Internet Radio May Survive, For Now

A proposed cap on royalty fees may keep broadcaster alive past July 15, but the offer stands only for the short term.

Although last week’s “Day of Silence” protest was intended to spur Congressional action to save Internet radio, it turns out that the helping hand may come from the very organization that arranged the royalty increase to begin with. SoundExchange announced on Friday [PDF] that it would offer a $2,500 cap on the minimum royalty fees that could shut down many stations.

Since many broadcasters operate hundreds of channels, the proposed $500-per-channel fee threatened to put many of them out of business, but the cap could allow larger broadcasters such as Live365 and Pandora to survive.

“There was a lot of misunderstanding out there about how the minimum fee would apply, and frankly some people were wrongly stating SoundExchange’s policy on this matter,” said John Simson, Executive Director of SoundExchange, in a statement. “We certainly don’t want anybody to get unduly hurt by the minimum fee, but there is a value to music and a cost to administering the digital royalty program, and we wanted to ensure that everyone was treated fairly – artists, webcasters and record labels.”

The Digital Media Association responded favorably to the offer, saying they would accept it, but requesting that it be extended past the proposed 2008 termination. “Any offer that doesn’t cover the full term is simply a stay of execution for Internet radio,” said DiMA executive director Jonathan Potter, in a statement.

With the July 15 deadline for new fees quickly approaching, webcasters have little time to negotiate. Barring Congressional intervention, SoundExchange’s offer may be the only thing to keep Internet radio afloat, even if just for a time.