The congressional vote regarding royalty fees for Internet radio has been moved at the last minute to 11 a.m. EDT Saturday, according to Pandora, one of the start-ups that has been pushing for this vote in the wake of pressure from the National Association of Broadcasters (NAB).
"It has to happen tomorrow," Pandora chief technology officer Tom Conrad said in an interview with CNET News on Friday night. The start-up has put up a blog post encouraging fans and users to call their congressional representatives through the night to support the cause. "The timing issue that's critical here is that many of the Internet radio providers, Pandora included, for financial reasons really need to have this issue resolved before 2009." Additionally, members of Congress will soon be on the campaign trail for their own re-elections and are already occupied by the Wall Street crisis.
To put it more bluntly, the Internet radio services could run out of money before a resolution is reached.
Earlier on Friday, it was revealed that the NAB had been lobbying members of Congress to halt legislation that would keep up talks between the Internet radio services and SoundExchange, which represents record labels and performers.
Conrad said that "it's not clear" as to what the NAB's motivations are, but speculated that it might be because the trade group feels threatened by the rise of Internet radio. "They operate the broadcast towers all over the country," he said. NAB insisted earlier on Friday that speeding up the negotiations would be rushed and unbalanced.
Pandora CEO Tim Westergren said in an August interview with The Washington Post that last year's Web radio royalty hike would consume 70 percent of Pandora's revenue and that the start-up could be close to shutting down as a result. Some allegations of "Chicken Little" melodrama ensued, but Conrad assured CNET News on Friday that the company did not regret those remarks.
"I think our message all along for the 18 months we've been negotiating this has been dramatic perhaps, but certainly not hyperbole," Conrad said. "Pandora's a venture-backed company. Without some kind of change, there's just no way for our investors to feel like it's a good investment."
Tim Westergren, the founder of popular Web radio start-up Pandora, has said in an interview with The Washington Post that his company may be close to a shutdown.
"We're approaching a pull-the-plug kind of decision," Westergren said in the article, published Saturday. "This is like a last stand for webcasting."
The problem, he explained, is last year's royalty hike for Web radio, which makes it extremely expensive for an independent start-up to stay afloat in the business. The royalty increase will eat up 70 percent of Pandora's $25 million in revenue, Westergren said.
SoundExchange, an organization comprising representatives from record labels and performers, believes that Internet radio owes a bigger cut of profits than traditional radio does. Activist groups like the SaveNetRadio Coalition, along with start-ups like Pandora, have fought the fee hikes.
A few Web geeks weren't convinced that Pandora's situation is as dire as Westergren says it is. "I love Pandora like my old baseball glove, but they can only pull this Chicken Little move so many times," marketing consultant Brian Oberkirch posted to Twitter on Monday morning.
But Westergren assured in the Post interview that he's not exaggerating. "We're funded by venture capital," he explained. "They're not going to chase a company whose business model has been broken. So if it doesn't feel like it's headed towards a solution, we're done."
In case you've haplessly been attempting to listen to Internet radio streams throughout the day, you might have noticed most are dead. This is by no means a fluke, and on a wider scale, it's a mass protest to the royalty rate increase that passed legislation in early March. The rate increase, which gives the RIAA (whose Web site is coincidentally down today) more money for every track served to listeners, has been the focus of much debate and controversy. The new fees go into effect July 15th.
The new fees don't just affect the smaller broadcasters though; even large Internet radio providers such as Yahoo simply can't generate enough ad revenue to break even, and they've said they'll call it quits if it becomes a loss-leader.
Interestingly enough, Last.fm, one of the more high-profile social music services out there isn't participating today, although they've listed their reasons on their blog.
For Internet radio enthusiasts out there, or anyone else who disagrees with the legislation, they can visit the SaveNetRadio Coalition's site to find resources for getting in touch with their congressional representatives. There's also a full listing of participating Webcasters and Internet radio stations here.
See also:
Music industry offers deal to small Webcasters (CNET News.com)
Internet Radio Dies Today (Frantic Industries)
Good for Yahoo, And Everyone Else Except Last.fm (TechCrunch)
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