The .14 Cent Solution

New royalties proposed by the music industry threaten to kill independent Internet radio

If you want to see the future of music, you might do well to visit an apartment in St. Paul, in an unassuming townhome complex behind a strip mall. Here, in a spare bedroom carpeted with CD jewel cases and electronic bric-a-brac, a 38-year-old Web producer named Eric Iverson is introducing the world to a Venezuelan band called Los Amigos Invisibles. Later, if the mood strikes him, he might spin Thai rapper Joey Boy or Afro-Cuban ensemble Hijas Del Sol. Iverson's playlist is hypothetically infinite. Likewise, the listening audience for his Internet radio program, Zoetek World Radio, is both potentially infinite and largely hypothetical. "I almost prefer not to know," he shrugs. "It's better to assume people are listening than to know they're not."

The radio station of the future, it appears, is a pretty modest affair. Introducing the "heart and soul of the operation" with a showman's flourish, Iverson slides open a closet door. On the floor a small, reconditioned Dell Optiplex server whirs industriously. "I was having transmission problems for a while," he explains, as he points to the mop and bucket that also reside in the closet. "Then I realized my mop was too close to the server."

When Iverson started broadcasting on the Net, in 1999, he spent around $1,000 on secondhand hardware. Most of his 1,000 or so CDs are promotional copies from small record labels. To send his signal out to the world, Iverson pays $14 a month to, a California-based clearinghouse that stores users' MP3 files on its servers and streams them onto the Web. He also sends his show to a company called iM Networks, which provides Net-radio programming for Internet-ready tuners. Although users are invited to click on Iverson's playlist and purchase the music they're hearing from, nobody ever does, and Iverson has yet to make any money from his hobby. He is not bothered by this. "I guess the main reason I started my own station was because there was nothing else to listen to," he says.

As a phenomenon, Internet broadcasting might seem more akin to a millennial ham radio than to the oft-evoked global jukebox. Yet Net radio stations like Iverson's are proliferating: alone offers 34,000 stations, ranging from the mainstream (Planet Zeb, an Eighties rawk program), to the esoteric (Dr. Dick's Dub Shack), to the puzzling (FluffertraX, which plays the soundtracks to adult films), to the truly indefensible (Shit 'N Disco, devoted to the art of Rick Springfield and Kajagoogoo). Many traditional radio outlets, from college stations to those owned by industry behemoth Clear Channel Communications, also stream their broadcasts on the Internet. But the medium undeniably remains largely the domain of obsessive music fans, dedicated hobbyists, the Eric Iversons of the world. It is music's wild frontier.

Just as Internet radio begins to catch the public's ear, though, new regulations pushed by the recording industry threaten to squeeze Webcasters like Iverson out of cyberspace. If approved this week by Librarian of Congress James H. Billington, these rules would force Webcasters to pay substantial new royalty fees to record labels and recording artists. The impact of the fees is hard to quantify: Some stations might pay as little as $500 a year; others could end up owing as much as $300,000. Anticipating financial ruin, a number of stations have already vanished from the Web. Others will do so soon. Webcasters fear that however this week's decision plays out, the royalties will ultimately be high enough to shut down most independent and college stations, leaving the Web to deep-pocketed media corporations. Taking out a calculator, Iverson quickly figures that his own modest operation could be on the hook for $1,000 a year (and possibly much more, as it turns out)--enough to take the shine off his hobby. "This was definitely more fun in the Nineties, when it was a novelty," he says. "It might lose its appeal very quickly."

And, Iverson points out, the situation may be even more dire for the majority of Webcasters: If the regulations are enacted, they could effectively smother Internet radio in its cradle.


Like most Internet-related ventures, commercial Web radio has been hit hard by the recent dot-com shakeout. Minneapolis-based, for instance, a Web-streaming pioneer that once broadcast 120 channels of music to three million listeners from its headquarters in Riverplace, quietly closed shop last October after failing to attract new investors.

But Net radio's current peril was plotted long before the New Economy flamed out. It dates at least as far back as 1993, when President Clinton appointed a former industry-entertainment lawyer named Bruce Lehman to revamp the nation's copyright laws for the digital age. Lehman was, not surprisingly, sympathetic to his former clients. In particular, he responded to fear from the music industry that digital technology would soon render the traditional record business obsolete.

"What they were seeing was a world in which rather than anyone buying CDs, any song you wanted to hear, you could just call up over the Internet," explains Niels Schaumann, a professor at William Mitchell College of Law who specializes in copyright law and the Internet. "Obviously in a world like that, you wouldn't need record companies anymore."

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