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Pandora has added classical music to the Music Genome Project, the extensive music database and engine that powers its DIY Internet radio site.

If you were addicted to Pandora before, just wait until you can actually figure out what kind of classical music you like.

The addition is significant as more than any other DIY Internet radio site, Pandora is known for its ability to figure out what listeners like based on a musical genetic code for each song. Nowhere is a song's musical genetic code more relevant to figuring out what you like than in the complexities of classically composed music.

Pandora Classical, as the company refers to the addition, includes a collection of over 10,000 recordings by more than 500 composers spanning the Baroque, Classical, Romantic, Modern, and Contemporary classical music genres.

"We think classical music enthusiasts will be delighted by the ability to explore any and all parts of the classical music universe in ways that have never before been possible. At the same time, we hope to make classical music more accessible and relevant to everyone," Tim Westergren, founder and chief strategy officer of Pandora, said in a statement.

In addition to stations based on one artist, listeners can choose to listen to one movement in a piece and then build a station that recommends other similar music pieces by other artists.

For the holidays, Pandora has also added a feature for playing holiday songs exclusively. As with all Internet radio stations, you can never call up an artist and song on demand, but Pandora has found a way to get you close to that. Typing in "Frosty the Snowman" brings up a list of covers of the song from many different artists. Choosing one of those brings up songs that sound like that particular artist, or brings up that artist singing a different holiday favorite. Alternatively, you can also type in the name of an artist and the word "holiday" to get holiday recordings with their sound.

There appears to be relief ahead for at least some small Webcasters that balked at a new requirement to pay higher royalty rates to musicians and record labels.

SoundExchange, the nonprofit record industry spin-off charged with collecting the mandatory royalty payments, said in a Tuesday press release 24 "small" Internet radio outfits have signed agreements guaranteeing they will owe through 2010 the same rates they have paid since 1998. Others are in the process of signing on, SoundExchange said. It was not immediately clear which radio stations had already reached agreements.

Under the deal first offered in May, that means Webcasters that earn $1.25 million or less in annual revenues would be required to pay 10 percent of all gross revenue up to $250,000 and 12 percent for all gross revenue above that amount. SoundExchange says those are "below-market" rates.

"It's a sacrifice our members are willing to make at the request of members of Congress and in order to give the smallest Webcasters below-market rates for an additional limited time," John Simson, SoundExchange's executive director, said in a statement.

The announcement arrives a few weeks after SoundExchange and the Digital Media Association, which represents large Webcasters like Pandora, Live365, Yahoo and AOL, said they had reached an agreement on a few thorny aspects of the royalty payments required of those companies. They're still attempting to reach an accord on the level of the royalty rates themselves, which opponents say can raise the costs of large Net radio operators by up to 300 percent and smaller ones by up to 1,200 percent.

The rates established under the agreements outlined Tuesday are essentially the same as those that resulted from a 2002 law called the Small Webcaster Settlement Act.

But some smaller Webcasters remain unimpressed by the royalty collectors' proposal. SoundExchange said some opted not to sign the agreements, which the organization began sending out in late August, because "their business models benefit more from the regular commercial rates." Others didn't sign on because they operate via Webcast "aggregators" who take care of the payments on their behalf, SoundExchange said.

David Oxenford, an attorney for a group of small Webcasters including Accuradio, Radio Paradise, Radioio, Digitally Imported Radio, and 3wk Radio, was quick to say his clients have not reached a deal with SoundExchange and continue to oppose the terms of the agreements in Tuesday's announcement.

"If the only deal that SoundExchange offers to small Webcasters is that which was just signed by the 24...they will do away with the independent Webcaster who is serious about growing a business, but to whom a per-performance royalty creates real issues," he said in an e-mail.

Because of the agreement's dependence on annual revenue levels, he went on, "you'll be left with an industry with essentially hobbyists and big companies that subsidize their Webcasting with other lines of business--essentially crushing the hopes of those who saw the Internet as a way to build an independent radio business."

As we reported earlier this week, many Webcasting services kept streaming without incident after feared new music royalty fees took effect, as talks with the record industry about alternative arrangements seemed to be proceeding on a favorable track.

How quickly things can change.

Now a new spat appears to be brewing between the Digital Media Association (DiMA), a lobby group representing large Webcasters like Pandora, Yahoo, RealNetworks and AOL, and SoundExchange, the group that collects and lobbied for the new payments on behalf of musicians and record labels.

The issue? Whether Webcasters should be required to cloak their streams in technologies designed to prevent "streamripping" as part of an agreement to cap the administrative fees they owe to SoundExchange.

Recall that large Webcasters have balked not only at the heightened per-song, per-listener royalty rates imposed earlier this year by federal copyright authorities but at a minimum $500 per channel administrative fee that they say would cost the three largest services, which allow users to create thousands of distinct "channels," more than $1 billion in the first year alone.

At a closed-door congressional meeting and in a subsequent press release last week, SoundExchange offered to cap that annual fee at $50,000 per Internet radio company, provided that the Webcasters agree to provide more detailed reporting about their music streams and "to work to stop their listeners from engaging in 'streamripping'"--that is, turning music streams into more permanent libraries. DiMA issued a statement over the weekend saying it was prepared to accept the cap, to provide the more detailed reports and to "research, identify, review and evaluate the prevalence of 'stream-ripping.'"

As it turns out, SoundExchange wanted more than just an inquiry on the streamripping issue. On Monday, SoundExchange Executive Director John Simson sent a letter to DiMA informing it that it had "mischaracterized" the group's offer. In exchange for the cap, the group is calling for Webcasters to "agree to implement technology related to streamripping...provided such technology is feasible and is available on reasonable terms."

That request--a copy of which was provided by DiMA to CNET News.com--drew a retort on Wednesday morning from DiMA Executive Director Jonathan Potter, who accused SoundExchange of backtracking on its original offer. He said in a statement: "SoundExchange has demanded enforceable technology mandates that are unreasonable, unworkable and way off-topic. They seek to leverage this absurd fee to impose mandates that they have unsuccessfully sought elsewhere."

SoundExchange spokesman Richard Ades blasted DiMA's latest characterization of the issue.

"What we have in the letter is the same exact terms that we discussed at the roundtable in front of members of Congress," he said in a telephone interview Wednesday afternoon. "For him to say that we're backtracking is political posturing and misrepresenting the truth. It's just totally disingenuous."

So where do we go from here? DiMA said it's still prepared to meet with SoundExchange soon to sort out the differences, and Ades said SoundExchange is also drafting a response.

It's important to note that the large Webcasters represent only one portion of the debate. Negotiations with small Internet radio outfits and noncommercial entities like National Public Radio have been occurring on separate tracks and so far appear to be progressing on a smoother course.

For more on the Net radio conflict, check out our FAQ.

Update at 2 p.m. PDT: SoundExchange has provided CNET News.com with a copy of its written response to DiMA, which contains something of a scathing rebuke.

"Late on Friday night you sent me a self-serving letter which did not accurately portray the offer we made at the roundtable," SoundExchange's Simson wrote. "You then accepted your own offer and released that to the press before I even had a chance to read it, much less respond to it. And now you accuse us of backtracking when you clearly know that is not the case."

Simson's letter said SoundExchange is also still waiting on DiMA to come through with multiple "promises," including DiMA's proposal for what to do about the fee structure and access to "proprietary company materials." It also said the group already arranged a "last minute" meeting with its board members and DiMA representatives in New York this week and had offered another "specific date and time" to meet next week.

July 15, the start date for new and retroactive royalty payments by Internet radio DJs, has come and gone without any apparent catastrophe, thanks in part to last-minute signs that Webcasters may be edging closer to harmony with the music industry.

The consensus among the small and larger Webcasters I've been surveying Monday seems to be that nothing much has changed in their operations--for now, at least. Further unscientific checking of Internet radio streams available at individual Web sites and through Apple's iTunes drove me to a similar conclusion: from NorCal hip-hop to office-friendly Top 40 to Christian metal, what I've been hearing is business as usual.

And in case you missed it this weekend, public broadcasters and royalty-collection body SoundExchange have reached a temporary accord that should allow public radio's music stream Webcasts to remain unchanged for at least the next three months while further talks continue.

That's not to say there has been any mass return of the hundreds of low-budget Webcasters who have reportedly taken their streams offline since the new fees were announced. Or that changes won't be necessary in the near future for stations that remained up and running.

Negotiations are expected to pick up again this week among various Webcasters and SoundExchange. While that process plays out, SoundExchange has said it expects Net radio outfits to follow the rules and pay what they owe--although it has also presented a few alternatives, including an offer to small broadcasters which, if accepted, would not raise their required payments above historic levels.

SoundExchange is continuing to receive new payments from Webcasters, spokesman Richard Ades said in a telephone interview Monday, although he declined to specify from whom or how much they entailed.

The Digital Media Association, which represents larger Webcasters, has requested a meeting with SoundExchange at a yet-to-be-determined location (either New York City or Washington) on Tuesday or Wednesday. DiMA said representatives from six major Webcasters--RealNetworks, Pandora, Yahoo, MTV, AOL and Live365--planned to attend.

At issue for the companies is the level of royalty fee increases set by a federal panel called the Copyright Royalty Board, which cover the time period between 2006 and 2010. For larger Webcasters, the fee increases could raise their required payments by as much as 300 percent, while for smaller outfits, the fees could climb by as much as 1,200 percent, according to the advocacy group SaveNetRadio, which opposes the new requirements.

In recent days, DiMA and SoundExchange have also been attempting to reach agreement on another point of contention in the rules: a minimum $500 "per channel" payment justified as necessary to cover SoundExchange's administrative costs. Large Webcasters had argued that without a cap on those fees, services that allow users to create thousands of distinct "channels" would owe more than a billion dollars in such fees in the first year alone.

Over the weekend, DiMA said it sent a letter to SoundExchange accepting a recent offer to cap the fees at $50,000 per company per year. The organization said it would also investigate whether it's necessary to implement stricter safeguards against "streamripping"--that is, converting Webcast music streams into more permanent digital libraries. But the deal is not yet final, as a number of other issues still needed to be worked out, SoundExchange's Ades said Monday.

On the small Webcaster side, attorney David Oxenford said Monday that his clients--which include Accuradio, Radio Paradise, Radioio, Digitally Imported Radio, and 3wk Radio--are still streaming music as usual. They are continuing their negotiations with SoundExchange on a more informal path, with ongoing conversations but no formal meetings or timetable scheduled, he added.

Any agreement with SoundExchange that ultimately emerges--involving his clients or anyone else--would have to be ratified by the copyright panel or another governmental body, Oxenford said in a recent blog entry.

The latest on the Internet radio saga bears some positive news for people who like to stream music from public radio's online presence.

Recall that starting on Sunday, new federal rules requiring higher royalty payments to the music industry from Webcasters--commercial and non-commercial alike--are scheduled to take effect. In recent days, Internet radio outlets have been stepping up negotiations with SoundExchange, the nonprofit entity charged with collecting the fees, over compromises aimed at blunting the increases' impact.

Now public radio says it has reached at least a temporary agreement with the record industry.

Thanks to a "productive" meeting with SoundExchange on Friday, National Public Radio and the Corporation for Public Broadcasting "are confident that public radio stations can continue their music streaming operations for the next three months as good faith discussions are ongoing about the structure and amount of the ultimate fee," NPR spokeswoman Andi Sporkin said in an e-mail message Friday night.

Sporkin said CPB has offered SoundExchange a payment believed to cover what it owes starting July 15, and the group has accepted that money.

"At this time, public radio stations will continue music Webcasting without a limit to visitors to their Webstreams or changes in their current operations," she said.

Meanwhile, large and small commercial Webcasters are still attempting to reach a final agreement with SoundExchange over the rates they owe, with those discussions expected to heat up again early next week. Some low-budget Webcasters have already shut down their operations out of fear they wouldn't be able to afford the new payments. Other industry representatives, including Pandora founder Tim Westergren, say they've been encouraged by the tone of the most recent negotiations and aren't planning to go silent come Sunday.

Check out our FAQ for more information on the conflict and the ongoing discussions.

This Sunday may not be doomsday after all for the smaller Internet radio stations that feared the onset of new royalty fees would kill off their operations.

But contrary to some published reports traversing the blogosphere on Thursday and Friday, SoundExchange, the nonprofit group charged with collecting the payments, has not made any sort of blanket pledge to delay enforcing the contentious new Webcaster payments established earlier this year by the U.S. Copyright Royalty Board, according to spokesman Richard Ades.

"There is a misunderstanding, and SoundExchange is making it very clear that everybody is expected to comply with the law," Ades told CNET News.com Friday.

The CRB ruling at issue requires Internet radio operators to pay additional fees to SoundExchange, which passes them on to artists and record labels, retroactive to 2006 and through 2010. Webcasters opposed to the new rules say the changes could drive up their mandatory payments by as much as 300 percent for larger entities and 1,200 percent for smaller ones, arguing such increases could put them out of business.

Here's where it gets complicated.

... Read more

A federal appeals court has declined to grant a petition by Webcasters to delay the onset of new royalty fees that they argue could imperil their offerings.

In a one-page order filed late Wednesday, the U.S. Court of Appeals for the District of Columbia said the opponents of the fees "have not satisfied the stringent standards required for a stay pending court review" and rejected their request for an emergency stay.

Barring an 11th-hour agreement, then, between Internet radio operators and the music industry, the new fees are scheduled to kick in on Sunday.

Jonathan Potter, executive director of the Digital Media Association, whose members include larger Internet radio operators like Yahoo, Live365, Pandora and RealNetworks, said he was hopeful Webcasters could still reach a compromise with the music industry.

But until then, Webcasters will be "forced to make very difficult decisions about what music, if any, they are able to offer," he said in a statement. "The result will certainly be fewer outlets for independent music, less diversity on the Internet airwaves, and far fewer listening choices for consumers."

The new rules (PDF) issued by the U.S. Copyright Royalty Board earlier this year prescribe rate hikes of 0.08 cent per song per listener retroactive to 2006. They would also climb to 0.19 cent per song by 2010. According to the advocacy group SaveNetRadio, smaller Webcasters could face payment increases of up to 1,200 percent of what they owed before, while larger ones could owe up to 300 percent more.

Each station would also have to hand over a minimum $500 royalty payment per "channel" under the ruling, which DiMA says could cost the three largest Net radio operators--Yahoo, RealNetworks and Pandora--more than $1 billion in the first year alone.

SoundExchange, the nonprofit entity that collects the fees, was not immediately available for comment on the decision Thursday.

The group has offered two attempted compromises to the Net radio industry, but they haven't gone far enough to meet the Webcasters' wishes thus far. First, it attempted to extend a peace offering to smaller Webcasters by saying it would freeze through 2010 the "below-market" rates they have been paying since 1998. But Net radio advocates said that would effectively discourage smaller firms from growing their operations. More recently, the group also reportedly to cap at $2,500 the $500 per "channel" minimum fee for all Webcasters but, according to DiMA, only through 2008.

If an accord can't be reached, Congress may need to step in and pass a bill that would overturn the CRB's ruling, said Rep. Jay Inslee (D-Wash.), one of the sponsors of the House of Representatives version. His bill proposes leveling the royalty rates for all digital broadcasters--satellite, cable and Internet--at 7.5 percent of their revenues.

"I hope a compromise between online radio broadcasters and record labels can be reached before then, but if the hammer drops, urgency for congressional action only increases," he said.

Update at 11:20 a.m. PDT: It's worth noting that the appeals court's denial of the emergency stay doesn't mean the entire legal challenge to the CRB's decision has been dismissed. David Oxenford, an attorney representing some of the Webcasters in that suit, said in a blog entry that "the appeal will continue and be fully briefed and argued over the course of the coming year," although the court hasn't set any timeline for that process yet.

Oxenford added that the looming due date doesn't necessarily mean that "lawsuits will follow the next day if a Webcaster does not pay on time." But Webcasters will be responsible for determining what they owe, he said, and such lawsuits certainly are a possibility if they don't pay on time.

Update at 12:55 p.m. PDT: SoundExchange has issued a statement applauding the appeals court decision. According to Executive Director John Simson, it "vividly demonstrates that the Copyright Royalty judges got it right when they set royalty rates and terms for the use of music on Internet radio."

Simson called the denial of the stay "a major victory for recording artists and record labels whose hard work and creativity provides the music around which the Internet radio business is built." He added that his group was nonetheless still actively negotiating with Webcasters over their concerns about the new fees.

It's looking ever less likely that Congress or the courts will act swiftly enough to save Webcasters from the doomsday that they argue will result from imminent new fees. But there are signs that Internet radio players and a group representing artists and record labels may be moving closer to a detente.

A few weeks ago, we reported that the increased royalty rates set to kick in July 15 were poised to create a burden not only for small major Webcasters but for the largest ones as well. Because the fee hikes also include a $500 minimum payment per "channel," the three largest Webcasters alone--Yahoo, RealNetworks and Pandora--said they would owe more than $1 billion in the first year alone because of the thousands of unique "channels" their services offer.

Now, with the deadline for the fees creeping ever closer and the outcry from Webcasters still at a fever pitch, relief may be on the way.

SoundExchange, the nonprofit industry group that lobbied for the changes, told CNET News.com on Thursday--and finalized in a press release (PDF) on Friday--that it has offered the Digital Media Association (DiMA), which counts the major Webcasters among its membership, a $2,500 cap on that annual requirement.

"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," John Simson, the organization's executive director, said in a statement.

According to DiMA executive director Jonathan Potter, however, there was a catch that wasn't mentioned in SoundExchange's press release. Namely, SoundExchange presented a written offer to apply that reprieve only through 2008, whereas the new U.S. Copyright Royalty Board rates extend through 2010.

"Any offer that doesn't cover the full term is simply a stay of execution for Internet radio," Potter said in a statement released Friday afternoon. Indicating that SoundExchange's public statement caught him by surprise, he added that he would have preferred not to be issuing such a statement at all and to be continuing negotiations directly with the music industry group.

SoundExchange has already attempted to extend an olive branch to smaller Webcasters that claim the new rules will wipe them off the map. In late May, it floated an offer to freeze through 2010 the "below-market" rates they have been paying since 1998.

But SaveNetRadio, a group lobbying against the changes, has argued the approach could stunt the long-term growth of smaller firms if it is based on keeping revenue below certain government-imposed caps.

Update at 6:45 a.m. PST: SaveNetRadio spokesman Jake Ward said Monday that the group was encouraged by SoundExchange's recognition that the per-channel payment could be crippling to many Webcasters. He said the ideal solution, however, would be to base the royalty rates on a Webcaster's revenues, as two congressional bills propose--and not, as the copyright officials decided, on the number of songs played and listeners.

If you depend on the sounds of Internet radio to get you through your workday, don't be surprised if your headphones pipe out little more than dead air next Tuesday.

In protest of the elevated royalty fees Webcasters are poised to begin owing to the record industry next month, Internet radio operators are planning to stage a "day of silence."

So far, Live365 and AccuRadio.com have agreed to cease their music programming on June 26, save for brief audio public service announcements sprinkled throughout the day, according to a Wednesday report by Kurt Hanson of the Radio and Internet Newsletter,. So has the online presence of KCRW, the Southern California-based public radio station.

UPDATE at 6:03 a.m. PDT on Friday: SaveNetRadio, an advocacy group opposed to the copyright judges' action, has posted an updated list of protest participants (PDF), which now also include Yahoo, RealNetworks' Rhapsody, MTV Online, and more than 30 other stations.

Smaller Webcasters staged a similar protest five years ago in response to a similar rules change by the U.S. Copyright Royalty Board.

At issue are fee hikes that the Internet radio community says could bankrupt its services, particularly those run by smaller operators. SoundExchange, the non-profit collection entity that lobbied for the changes, has repeatedly argued the changes are fair and necessary to ensure artists are compensated adequately.

Opponents of the changes are still hoping for a reprieve before the July 15 date on which the royalties are scheduled to kick in. They are continuing to pressure politicians on Capitol Hill to pass bills that would overturn the royalty rate increases and align them with those required of other digital services, such as satellite. Some groups have also asked a federal appeals court to delay the rate changes.