Yahoo! Music goes radio silent

Apologies to anyone who was hoping to listen to free LAUNCHcast today. We’re shutting down the Internet’s #1 radio service for the day to draw attention to the outrageous rates recently set by the Copyright Royalty Board in Washington, D.C.

We're doing so in alongside thousands of webcasters, including Pandora, MTV, Real/Rhapsody, WXPN.com, KCRW.com, and many many others. (For a more complete list, check Kurt Hanson’s site, RAIN). AOL and Clear Channel stand out as the only two online broadcasters too corporate to show their solidarity (sorry, Lisa :) ). Hopefully you’ll be seeing lots about today’s protest in the press and, most importantly, I hope you’ll let your representatives in Washington know how you feel. Please visit the SaveNetRadio.org site where they make this easy for you. We need your help between now and July 15th when the first payments are due under the new royalty rates.

The situation webcasters are in is simple: the new royalty rates are higher than the revenues anyone can hope to make from related advertising. In other words, we all lose money on Internet radio starting July 15th. Yahoo! has no intention of operating LAUNCHcast radio as a loss-leader. This senseless rate hike needs to be changed, or our business will have to. And unfortunately the way we’d have to change our business would end up curtailing the great diversity that makes Internet radio uniquely compelling.

I think we’d all be terribly sad to see Internet radio start to sound more like terrestrial radio with its limited number of stations playing very limited playlists. The irony that the new rates force webcasters to either go out of business or sound more like terrestrial radio, which pays no similar royalties, is rich.

Here are a few myths which the industry needs to get its head around:

Myth: Yahoo! (and other big Webcasters) can “afford” these rates. Fact: LAUNCHcast loses money under these rates. Yahoo! has no appetite to run radio as a loss-leader.

Myth: All Internet radio should be for-pay subscription.
Fact: Less than 3% of our radio listeners are subscribers. Subscription is a feature for users who would prefer no interruptions, not an interesting business for anyone.

Myth: Radio drives tons of users into Yahoo! and therefore Yahoo! will operate radio at a deficit.
Fact: Not only is this a terrible way to structure an Internet business ecosystem so that it grows, it’s just not true. We’re fortunate to be a part of Yahoo!, the most visited network on the Internet, and the traffic the network drives to us is what makes us so popular. Not vice versa.

I’m sure you’re wondering how we ended up in this situation. How is it that a board set up by Congress would ask a growing business to pay more than 100% of its revenues in royalties? We’re all asking ourselves that question and, to be honest, still scratching our heads a bit. For a rundown of the chain of events that put us where we are, check out my slightly longer post at the Yahoo! Music Blog.

I’ve had the pleasure of meeting with the folks that run Sound Exchange, the organization that represents the copyright holders and administers the payments from webcasters. They’re good people, by all accounts, and I can only imagine that they believe in the position they’ve staked out in the press, that the Copyright Royalty Board (CRB) saw the details of our business and chose a rate that we could afford.

If only. Unfortunately the CRB made a mistake, handed Sound Exchange a loaded gun and gave them the option to shoot Internet radio dead. How the CRB came from the testimony presented to this outcome is a complete mystery to everyone involved. I’m guessing Sound Exchange is nearly as puzzled as we are at this point.

I’ve also had the pleasure of meeting with our representatives in Congress and understanding their position. Congress doesn’t like to set rates, and I think we’d all agree that we’d prefer they didn’t micro-muck with the economy at this level. Instead, they set up a process and a standard, we all went through the process, and they’d like to think the outcome served the needs of the people. Our continued protest just sounds like “wah! the rates are too high! wah!”, which they’re sick of hearing and I don’t blame them. So we’ve been working hard to show them that the conversation here isn’t just “hey, we aren’t making as much money as we used to” but really “um, we are losing a lot of money on Internet radio, and we’re going to have to change our offering in such a way that it’s going to lose a lot of its great diversity of programming at the very least or that it’ll go away entirely at the very worst.” But it’s a tough slog and has taken a lot of convincing.

Finally, the elephant in the room is that while they’re asking Internet radio to pay more than 100% of revenue in royalty fees, satellite radio pays about 7% of revenue and terrestrial radio pays 0%. Killing the newest, most diverse, with the most growth potential, is asinine for all involved.

I’d like to think we’re making progress, though. Please do your part and write or call your representatives in Washington and let them know what you think of the above process and outcome. With your help, we can put Humpty back together.

Tune in to KCRW.org anytime today, they will be looping an hour long radio program where Webcasters discuss the specifics of their situation.

Thanks for reading and your support.

ian c rogers
General Manager, Yahoo! Music