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Royalties Hike May Shut Down AOL, Yahoo Webcasts
NEW YORK -- November 28, 2007: Executives from Yahoo and Time Warner's AOL told Bloomberg that they've already stopped promoting their hugely popular Internet radio services and may consider shutting them down because of the increase in webcast royalties set by the Copyright Royalty Board in March.
SoundExchange began collecting the higher royalties in July, and Yahoo Music GM Ian Rogers told Bloomberg, "We're not going to stay in the business if cost is more than we make long-term."
Webcast royalties are per-performance -- that is, a webcaster pays a fee each time one song is streamed to one listener -- so as a webcaster's audience grows, so do its royalties. The CRB in March bumped up the rate from about .07 cents per performance to .08 cents in 2006 (paid retroactively) and .11 cents this year, rising to .19 cents by 2010.
"The current math doesn't add up," AOL Radio Managing Director Lisa Namerow told Bloomberg. "If the rates remain as they are, it would be very challenging to sustain a business that is profitable." She said "shutting down the business" is possible if the new royalties rates stand.
Webcast-industry groups have been negotiating with SoundExchange over the rates for months, and some small streamers have accepted a compromise offer. But many webcasters are looking to legislators to solve the problem: Versions of the Internet Radio Equality Act, which would set aside the CRB rates and set a transitional royalty rate of 7.5 percent of revenue through 2010, are pending in the House and the Senate.
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