There may be hope for Internet radio stations yet as the music industry has agreed to lower the rates per-song-per-listener to a much more acceptable level. SoundExchange, the media organization that handles the royalties for artists and the music industry, and representatives of the online radio stations have reached an agreement after two years of legal battles and maneuvering, even if, at one point, the future looked particularly bleak for the latter.
"Supporting new business models through innovative licensing agreements is critical to the future of our industry," Steve Marks, RIAA vice president and one of the people directly involved in the deal, said. "We are pleased to have found an alternative in the hope of avoiding costly litigation in favor of building partnerships."
Under the new deal Internet radio stations would pay 0.08 cents per stream retroactively for 2006 and upwards or 25 percent of their revenue, whichever would be higher. For sites with less than $1.25 million in income the share or the revenue they must pay will be around 12 to 14 percent and all stations would have to pay a minimum of $25,000 a year. The 0.08-cent rate will also increase to 0.14 cents by 2015.
A federal royalty board decided in 2007 that Internet radio had to pay 0.19 cents per stream, which caused an outcry with the online radio station owners as it meant that it would likely put most of them out of business. Two years later the parties have finally reached a deal that they agree on. Traditional radio broadcasters on the other hand do not pay any royalties for the music they play.
“Pandora is finally on safe ground with a long-term agreement for survivable royalty rates. This ensures that Pandora will continue streaming music for many years to come!” Tim Westergren, founder of the Internet radio station, said.
Pandora is one of the biggest online radio stations, with $19 million in revenue last year and an expected $40 million in 2009. The site says it is pretty satisfied with the outcome though it still thinks the rates are higher than they should be and, as such, it will be introducing a limit of 40 hours of listening per month per user, which it says will affect less than 10 percent of its user base. Those who want more than the 40 hours will have to pay $0.99 for unlimited streaming for a month.