Tuesday, July 22, 2008

Is Internet Radio on Its Last Legs?

At a time when the music industry is blaming digital piracy for the destruction of their business, you would think that internet radio - which promotes albums while simultaneously rendering piracy almost technically impossible - would be the one format that they'd be supporting. But alas, in keeping with their decade-long pattern of misguided futility, the music industry has instead been trying to run internet radio out of business.

The question is, are they succeeding?

As this Mashable article describes, "Internet radio captures 33 million listeners per week... and nearly 15% of 18 to 49 year olds tune in to Internet radio on a weekly basis. Internet radio companies, such as Pandora, Last.fm and Slacker offer a personalized radio experience which gives its listeners access to a greater variety of music and enhanced control over the music being delivered to them."

Internet radio is also entering new markets, as stations are increasingly being offered portably, as demonstrated by Slacker’s offering a for-sale portable player and Pandora delivering an iPhone application.

But in retaliation against this nascent industry's success, the music industry has been lobbying heavily to force internet radio stations to pay royalty rates that exceed their total revenues, which, if enforced, would drive nearly all of them out of business.

Compare this to how traditional radio stations don't pay a dime in royalty rates because they are considered "promotional".

Can someone please explain to me the difference? How is traditional radio more "promotional" then internet radio? Fear of piracy can't be the rationale since it's far easier to record a traditional radio program then to break the strong encryption on internet radio. So what gives?

If the music industry would be brave enough to shed their paranoid hysteria against anything new, they might actually see a technology that both promotes their product as well as protects it from piracy as a terrific business opportunity. Fearing change to the point of assuming a knee-jerk defensive posture and seeing everything as a threat that must be destroyed is hardly a recipe for future success.


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