• by July 13, 2007

The day many Internet radio webcasters have been dreading is almost here. A federal appeals court late Wednesday refused to stay Sunday's due date for the radio sites to pay greatly increased royalties (some 300%-1200% higher than before, according to Save Net Radio, and retroactive to January 2006).

While applauding the court's decision, the SoundExchange collection organization said it was committed to growing the Internet radio industry, and had offered two solutions that would mean no rate increases from 1998-2010 for "the vast majority of Internet services":

1. Extend 1998-era "below market" rates to small commercial webcasters

2. Keep rates at 2003 levels for thousands of non-commercial webcasters.

The organization also said that it is in active negotiations with the Digital Media Association (DiMA) and other groups to put a cap on minimum fees.

In its own statement, DiMA pointed to a $500-per-channel minimum fee on top of the royalty payments that it said would total more than $1 billion annually. "We're hopeful that Congress will take steps to ensure that Internet radio is not silenced, and that webcasters and SoundExchange will find a way to compromise and maintain the diversity and opportunity of Internet radio," said Jonathan Potter, DiMA Executive Director.

Meanwhile, SoundExchange's most vocal nemesis--the SaveNetRadio coalition of webcasters, listeners and artists--continued organizing the opposition. The group's Web site on Thursday offered a countdown clock to the "day the music dies" and urged listeners to call their Senators and House members to pass the Internet Radio Equality Act immediately.

SaveNetRadio said that Congress had already received more than half a million messages in support of Internet radio.

Individual webcasters also continued to protest the higher royalty rates, including "urgent" messages on their audio streams and Web sites. SomaFM, which offers 11 music channels, placed the blame squarely on the Recording Industry Association of America, which it said is negotiating in secret with several different groups on behalf of SoundExchange.

Said SomaFM Founder and General Manager Rusty Hodge: "The RIAA keeps saying that most webcasters are billion-dollar companies, but with the exception of AOL, Yahoo and Real most of the top 20 listened-to music webcasters are privately held, small-scale independent operations. The RIAA is willing to let independent webcasters be the collateral damage in their battle to extract more control over the large webcasters."

SomaFM claimed its royalties would actually increase 3,000%, from $20,000 actually paid in 2006 to $600,000 under the new formula.

The Internet Radio Equality Act would set a royalty rate at the same 7.5% rate currently paid by satellite radio services.