As if times at AOL Radio weren’t bad enough, a legal decision will now require three of the Internet’s content distributors to pay for proper licensing to ASCAP for music they streamed to Web users. This decision serves as a legal precedent for enforcing licensing of music over the Web. I have a hunch that AOL Radio is going to either get fully stocked with ads or will punch out of the Streaming Music market — or both.
AOL isn’t the only provider affected by the decision, but no doubt they are one of the largest ones with millions of engaged subscribers. (No, not 500K Shoutcast subscribers; more like 5MM+ paying AOL subscribers.) Yahoo and RealNetworks will be affected, but I don’t think anyone really associates streaming music with those providers.
Internet Radio is in trouble. Besides the fact that AOL represents all that is evil and greedy on the Internet; they do provide valuable bandwidth for top Shoutcast radio stations, that enables them to reach larger audiences without paying an arm and a leg for it. The result of AOL’s act of kindness, it brings better quality streams, reliable streams and no [forced] monetization of them. (Meaning, the users love it…)
This decision is retroactive from 2002 through 2009 — seven years of streamed content:
The decision covers license fees for periods starting as far back as July 1, 2002, and continuing through December 31, 2009, for the performance of musical works in the ASCAP repertory by AOL, RealNetworks and Yahoo! Based on the formula established by the Court, the total payments to be made to ASCAP and its membership by these three services for that full period could reach $100 million.
Here are my theories for what will happen, in consecutive order:
- AOL Radio cranks up more in-stream ads (audible).
- AOL Radio goes completely automated with no more than a few people in the control tower guiding the product.
- AOL Radio undergoes a massive human resource decimation to recoup legal dues from employees wages.
- AOL pulls their relationship with Shoutcast to avoid being considered an “accessory” in unlicensed content distribution.
- AOL discontinues their Shoutcast pipes for independent radio streamers for the reason above.
- AOL monetizes their Shoutcast bandwidth for exorbitant rates, causing stations to place ads in their streams just to stay on the air.
- AOL realizes they can’t monetize the product enough to make it profitable (and legal); so they punch out of the Internet Radio business.
- Shoutcast collapses without the AOL infrastructure.
- Last.FM, Pandora, and Slacker collapse in fear of legal recovery.
- Internet Radio goes silent.
- RIAA and ASCAP spoon together as they make consumers buy CDs again.
While this description is a stretch, it’s definitely possible that decisions like this hurt the distribution of music on the Internet. Internet Radio is not (and can’t be) monetized the same way as traditional FM radio currently is. ASCAP and all the others in bed with the RIAA need to understand this. You can’t charge expensive licensing as a means to levy taxes on Internet Radio. Licensing fees should be negotiable and vary based on the amount of subscribers, quality of stream, etc.