Remember how last year there was a big to do about the future of internet radio? The US Copyright Royalty Board imposed new, higher fees for online broadcasters, and web radio services like Pandora and Last.fm complained that the new fees would effectively put them out of business. A bill was introduced in Congress to work things out, but that never really went anywhere. But now, a year and a half later, the Digital Media Association, which represents a number of online music distributors, announced an agreement with copyright holders. It just doesn't exactly cover internet radio.

Here's the deal. If you're a company that provides limited music downloads or interactive streaming audio, you have to pay 10.5% of your revenue in royalties, less any amount owed for performance royalties. That covers subscription based services like Rhapsody which let you download music to your PC, so long as the music becomes useless when you stop paying up. It also covers interactive sites like Last.fm which let you select the songs you want to play.

What it doesn't cover are internet radio sites like Pandora or Radio Paradise which provide a stream of music for you selected by a human being (not yourself) or a computer algorithm. No agreement has been reached yet to cover these services.

The good news is that if the parties involved were able to work out a reasonable deal for certain types of online music services, there's hope that Pandora and other online radio companies can be saved... eventually.

[via Techmeme]

New royalty rates affecting online radio stations are set to take effect Sunday. But SoundExchange, the group responsible for collecting those royalties now says it will not enforce the new rates.

The news came out of a Congressional hearing on Thursday, and follows months of heated discussions. Webcasters say the new rates are high enough to put almost every internet radio station out of business. A coalition of webcasters held a day of silence protest last month, and Congress is considering legislation that would change the way rates are calculated.

SoundExchange says it will not enforce the new fees until a new agreement can be reached that would let stations like Pandora, Last.fm, and Radio Paradise remain on the air.

Later this month, new music royalty rates are scheduled to rock the world of internet radio. The rates are calculated in such a way that some online broadcasters say they would have to pay millions, or even billions of dollars in order to stay online.

While Congress is considering action that would change the way royalty rates are calculated, it looks like SoundExchange, the nonprofit acting on behalf of the record labels is willing to offer a compromise.

In a nutshell, the new rates include a minimum $500 payment per channel. That's fine if you've just got a single webstream. But if you're a company like Yahoo! or Pandora that operates by offering each user a customized music stream, you might have to pay $500 for each stream, to the tune of millions of dollars.

SoundExchange is offering to cap the minimum payment at $2500. But the offer's only good through 2008, while the new royalty rates don't expire until 2010. The Digital Media Association, which represents webcasters issued a press release stating that the group would accept the new rates -- but only if they are extended through 2010. And the beat goes on.

Next month internet radio stations will have to begin paying new royalty rates that will be high enough in some cases to put the webcasters out of business. Of course, the implementation date has been pushed back a few times, and Congress is considering legislation that could help out the internet radio stations.

But advocates for independent radio are making their voices heard -- by shutting off their mics. On June 26th, a number of online radio stations, including Live365, AccuRadio, KCRW.com, and Radio Paradise are participating in a day of silence.

There's always a risk associated in this sort of silent protest. On the one hand, you're showing what the world will be like if internet radio is shut down (at least in the US). On the other, what if an internet station goes silent and no one's around to not hear it? Does it not make a sound?

The Copyright Royalty Board wants to more than double the amount of money internet radio stations pay to license the music they stream online over the next four years. For many webcasters, the new fees could be enough to put them out of business.

Bill and Rebecca Goldsmith, who run Radio Paradise, have started a new blog, with a detailed explanation of the impact the new rates would have on small webcasters. While both internet and traditional radio stations pay royalties to artists and songwriters, only online webcasters have to pay royalties to copyright holders. That's because Congress bought the argument that streaming audio is no different from MP3 downloads, in that both make high quality digital audio available to users who can then save copies on their computer.

Of course, you could also record broadcast radio onto a cassette or CD if you have the equipment. And while it's not that difficult to find software allowing you to save internet broadcasts, the product you wind up with typically isn't nearly as good as what you'd get from iTunes or BitTorrent. The songs run into one another; may or may not include metadata; you don't get full albums.

At the very least, internet and terrestrial broadcast radio stations should be subjected to the same fees. But the truth is that while companies like Clear Channel could easily afford the new fees, small stations like Radio Paradise cannot. And I think the world needs small non-commercial stations to broadcast music that might be hard to come by otherwise. Something copyright holders have never seemed to understand is that internet radio serves the same promotional purpose as broadcast radio. If you hear a song you like, perhaps you'll go out and buy it.