The American Copyright Royalty Board has just agreed new royalty rates that could jeopardise the business of websites that derive revenue from streamed music. Although a seemingly small increase in microcosm, in aggregate the impact could be enormous. Wired states:

In the old, percentage-based fee system, webcasters paid SoundExchange — the Recording Industry Association of America-associated organization that pushed the Copyright Royalty Board to adopt the new rates — between 6 percent and 12 percent of their revenue, depending on audience reach. The new system charges all webcasters a flat fee per song per listener; for instance, in 2007, streaming companies would owe $0.0011 per song per listener (rates change based on year).

Commentary on GigaOm quotes Pandora’s co-founder sounding very worried:

“Left unchanged, it’s over for us and every other internet radio service, period. Makes it un-viable,” Pandora co-founder Tim Westergren wrote in an email. “We’re staying online because we’re hopeful that sanity will eventually win out. This is a ludicrous ruling.”

It’s worth reading the comments on the GigaOm post for informed opinion. It appears this change will only apply to US-based companies leaving the likes of Last.fm unaffected, although there’s talk of an imminent deal between the UK company and Warner which may spell trouble, revenue-wise. Wired concludes:

If the new rates stick, online music fans may come to expect far less innovation, variety and quality when it comes to internet radio. Some industry experts fear that even more users could be driven to illicit services that pay no royalties or those that operate from other countries.

Or perhaps new services will establish themselves outside the US alongside a migration of existing companies.

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