From Bloomberg.com: Yahoo! Inc. and Time Warner Inc.‘s AOL unit may shut down their Web radio services after being hit with a 38 percent increase in royalties to air music.

“We’re not going to stay in the business if cost is more than we make long term,’‘ Ian Rogers (pictured, below), general manager at Yahoo’s music unit, said in an interview.

Yahoo and AOL stopped directing users to their radio sites after SoundExchange, the Washington-based group representing artists and record labels, began collecting the higher fees in July…

Radio sites have been “dealt a severe blow,’‘ said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York. “It seems very unlikely that at this stage a solution will be reached.’‘

Yahoo…is promoting a music service offering videos and songs for sale rather than its LAUNCHcast, the largest Web radio site, Rogers said.

As a result, the number of people using LAUNCHcast fell 11 percent to 5.1 million in October, according to ComScore. AOL Radio users declined 10 percent to 2.7 million… Radio sites attracted 51.2 million U.S. visitors last month, more than a quarter of all U.S. Web users.

According to analyst Lindsay, the higher fees will “kill the growth’‘ of Yahoo’s LAUNCHcast. Revenue at Yahoo’s music unit may rise 4.7 percent to $45 million in 2008, compared with a 19 percent increase this year, he estimated. LAUNCHcast accounts for about a quarter of the division’s sales, Lindsay said…

“The current math doesn’t add up,’‘ said Lisa Namerow, managing director of AOL Radio in Dulles, Virginia…

Tim Westergren (pictured, right) at popular website Pandora says … “If we don’t think there’s a real answer that’s going to happen, it’s our fiduciary responsibility to stop” providing the online radio service…

“We want to make sure there’s fair treatment of everybody,’‘ said Richard Ades, a SoundExchange spokesman. “That doesn’t mean cutting what the recording artists are paid…’‘

Read the full Bloomberg article here.

RAIN ANALYSIS: There’s strangely little “news” in this news story; most of the quotes sound like they’re everyone’s positions from last spring or summer. (The SoundExchange spokesman is eliding over the fact that record labels get half of the royalty collections, etc.) And the closest thing to a timely fact in the reporter’s article — that AOL Radio and LAUNCHcast are seeing 10% audience declines because they “stopped directing listeners to their radio sites” — seems objectively untrue! Just go to www.aol.com or www.yahoo.com and I believe you will, in fact, see moderately-prominent links to the radio properties. (Dictum to journalists from Chicago’s old City News Bureau: “‘If your mother says she loves you, check it out.’‘) This is not to say that the overall point of the article is not correct. The CRB rates, if left to stand, are so high that most operators of webcasts would be forced to shut them down. But we knew that last March. — KH

Comment

1. Dear RAIN:

   Your continuing coverage of the impact of the new CRB royalty rates is appreciated.

   As director of a noncommercial network, I am unclear whether the alliance of DiMa, NPR and small commercial webcasters is still intact and engaged with Sound Exchange?

   Or, have NPR and CPB opened up a separate dialogue with SX purely for noncommercial broadcasters?

   Regards,

   Rob Robinson
   robrobin@rcn.com
   The Pacifica Foundation

   — Rob Robinson · Nov 30, 01:27 PM · #

2. Rob,

   I believe that each of the three groups of webcasters you mentioned in your second paragraph is holding SEPARATE discussions with SoundExchange.

   None has reached a substantative conclusion yet, as far as I know, but no dialogues have broken down, either.

   — Kurt Hanson · Dec 3, 11:45 AM · #

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