RIAA Royalty agreement threatens Internet Radio

Internet radio has had a tough time recently, with artists and song writers continuing to demand more and per song licensing fees, a practise that has already seen popular music service Pandora close its doors to UK users.

Today things have gotten even more serious for the world of music streaming services, with a new agreement between the RIAA, representing music publisher and songwriter associations, and the Digital Media Association (DiMA), which represents industry leaders such as Amazon, Apple and Microsoft which could push internet radio stations and interactive streaming platforms over the edge.

"This agreement provides a flexible structure to support innovative business models in the digital music marketplace that will benefit music fans, creators and online services," said Mitch Bainwol, Chairman and CEO, RIAA. "The agreement demonstrates that our industries can work collaboratively to solve complex issues."

The agreement is indeed pretty complex, but comes down to payment of a 10.5 percent royalty on all revenue based on interactive and restricted streaming - that means that while services like iTunes and AmazonMP3 won't be affected because you're purchasing a physical license to your music, services like Napster's unlimited download Napster To Go service, and interactive music streaming sites like Pandora or LIVE365 will effectively lose more than ten percent of thier advertising based revenue streams.

The worst part of the agreement though is the decision to impose a royalty of 8.5 percent on revenues retroactively, all the way back to December 31, 2001, overwriting the previous agreement made by the RIAA and music publishers which allowed online streaming services to operate without a set royalty rate.

Add this retroactive royalty to the continued clamouring by artists and record labels for further "per play" performance royalty fees, and we have to ask how long interactive or unlimited streaming services will be able to stay afloat before being swamped by artists, song writers and publishers all demanding thier slice of the internet monies they keep hearing so much about.

While we here at bit-tech agree that artists, just like game studios, should be paid for thier work, the vast success of digitally distributed music via stores like iTunes and AmazonMP3 has already secured music's place online, and by further squeezing online radio stations and streaming services, the RIAA and music industry at large are hurting a channel where people can easily discover new music. I for one have lost count of the number of bands I've discovered using such services, which I'd have never found otherwise.

Are song writers and publishers right in chasing such services for more royalties? Will that retroactive royalty drive some business out of business? Or should the the music industry just leave web-radio alone? Let us know in the forums!

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