Fee ruling may imperil online radio

In a ruling made public Tuesday, the Copyright Royalty Board significantly increased the royalties paid to musicians and record labels for streaming digital songs online. The decision also ended a discounted fee for small Internet broadcasters.

Broadcast radio stations that also stream their programs online, such as KCRW in Santa Monica, said they might have to scale back on webcasting, and operators of Internet-only radio stations said the new fees would probably force them to go silent.

An estimated 72 million listeners each month tune in to Internet music programming from hobbyists, traditional radio broadcasters and Web companies such as Yahoo Inc., AccuRadio.com and Pandora.com, seeing them as an alternative to broadcast radio.

The board ruled that the current rate of 0.08 of a cent each time a song is played would more than double by 2010. For music sites run by tax-exempt nonprofit organizations, the board set a flat $500 annual fee per radio channel for a certain number of listening hours per month -- which stations such as KCRW far exceed.

"Unless we can find an alternative to paying the published rates, there's no feasible way we can continue," said Bill Goldsmith, who operates an online rock-music station called Radio Paradise in Paradise, Calif. He estimated that he would owe $650,000 in royalties under the new fee structure in 2007 -- 25% more than he expected to pull in this year from listener donations.

KCRW general manager Ruth Seymour called the ruling draconian. She said the station, one of the largest National Public Radio affiliates in Southern California, could owe more than $350,000 for 2006 and 2007.

"Do I build a gate, where you can only listen online if you're a subscriber?" she said. "I'm opposed to that idea. I'm a public broadcaster, after all."

Seymour said she was optimistic that National Public Radio and the Corporation for Public Broadcasting could negotiate a better deal with the recording industry. Such separate royalty agreements are possible, though difficult to negotiate. An attorney representing small Internet broadcasters said they would try to do the same.

Internet radio supporters also can appeal the board's decision or ask Congress for help.