlet for music lovers to share the songs they love and for independent musicians to get a crack at some radio airplay. Indie musicians have very little chance of getting played on terrestrial radio, and so internet radio is their only outlet. Internet radio companies already pay royalties on the songs they play, but it seems those royalties may not be good enough.

New royalty rates could come into effect on July 15, 2007, that could put the nail in the coffin of internet radio. Here is what you need to know about this incredibly important issue:

  • The US Copyright Royalty Board issued a new set of royalty rates that apply only to internet radio, bsaed in the advice of three experts appointed by Congress.

  • These new rates represent a 300% - 1200% increase

  • Satellite radio and terrestrial radio pay far less than the new rates suggested for internet radio - in fact, in some cases, they do not pay any royalties at all

  • SoundExchange, the company that collects internet radio royalties, was started by the RIAA (Recording Industry Association of America)

  • The RIAA supports these new rates

The obvious question is: why? Why should internet stations pay such outlandish royalty rates? They're not trafficking in illegal music - they already pay royalties for every song they play.

One side of the debate says that internet radio contributes to illegal music downloading since their songs can be streamed. Another side of the debate says that the RIAA, which is fundamentally a major label body, wants to shut down or gain more control over these stations that by and large aren't playing their music.

In July of 2007, it appeared that internet radio was within days of collapsing when SoundExchange reached an agreement with internet radio stations to negotiate new rates that supersede the rates set by the Copyright Board. That agreement had to get Congressional approval, and in September 2008, it did just that.