What is being called by many webcasters as the "Day Of Reckoning" will come this weekend after months of protesting a ruling from the Copyright Royalty Board that will almost double the royalty rates facing Internet radio stations both small and large. The ruling comes as a shock to many who have seen Internet radio as an answer to terrestrial radio, giving a voice to independent artists, and playlists that span genres, decades and tastes. Although the rate increase will set royalty costs at less than one fifth of a penny per song played by 2010, this is still an increase of 300 percent for large webcasters and an increase of nearly 1,200 percent for smaller operations. The additional fees for just one webcasting service like Live365, currently set at $500 per channel, have been estimated at $4.2 million for just 2006 alone.

If said ruling goes into effect, many radio stations' Internet streaming capabilities will be unaffordable.

"Gone, goodbye, over and out, see ya," says Ted Lebowitz, music director at BaGeL Radio, who streams via Live365. "We do pay royalties, and we pay them to SoundExchange, who turn around and spend that money harassing us for rates that no one can afford. If artists aren't getting paid they should look to the culprit, which is SoundExchange, a bunch of RIAA lawyers doing what lawyers do best—making negotiations take forever so they keep getting paid."

But what has become a he-said/she-said war between SoundExchange (an offshoot of the RIAA that will be collecting the CRB's ruling) and compatriots of SaveNetRadio (a coalition formed to campaign a proposed Internet Radio Equality Act that will eliminate the proposed increase on fees), are claiming two very different sides of the story. According to Richard Ades, a spokesperson for SoundExchange, the thought that many webcasters will be bankrupt is just a claim.

"There's a lot of propaganda out right now that [webcasters] will be going under and that is just not true," says Ades. "The CRB and only the judges on the CRB board got to see propitiatory evidence and only they could make that judgment. This is about the artists. They are the small business people who need to be paid for their music."

Only time will tell whether the claims will be made true, a realization that many webcasters would rather not see take place. Since the March ruling, a number of offers have been put on the table, but none have pleased either party. Currently, according to SoundExchange, there are three offers. The first is to extend the Small Webcaster Settlement Act (SWSA) which was set up in 2002 until 2010, that sets below-market royalty rates for small Internet radio stations in order to give them time to build their business. However under that act, two prominent webcasters, Pandora and Live365, would be bankrupted due to the fact that they aggregate more than 10,000 individual webcasters, but have staffs of 100 or fewer. The second offer was a similar offer made to non-commercial radio, which includes college radio, NPR and religious stations to give them a separate rate as well. And the latest from SoundExchange was a cap on the minimum rate at $2,500 opposed to the original $500 per channel proposed. All proposals are still in negotiations.

"SoundExchange doesn't understand the impact the royalty rate increase will have on the industry and has dramatically underestimated the threat it poses to every webcaster," says Jake Ward, spokesperson for SaveNetRadio. "Moreover, the proposal is a tacit admission that the rates set by the CRB are too high for a business to succeed, otherwise they would not need to be lowered to give any webcasters a chance at success."

For the college radio community, the effect of the July 15 ruling is much like that of any small webcaster. For a number of stations, their internet radio stream becomes their premiere source for listeners. Should the new royalty rates go into effect, many will lose that stream, undoubtedly finding the cost too high to continue. WXPN, a public radio station that broadcasts from the University Of Pennsylvania, will be forced to reduce the number of listeners who can access their site, should the ruling go into effect.

"One of the curious aspects of the ruling was that public stations that have above a certain number of listeners will be treated like commercial stations," says Roger Lamar, general manager at WXPN. "To me, the message was: don't go into this business. Or, if you do: don't encourage people to listen. One way, while this would put a lot of people out of business, would be to limit our exposure with only a certain amount of people online at one time. It would be absolutely the opposite of what we want to do. Given the artists that we try to get exposure, it would be counterproductive." Like WXPN, 3WK is hoping a resolution is resolved, but will offer artists waivers to play their music and avoid the royalty costs. "I'm sure that the promotion 3WK provides indie artists is worth far more to them than the money they'd receive in copyright fees."

Talks are expected to continue throughout the week although the reality of the ruling is beginning to affect not only the Internet stations themselves, but the independent community at large. Publicists, radio promoters, labels and artists alike are coming forward by stating their opinions (which you will find throughout this week on the CMJ blog). Some, like Ben High of SPECTRE Music, say "this isn't going to kill terrestrial college radio, but it does knock down their ability to reach out to a bigger audience." Aaron Romanello of Say Hey records (home to Shy Child and White Rabbits) agrees, stating that although it would be a blow to the community at large, "there will still be community spaces like MySpace or popular blogs," he says. "Something new always comes along to fill a vacuum." While on the opposite side, Carter Matschullat, owner of DoveCote records (home to Mason Proper and Tim Williams) says music directors and DJs of Internet radio is "open to new music" and that the CRB's ruling could "ruin all this, putting more power into the hands of commercial stations."

Whatever the turnout of this weekend's ruling, the effect on the industry's recognition of the power of Internet radio is unprecedented. Over 126 Representatives are currently supporting the Internet Radio Equality Act, with major news outlets like Time giving ample space to the cause.

"These actions are all part of the ambiguous redefinition of the business model and economy of the music industry," explains Joe Alexander, a professor in the music industry and technology program at California State University. "RIAA/SoundExchange exists because they are funded by labels through dues and are the major lobbyists on their behalf. Internet radio stations and webcasters must rely on public support and the efforts of organizations such as Digital Media Association to represent them in seeking legislative support. This takes time...and the new recent rules may put many out of business before anything new ever transpires."

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