It’s actually this Tuesday, June 26th. On that day, thousands of Internet broadcasters are going to go silent in protest of a massive royalty rake hike. Internet broadcasters will be liable for royalties of .08 cent per performance retroactive to the beginning of 2006. This increases annually to the final rate of .19 cent per performance in 2010. When you consider that a performance is defined as one song to one listener, you can see how these rates can add up quickly.

Take a station that plays “Ice Ice Baby” once an hour, every day of the year, to 1000 listeners. If this station were to go off the air today, it would owe roughly $11,826 in royalties alone. That’s $7008 for 2006 (24 songs per day x 365 days per year x 1000 listeners x $0.0008) and $4818 (24 x 365 x 1000 x $0.0011) for half of 2007. If this station continued through the end of 2007, the final amount would actually be $16,644. Now, considering that a typical station may very well play 12 - 15 songs per hour, a 1000-listener station would actually wind up with a royalty bill for a whopping $249,660.

That’s $134 per listener per year.

Again: One hundred thirty-four dollars per listener per year.

So who’s behind this? There are lots of responsible parties, but the ultimate authority may surprise you. It’s musicians. That’s right; the artists themselves are pushing for this through their mouthpiece of the RIAA. Online forums everywhere are full of finger-pointing and accusations (”It’s the neocons!” “It’s the liberals!” “It’s terrestrial broadcast corporations!”), but the simple fact is that the people making the money want more. I can’t say I really blame them — don’t we all want more money? — but there’s a bigger issue here:

The Harrisburg / Carlisle / Lebanon radio metro area has about 560,800 listeners (even more if you count those under 12 years of age).  Now, it’s been a while since my Broadcast Communications classes, but if I’m interpreting the Winter 2007 Arbitron ratings correctly, then the Harrisburg Clear Channel music stations have roughly 125,000 listeners.  If they were all Internet radio stations, that would mean royalties of about $21.7 million for 2006 and 2007. Truly a drop in the bucket for a company with just shy of $2 billion EBIDTA for 2006.

Which is what makes this next part that much more interesting.  The RIAA, in a suicidal fit of … well, I don’t really know what, has announced that they will be taking on terrestrial broadcasters next.  From the LA Times article:

Broadcasters are already girding for the fight, expected to last more than a year. In a letter to lawmakers this month, the National Assn. of Broadcasters dubbed the royalties a “performance tax” that would upend the 70-year “mutually beneficial relationship” between radio stations and the recording industry.

“The existing system actually provides the epitome of fairness for all parties: free music for free promotion,” wrote NAB President David Rehr.

Them’s fightin’ words.  Of course, they’re coming from the man who just recently said that “The (National Association of Broadcasters) recognize the importance of going on offense – of advancing our interests going forward and using the NAB as a vehicle for positive change for radio.”  Speaking against Internet radio, he added “We will beat you”.

So what’s going to happen?  It’s anyone’s guess.  Unless things change, Internet radio is very likely going to be wiped out.  That’s not even really a question.  The question is actually whether the rest of the broadcast industry will be held equally responsible.  As it stands now, the average terrestrial broadcaster pays royalties of around $1.56 per listener (2006), while the average Internet radio station will pay around $8.91 per listener.  In just three more years, both numbers will go up; a feeble $1.94 (terrestrial) compared to a whopping $15.59 (Internet).

Make no mistake about it:  Terrestrial broadcasters are gigantic.  They’re well-versed in legal matters and licensing issues.  But they’re going up against the master of license litigation.  The RIAA takes what it wants.  This is going to be a complex and expensive war, and it’s one that terrestrial radio will have to fight while simultaneously fighting decreased listenership and attempting to convince people to switch to HD radio (an effort that is failing miserably).

The supplier is attacking the buyer.  The buyer is attacking the seller.  Both have a critical need for the other; each would virtually cease to exist without the other.  Who wins?

Not you.