Webcasters worry royalties threaten free Internet service

Internet broadcasters are cautiously viewing a proposed royalty rate that could make them pay fractions of a cent each time they play a song online.

But the ultimate cost could be their businesses.

"Certainly, we would have to take a serious look at the business going forward if this were to remain the rate," said John Jeffrey, executive vice president of Web broadcaster Live365 Inc.

If approved by the librarian of Congress, the expense could lead to the end of another free Internet service. Web radio would be dominated by subscription services and stations operated by companies with deep pockets, wealthy parents or multiple revenue streams, analysts say.

The proposed rate by the Copyright Arbitration Royalty Panel is .14 cents per song streamed - about 10 times higher than a plan submitted by Webcasters to base the rate on hourly usage or a percentage of revenue.

"What that means is that there is no real cost savings that accrues from volume," said Aram Sinnreich, a senior analyst at Jupiter Media Metrix. "It makes it much more difficult to create a business model that would yield profitability over the long term."

Many standalone Internet radio stations hoped to generate revenue through advertising. But, as with other dot-coms, the advertising market has mostly disappeared.

Because the fees would be retroactive, existing companies that have attracted users will be even harder hit, said Jonathan Potter, executive director of the Digital Media Association.

News source: The Nando Times - Webcasters worry royalties threaten free Internet service

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