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On March 2, the Copyright Royalty Board (CRB) published a "Determination of Rates and Terms," which announced an artist and recording company royalty fee structure for Internet radio based upon a "per song" structure. As it so happens, that was the model proposed by SoundExchange, a digital fee collection agency founded by the Recording Industry Association of America (RIAA).

According to Radio and Internet Newsletter (RAIN), the CRB has determined that the fees, which will be effective retroactively to the beginning of 2006, will be ramped up each year through 2010, with a cost of 0.08¢ per performance in 2006, going up to 0.11¢ in 2007; 0.14¢ in 2008; 0.18¢ in 2009; and 0.19¢ in 2010.

And what is a "performance"? RAIN reports it as streaming a song to an individual listener, which means "a station that has an average audience of 500 listeners racks up 500 'performances' for each song it plays." The minimum fee would be $500 per channel per year, although RAIN notes "there is no definition of what a 'channel' is."

For large Internet services, such as AOL Music or Pandora, the new fee structure could be crippling. RAIN's publisher Kurt Hanson did a seat-of-his-pants estimate for AOL, taking its comScore Arbitron rating for November 2006 (210,694 average audience) and calculating that the network might play 16 songs per hour, 18 hours a day for 31 days. "At the CRB's royalty rate ($0.0008 per play), I'm guessing that would create a royalty obligation to SoundExchange for the month of November of about $1.65 million. Annualized, that's about $20 million for 2006."

And for small Internet radio broadcasters, which currently get to pay a sliding fee which amounts to 6–12% of the station's gross income, the proposed increase would be "a death sentence," says Bill Goldsmith of Radio Paradise. Under the new proposal, "we are now liable for royalties, retroactive to the beginning of 2006, that are equal to approximately 125% of our income."

Let's pause for a moment and look at how artist and recording company royalties work for broadcast radio in the US: They don't exist. Radio broadcasters pay publishing royalties, which are collected for the songwriters by BMI, ASCAP, and SESAC. Webcasters also pay songwriter royalties; the CRB fees are in addition to publishing fees and do not apply to "analog" broadcasters.

How come? Blame our old friends the 1995 Digital Performance Right in Sound Recordings Act and the 1998 Digital Millennium Copyright Act, which ruled that "digital" broadcasts weren't "radio," but rather perfect copies of recordings beamed directly into consumers' homes. At least, that's how Goldsmith sees it in his "Save Our Internet Radio" web-atorial.

"The truly fair solution is a moratorium on the collection of any fees and the imposition of any penalties until Congress has had the opportunity to revisit the decisions it made a decade ago, and see if there is not in truth a profound wrong that deserves to be righted," Goldsmith declares.

In the meantime, National Public Radio, alarmed that the new rate structure would force its affiliates to stop streaming broadcasts online, became the first party to file a petition for reconsideration with the CRB on March 16. "This is a stunning, damaging decision for public radio and its commitment to music discovery and education, which has been part of our tradition for more than half a century," said Andi Sporkin, vice president of communications at NPR. "Public radio’s agreements on royalties with all such organizations, including the RIAA, have always taken into account our public service mission and non-profit status. These new rates, at least 20 times more than what stations have paid in the past, treat us as if we were commercial radio—although by its nature, public radio cannot increase revenue from more listeners or more content, the factors that set this new rate. Also, we are being required to pay an Internet royalty fee that is vastly more expensive than what we pay for over-the-air use of music, although for a fraction of the over-the-air audience."

As they say in old media, stay tuned.