On Tuesday, tens of thousands of webcasters interrupted their regularly scheduled programming to give their listeners a taste of the future -- complete silence. Yahoo, Live365, Rhapsody, MTV Online, AccuRadio, Radioio, Born Again Radio, Pearadio.com, and Ear.fm were among the many webcasters who participated in the the "Day of Silence" protest.
The radio silence was a protest against the recent 300 percent royalty rate increase for online music webcasters. The twofold goal of the blackout was to raise awareness of the threat these new rates pose to the future of Internet radio and rally support for legislation pending in Congress.
The question now is whether the last-ditch effort will serve as a catalyst to stir listeners to storm the gates of Capitol Hill with e-mails, letters, and phone calls, or whether listeners will stay quiet as the House Committee on Small Business prepares to hold a hearing to assess the effects of the increase on recording artists and webcasters on June 28.
Tangled Legal Webs
Mike McGuire, an analyst at Gartner, said he is sure the Day of Silence raised awareness among consumers, many of whom might not have heard about the royalty issue. But whether the stunt rallies support for legislation in Congress remains to be seen, he said, noting that it is questionable anyway how much good it would do if listeners do pipe up.
"When you bring legislation in, the process sometimes brings another set of interests and complexities to the issue," McGuire said. "Legislators and the law have demonstrated an inability to stay in front of a lot of these digital media technology issues. When you bring these legislators into it, there are also a host of agendas to deal with."
What legislators witnessed, though, was a dedication and commitment among webcasters large and small to find a middle ground in the royalty rate issue, McGuire said, noting that many industry watchers are hoping a negotiation can be had to avoid grim realities of webcasters who are unable to absorb the financial hit.
The Day the Music Dies
Indeed, Internet-only webcasters and broadcasters that simulcast online fear they might be forever silenced after July 15, the day on which 17 months' worth of retroactive royalty payments are due to the SoundExchange collection organization.
What's more, the royalty rates will increase when the old rates expire. Many believe the higher rates are designed to compensate the recording industry for slumping CD sales. The new rates could ring up fees totaling about $1 billion compared to last year's $20 million and put many webcasters in the permanent silent mode.
Some have suggested that the larger webcasters, including Yahoo and AOL, could take up the slack on the royalties for the collective bunch. But the problem lies in corporate structure. These megacorporations have individual business units for webcasting, complete with profit-and-loss statements that must be reckoned with.
"If the cost increases for the big players, they could start throwing more ads up," McGuire said. "But if you start creating ads and they become intrusive, then consumers will respond the way they did to traditional radio; they will go find something else."