Government ruling could price Internet radio stations out of the show

Sam McManis

SACRAMENTO, Calif. (MCT) — The Web site’s font is large and vibrant. And in case a visitor’s eyes somehow still gloss over it, it’s set in boldface and italics to boot:

“Welcome to Wild West Radio.”

“Quite Possibly The Best Damn Streaming Internet Radio Station On Planet Earth!”

Scroll down a bit, past the caricature of a wizened cowpoke, beyond the name of the song playing and a link to buy the album, and you see another cheeky, mock-boastful declaration:

“Warning: If you’re looking for mainstream Vanilla Flavored, Homogenized, Corporate Country Music, you’ve come to the wrong place.”

Well, now, that’s enticement enough to double-click and check out the site, owned and operated by Jeff Scammon of Roseville, Calif.

Listen to a set of Scammon’s commercial-free music and you’re bound to come away convinced that the guy makes no idle boasts.

A sample set: alt-country’s “Bottle Rockets,” followed by Steve Earle and then Todd Snider. Then, after a station ID — Scammon, with a slight drawl, saying, “You’re tuned into Wild West Radio, playing fewer hits more often” — on comes a James McMurtry ballad.

That’s the beauty of Internet radio, supporters say, thanks to some computer-savvy users with a couple hundred bucks to spare on software who go online and create a station: The range of music options is broadened, and emerging artists are given a boost.

And folks are obviously listening. About 70 million people are said to listen to an estimated 10,000 online stations worldwide, according to Edison Media Research. Digital music streams are provided by the big boys (Clear Channel and CBS Radio, for example), as well as the little guys (Scammon’s

But a ruling in March by the U.S. Copyright Royalty Board could change all that. The board is proposing to raise the royalty rates paid by Internet stations, which could put smaller operators out of business and dissuade the larger ones from paying the hefty fee.

At least, that’s the doomsday scenario being put forth by Internet radio providers, who are mobilizing online petition drives and planning to appeal the ruling before the new regulations take effect in May.

Both broadcast radio and online stations pay royalties to publishers of the music, but over-the-airwaves radio is exempt from paying “performance fees” to artists and record companies. Internet radio has no such exemption.

The music industry is applauding the idea of increased rates for online music use. A statement released by SoundExchange, created by the record industry to collect royalties from Internet streaming, called the board’s proposed action a “fair and reasonable decision.”

But guys such as Scammon say it casts doubt on their future.

“I’m not sure how it’s going to affect me,” says Scammon, who’s been online for less than a year and reports 200,000 total “hits” for his streaming audio.

To support his online operation — which he views essentially as a hobby — he accepts donor contributions, which he uses only to pay royalties to music publishers (currently $22.50 a month) and for Web site maintenance.

“If what I hear is (accurate),” Scammon says, “you’ll see genres like my music disappear. And that would be awful. Great for corporate radio, but not for the consumer or artists who need exposure.”

Other small Internet broadcasters agree.

“This would totally put me out of business,” says Bill Goldsmith, operator of the rock-music Web site Radio Paradise, based in Paradise, Calif. “We’d be paying significantly more than we plan to make this year.”

Under the proposed ruling, Goldsmith estimates, he would pay $650,000 in royalties in 2007. “And that would come out well over 100 percent of our gross income,” he says. “I can’t afford that.”

Even one of the largest online radio operators says he would be forced to shut down. Kurt Hanson, a Chicago businessman who runs AccuRadio, says the station gets more than a million listeners a month and that he accepts advertising.

He writes in a newsletter that he currently pays $50,000 in royalty fees out of the $500,000 he makes a year. Under the new system, he says, he would pay $600,000 annually in royalties.

“Internet radio is in danger of becoming extinct,” he writes.

It’s all a matter of fairness, argue the folks at SoundExchange.

“Artists have earned the right to be fairly compensated for the performance of their work by webcasters who benefit — financially or otherwise — from their talent,” the organization’s statement says. “Without these royalty payments, these artists would, in many cases, be unable to continue contributing to the music world.”

But Scammon, a real estate agent in his “real” life, and others counter that Internet radio gives voice to artists.

“Ninety-nine percent of the stuff I play, there’s no way that’d be on KNCI,” Scammon says. “A couple of the big stations have been approached about playing people like (Earle and Snider), but they say, ‘Oh, no, our conservative listeners wouldn’t approve of this.'”

“So the corporate broadcasters just play the regurgitated (music) day after day, year after year, that you can hear on five different stations in any given market. How does that help emerging artists?”

Indeed, the Internet has helped propel some artists to stardom. Rock groups such as the Shins and Arcade Fire credit play on the Internet stream of “Morning Becomes Eclectic” (on Los Angeles public radio station KCRW) for helping them reach wider audiences.

In addition, Scammon, Goldsmith and most other Internet radio sites provide one-click links to, allowing listeners to purchase the CD from the artist they are hearing.

But John L. Simson, executive director of SoundExchange, apparently isn’t buying it. He told the Washington Post in March that he believes Internet radio providers are exploiting musicians.

“The attitude that really has to change is the idea that the people playing this music on the Web are somehow doing artists a favor,” he told the paper.

Goldsmith calls Simson’s stance “disingenuous.”

He charges that the record industry is pushing for the royalty increase because it made a mistake years ago by letting commercial radio stations pay significantly less in fees. (Several decades ago, radio lobbyists had argued that commercial broadcasting constituted free promotion for artists and record companies, and Congress agreed.)

Broadcast radio, therefore, has a huge advantage over online competition, Goldsmith says.

“I don’t like the greed with which they are pursuing the maximum amount possible from Internet radio,” Goldsmith says.

Of course, commercial radio may not be exempt for long. Simson says SoundExchange and the record industry might be going there next, also telling the Washington Post: “There’s really no justification for broadcast radio not paying, and we’re going to address that.”

Online stations hope Congress will step in — as it did to a limited extent in 2002 for the same reasons — to help webcasters.

Last month, the House panel on telecommunications and the Internet met to discuss the issue. And the panel’s chairman, Rep. Edward Markey, D-Mass., said the royalty board’s ruling “represents a body blow to many nascent Internet radio broadcasters and further exacerbates the marketplace imbalance between what different industries pay. It makes little sense to me for the smallest players to pay proportionately the largest royalty fee.”

In the meantime, Scammon says, he will continue streaming his curious mix of alt-country, bluegrass, folk and blues until he no longer can afford to do so. He says it serves listeners who log on from as far away as Argentina, Taiwan and Sweden — “places,” he adds, “where you wouldn’t think they’d understand country music.”

Sam McManis

McClatchy Newspapers