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Radio Consolidation

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Media watchdog groups such as the Media Access Project and consumer groups such as Consumers Union argue that the purchase of hundreds of stations by large companies is reducing the amount of diversity in American radio (see Table 11.5). Media critics say that such consolidation is narrowing the actual range of music broadcast. According to these critics, when the big radio firms buy up stations, they put in place cookie-cutter approaches to formats that have proved efficient in other markets. As a result, cities and towns around the country increasingly have the same line-up of formats with the same line-up of sounds—sometimes even played by twenty-four- hour format computers in places far away. As a result of consolidation, they argue, radio doesn't reflect different regional or local tastes; nor does it encourage live performances by local artists. They add that the growth of round-the-clock format networks that has resulted from consolidation has further homogenized radio despite the large number of stations.

THE RADIO INDUSTRY’S INFLUENCE OYER INTERNET ROYALTY FEES Individuals who want to see music flourish on the internet worry that the large radio firms and the major recording companies could make it difficult for small websites to compete online. For example, if these large firms set royalty fees for the copyright holders of the music at levels that the big firms with a lot of ad revenues could afford but that small firms could not, the traditional industries could block new players. Critics argued that SoundExchange, the nonprofit organization that collects and distributes digital royalties on behalf of artists and labels, had pushed the government's Copyright Royalty Board toward a two-part fee that was unrealistic for small firms. One part was a high per-song charge, 17 cents. The other part was a $500 annual fee for each music channel run by a company. Independent sites such as Pandora argued that not only was the per-song charge tough to support without a lot of advertising, the annual fee would make it prohibitive for companies to stream a large variety of channels.


Table 11.5 Number of Stations Owned by Top Broadcasting Companies


Such a royalty regime would, in the words of The New York Times, put internet radio on its “death bed."8 But supporters of internet music resisted the Royalty Board and tried to convince SoundExchange that the record labels would gain a lot from the many sites that lower fees would encourage because they would be a useful way for millions to discover music. In 2009, they came up with a compromise that allows small sites with less than $1.25 million in revenue to pay 12 percent of revenues, going up to 14 percent by 2015, with no per-song fee. That approach will encourage even the smallest firms to have a variety of channels, even personalized channels, streaming together. Webcasters with higher revenues, like Pandora or Slacker, will pay the greater of 25 percent of revenue or a fee each time a listener hears a song, starting at 8 cents and going up to 14 cents in 2015. Internet music executives breathed a sigh of relief. "This is definitely the agreement that we've been waiting for," said Tim Westergren, the founder of Pandora, one of the most popular internet radio sites with 30 million registered users.9


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