Even though Internet radio has a collective audience of 54 million listeners, it has been put under constant threat from the Recording Industry Association of America (RIAA) and other trade group organizations.
Pandora, an Internet radio company based in the San Francisco Bay Area, is the latest high-profile radio service under threat by the RIAA. The online service has become an instant hit among Apple iPhone owners looking for ways to listen to streaming music through their phone.
Pandora representatives said they openly support paying royalties to the musicians and RIAA, but believe the current pay structure is unfair to online music streamers. The site is close to closing down because of the "unfair" pay structure, with 70 percent of the company's $25 million in revenue going to the music trade industry.
As it currently stands, each online radio station paying royalties pay the money to SoundExchange, the organization responsible for collecting all money for the RIAA. The broadcasters pay royalties based on each song for each listener who is listening to the station. Although this number was acceptable, the rate will soon increase from 8 one-hundredths of one cent to 19 one-hundreds of a cent in just two years.
Along with Pandora founder Tim Westergren, other broadcasters have said it's becoming too difficult for them to make a profit because of the drastic increase in royalties that looms on the horizon.
AccuRadio, a smaller, independent radio station, has to pay around $67,000 per month in royalties, except the site only makes $40,000 to $50,000 per month.
The RIAA and radio broadcasters are going to continue to battle one another while Internet radio continues to have a possibly bleak future even with record numbers of listeners.
