Anyone who was downloading music during the heyday of Napster, and, by extension, the beginning of Peer To Peer networking as we know it, understands the now-clichéd reality of copyright law and the internet: technology will move faster than the law can keep up. Just as Napster's Shawn Fanning was eventually busted, brow-beaten, dragged through the courts, before eventually being co-opted by the big recording labels who love music downloads so-long-as-they’re-paid-for, another technological entity that went years without being broken—internet radio—might soon reach the end of its road.

The idea behind live streaming radio on the internet is by no means unprecedented. With land stations capped at about twenty per city due to limited bandwidth, putting radio on the internet is a no-brainer. What is spectacular is what internet radio has done for the music industry, along with other internet-advents, such as mp3 blogs and (as much as I hate to admit it) MySpace. On internet radio, there is room for more than the ten or so standby ‘types’ of radio stations, such as Country, Top 40, R&B hits, Pop standards, oldies, etc. Suddenly, it’s possible to hear a radio station devoted to nothing but underground hip-hop from Seattle, traditional Celtic songs, accordion music, and basically anything else there is even a minor demand for. Obscure genres of music that can’t find a place on commercial radio have found a home on the net.

Editor of Wired Magazine, Chris Anderson, among others, refers to this as the "long tail," which is a product curve like the bell curve but with an infinitely long tapered tail representing the tiny niche markets. These niche markets are creating a new age of sharply defined personal expression that will hopefully dismantle mass pop culture that caters to the lowest common denominator and homogenizes personal taste. Internet radio is adding to the progress of the long tail phenomenon by providing easy access to the niche music markets.

On March 2, 2007, the Copyright Royalty Board (CRB), a part of the Library of Congress, announced its decision to raise royalty rates for internet radio, rejecting all arguments against this royalty raise brought by Webcasters since May 2006. The previous royalty fee system set up in 2002 by the Small Webcaster Settlement Act (SWSA) involved an annual fee, plus a percentage of the profits from any internet radio provider. The new system, originally slated to begin May 15, would change the basis of payments to a fee for each “performance." A performance is defined as the streaming of one song by one listener. So, if I listened to a song twice, they would pay twice. If me and my neighbor listened to the same song at the same time, the internet radio providers would pay twice.

This fee system applies to internet radio providers retroactively, starting from 2006, and the fee would increase every year. For each performance in 2006, the internet radio providers would pay $.0008; in 2007 it would be $.0011; and on up to 2010, when each performance would cost $.0019 in royalties. It doesn’t sound like much, but let’s put it in perspective: a typical radio station plays about 16 songs an hour, which is a royalty obligation of 1.28 cents an hour for every user, or per listener-hour. If two users were listening each for one hour, the fee would be 2.56 cents, and so on. According to RAIN, the Radio and Internet Newsletter, a typical Webcaster will make only 1.0-1.2 cents of revenue per listener-hour, far too little to cover the 1.28 cent fee. RAIN estimates that one of the largest internet radio stations, Pandora, would owe about $20 million dollars for the year 2006 alone.

On top of the royalty fees, each internet radio provider would have to pay a minimum fee of $500 per channel per year. For the Webcasters that provide multiple channels, this fee alone could be financially crippling. These fees are far higher than internet radio’s brother industries, terrestrial (or ‘normal’) radio and satellite radio.

Copyright law, in its basis, is meant to keep all creative industries going. It provides incentive for artists to keep creating - that incentive being the ability to make a living off of their work - with the ultimate goal of protecting a service for the public. Copyright law exists to make sure that the public still has the art that they love and that the artists are still able to make it. Copyright law is not intended to cripple a burgeoning industry, which is what the new CRB ruling has the potential to do.

One of the CRB’s main reasons for increasing the royalty rates has to do with the Recording Industry Association of America’s (RIAA) argument that listeners can make a “perfect digital copy” (the RIAA’s words, not mine) of a song when it is streamed live over the internet. This terminology is misleading because it is not only difficult to make a digital copy of a single song from a internet radio station, but internet radio stations stream at much lower than CD quality, meaning that even if a listener did copy the song from an internet radio station, it would not be “perfect” at all.

Naturally, this prompted an uproar in the Webcasting community after the CRB’s March 2 announcement. A group of Webcasters small and large, spearheaded by National Public Radio, filed a petition for the rehearing of the CRB’s determination. On top of another hearing, the petition called for a revaluation of the “per performance” fee structure. Unfortunately, the panel of judges at the CRB denied the request from NPR. However, they did decide to change the “per performance” fee structure to a royalty fee based on average listening hours through the end of 2008.

Though this change was an important step in the right direction, even without a “per performance” fee structure, the royalties would still be too high for most Webcasters to afford, and they continued to speak out and fight against the ruling. In response to this pressure, the CRB announced many more alterations to the original ruling. The first was an extension of the start-date, from May 15 to July 15, announced on May 1. On May 22, SoundExchange, the board which words in accordance with the RIAA to collect and distribute royalties, announced they would extend the rates and terms of the SWSA to “small Webcasters” through the end of 2010. SoundExchange neglected to provide any information on how they would define a “small Webcaster.” Large Webcasters would still have to pay come July 15. SaveNetRadio.com, a website which is fighting the good fight against the CRB ruling, spoke out against this olive branch, arguing that the large Webcasters would still fold and ensure that small Webcasters would never seek any real growth.

On June 1, SoundExchange announced an offer to “non-commercial” Webcasters, purporting to let them continue under the terms of the SWSA, but these webcasters would have to make private agreements with SoundExchange, meaning this is not a blanket offer. This offer was probably an attempt to woo NPR away from their adamant battle against CRB decision and thus quiet one of the loudest protesters.

In perhaps the most pointless of the offers, SoundExchange announced on July 1 that they would cap the minimum fees of $500 per station at $2500 total, per Webcaster, until 2008, meaning this deal would only be good for about six months.

What these adjustments have in common with the original ruling is that they don’t provide any real answers to the problem at hand: with the royalty system CRB set forth in March, internet radio as we know it will die. It might not die as soon (and certainly didn’t die on May 15, as it originally could have) but it will be strangled, nonetheless. The only thing these offers really provide is time, maybe time enough to reverse or revise the original ruling.

Recent developments in the ongoing negotiations have proven that internet radio might actually be on the road towards survival. On July 12, legislation was introduced in the House of Representatives that would push back the start date for the CRB ruling another sixty days (to September 3). On July 13, SoundExchange agreed to permanently limit the minimum fee to $50,000 per webcaster, that's $500 per internet radio station for the first 100 stations, which will save the large webcasters like Pandora millions of dollars. SoundExchange also announced that it would not pursue legal action against webcasters that kept broadcasting after July 15 while, to paraphrase the press release, negotiations were ongoing and the royalty rates that applied before the CRB decision were still being paid. It's unclear whether or not webcasters who are not currently negotiating with SoundExchange will be prosecuted. On July 16, though, webcasters of all manner and size tentatively continued to broadcast, waiting for the next development

Though a change in the original ruling seems eminent, internet radio is far from out of the woods. The only foreseeable reprieve to Internet Radio's approaching death is the Internet Radio Equality Act, introduced to the House by Representative Jay Inslee (a Democrat from Washington). If passed, this bill would nullify the CRB decision proposed on March 2. It would also change the royalty rate-setting standard that applies to internet radio to the same standard that applies to satellite radio, impose a $500 cap on minimum annual royalty per service fees, establish a transitional royalty rate until 2011 of either .33 cents per listener-hour or 7.5% of annual revenue (chosen by the provider, not the CRB), and alter the Copyright Act so that noncommercial internet radio channels could perform sound recordings over the internet at rates designed for noncommercial entities. The bill would also target the problem at it's source: flawed CRB hearings. The Internet Radio Equity Act would add three new reports to be submitted to the CRB judges when they are making subsequent decisions regarding internet radio: one about the industry impact in terms of competitiveness, one about the effects of the proposed rates’ on diversity of programming, localism, and competitive barriers to entry, and one about the effect of the judges proposed rates on their licensees. A similar bill was proposed in the Senate by Ron Wyden (a Democrat from Oregon) and Sam Brownback (a Republican from Kansas).

Internet radio isn't just another method of getting music to the masses, it represents a new wave in availability of all kinds of music, especially those that never get airplay on terrestrial radio. The death of internet radio, or even the death of internet radio as a window to niche music genres, would not just be the dismantling of a market, but of the idea behind that market, the idea that there should be a system of easily accessed music consumption that is not regulated by the labels that produce the music but is instead provided by other listeners. Internet radio’s last hope is probably in the hands of Congress.

To help the cause, go to SaveNetRadio.org, which provides phone numbers for your local Congressmen and gives a comprehensive list of talking points for you to discuss when you have them on the phone.