1. A battle is brewing over performance royalties for terrestrial radio, so don’t think that terrestrial broadcasters aren’t going to be potentially facing a similar situation. Record companies do not care about radio advertising; they care about being compensated for the performance of their content. Advertising is simply the primary means by which the broadcasters make a lot of their money.

2. The possibility of a vibrant Internet radio industry exists because Internet radio providers can take advantage of compulsory licensing. An Internet radio provider, for instance, does not need to get The Beatles to provide it with a license; compulsory licensing enables it to perform Beatles music by paying a royalty. Note that, for instance, there’s no compulsory licensing system for video, and you see how that has created legal nightmares for services like YouTube. I would argue that the costs of going out and trying to do individual deals with all the key rights holders would cost significantly more than what Internet radio providers will pay in terms of the increased royalties.

3. That said, if Internet radio providers are unhappy with the royalty rates, there is nothing stopping them from pursuing licensing deals individually with rights holders. Again, the royalty rates we’re discussing are part of a compulsory licensing system that makes it possible for entities wanting to become Internet radio providers to do so provided that they have the financial resources to pay the royalties.

The problem is that royalties are more expensive for internet radio than for conventional radio and than for satellite radio. This is not fair. Why the double standard of prices? Because the record companies want to control radio as their advertising channel and want to fight and destroy internet radio that play many music works that are not mainstream.

What will happen is that internet radio will abandon mainstream music works all together and dedicate to the infinite number of emerging music artists, which will only isolate the powerful record companies off the advertising media of the future.