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National Day Of Silence: Will Internet Radio Be Heard?

Internet radio sites are declaring a "National Day of Silence" Tuesday, protesting higher royalty rates. The SaveNetRadio coalition (savenetradio.org)is organizing webcasters to fight the higher rates set by the Copyright Royalty Board, which are due July 15, and are retroactive to January 2006. The leader of SaveNetRadio says these new royalties would bankrupt the smaller players and would render the divisions of the large companies unprofitable, putting them out of business, effectively ending Internet radio as we know it.

Webcasters ranging from the Yahoo and MTV Online, to RealNetworks Rhapsody , and Pandora, and many public radio stations are teaming up to fight the change--and they're pushing a new bill to reverse these rules. Called the Internet Radio Equality Act, it would charge webcasters 7.5% of their revenues, which is pretty much in line with what the satellite radio operaters pay. Before this new rule (going into effect July 15), webcasters would either pay a per-listener, per-song rate, or the smaller webcasters would pay a percentage of their revenues.

This new rule shifts to a purely per-song per-rate rule, and a rate that's higher than it used to be. Another webcaster gripe with the new rules-- according to the Radio and Internet Newsletter site, webcasters would be charged $500 per channel, which means that programs like Rhapsody, which stream more than 400,000 channels--are in big trouble.

Here's what the other side says. SoundExchangecollects royalties for all the major music companies and tens of thousands of musicians. And the Executive Director of Sound Exchange just told me that they've offered (under pressure from Congress) to extend the current rates (a percentage of revenues) to the small webcasters, to keep them from going out of business. He also said that the new proposal was totally unfair to the music industry (and investors in the music industry)--saying that the big players would save tens of millions of dollars should the Internet Radio Equality Act be passed.

Despite SoundExchange's offer, the Day of Silence is happening tomorrow--and may prompt more listeners to call their congressmen about getting their favorite music back on air.

We'll see what kind of noise a day of quiet can cause.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.