New webcasting rates were announced and press reports said they 'averted the royalty crisis.' But closer analysis shows they don't allow a viable web radio business.
Webcasters are required to pay 25% of revenues or a per-song fee, whichever is HIGHER. Because per-song fees will virtually always be higher, the revenue share component is moot. Pandora estimates they'll do 1 billion hours of streaming in 2009, requiring $17 million in royalties against $40 million in revenue — that's 42.5% going to record labels. No business can operate that way.
Traditional radio pays nothing to record labels. Satellite pays 6.5% of revenues. Online radio must pay 40-100%+ of revenues. The economics don't lie. Net radio is going to die a slow death in the United States.
--MR
