Internet Radio To Suffer From New Licensing Costs

On June 26, a number of radio sites that stream content on a regular basis led a silent protest against costs imposed in March by the Copyright Royalty Board for streaming audio content — specifically on songs. The change from a per-song rate to a per-listener rate, which goes into effect on July 15, will likely shut down a significant number of Internet radio sites. I won’t argue for the right to charge for use of songs or patents. I will, however, argue against the excessive costs, regardless of the type of IP involved. It renders certain services impractical and pushes the cost of products past their point of profitability. In many instances, preventing someone else from using the IP is the goal. In fact, the reason countries give away patent and copyright protection is so the IP holder can have exclusive use of the IP. Holders often license this IP to make a profit. Maximizing profits is not against the law. But killing the goose can result in no one getting a piece of the golden egg. The trick for those interested in getting revenue from their IP is to make sure that their cut does not result in a cooked goose. Unfortunately, products or services today are covered by more than one patent. Any of these can raise costs so that the product or service is impractical to provide. This is what is happening with Internet radio. It is also happening with standards in our industry as well. There are probably more standards that have IP-related restrictions than not. They range from network protocols to digital video transmission. In the latter case, some proposed standards have come to a screeching halt because one of many IP holders wants a bigger cut. Sometimes the appearance of reasonability can quickly move into the realm of the absurd. In the Internet radio issue, the new costs would typically exceed any possible income, let alone profits, by a factor of 10 or 100 or more. The big problem with the Internet radio issue is that it competes with terrestrial radio that does not incur these costs, although they may not be immune in the long term. That may be the day the music really dies.