Jupiter Research said royalty fees could bankrupt Web radio stations by forcing them to pay more to play songs than they could ever make up in advertising revenue--a prediction that's already come true for dozens of stations that have ceased their Webcasts because of the payments.
"While listening to online audio is up...streaming music has yet to produce a survivable--let alone profitable--business," the report said.
Researchers said the only viable Web radio formats over the next 18 months to 24 months appear to be talk and sports radio.
The report comes three months after the Library of Congresscontroversial royalty fees requiring Webcasters to pay labels .07 cent every time they play a song for a single listener. Although the labels complain the fees are too low and will not adequately compensate artists, Internet radio stations warn the payments will cripple their ability to deliver Webcasts. Both sides are a court to reconsider the fees.
Jupiter researchers said a central rights clearinghouse, which would allow Webcasters to go through a middleman rather than paying each label and artist for each song on a per listener basis, could help to alleviate the problem. The record labels already have created a clearinghouse called SoundExchange, which is designed to help collect and distribute the Webcasting fees, but some critics are highly skeptical of the industry-backed plan.
Many stations, including a slew of hobbyist and independent channels, already have succumbed to the new payment plan and shut off their Webcasts. KPIG, one of the first stations to Webcast live programmingthe practice in July, saying it could not afford the royalty fees.
However, KPIG's Webcasts returned to the Net last month, when the company signed up as a channel with RealNetworks' RealOne system. Users now have to pay $5.95 a month for a subscription package that will allow them to hear the stations including KPIG over the Internet.