I am a big fan of Internet radio on the grounds that it offers a wide choice of genres and can be listened to over one's existing computer hardware without the special equipment that satellite radio requires. The problem is that net radio is about to be destroyed by the government.
Here's the rub as I understand it: the royalty rate for songs broadcast over Internet radio is not set by the free market. Instead, the government-run "Copyright Royalty Board" (administered by the Library of Congress) determines the royalty paid to music copyright-holders (or more specifically, the government-created monopoly that represents copyright holders). This spring, the CBR ordered a 300% to 1,200% royalty rate increase on net radio, far in excess of what other transmission mediums are required to pay. Furthermore, the CBR eliminated the ability for webcasters to pay royalties as a portion of their revenue; in effect, it mandates a draconian one-size-fits-all solution that is likely to force most Internet radio stations to shut down their services.
It gets even worse. The webcaster-supported alternate proposal to the CBR's rate increase is a bill before the Congress that mandates a flat-rate revenue sharing model. While the bill restores parity between net radio and satellite services, it fails to address the fundamental problem plaguing the broadcast of intellectual property; that is, it fails to protect the property rights of all parties by abolishing government intervention in the music broadcast industry. Instead, the proposed legislation merely resets the terms of the government's intervention. Talk about unsatisfying reform to save an industry that I otherwise value.
After all, let's look at the issue philosophically. A new technology is developed that promises to enhance people's lives for the better. This nascent technology requires a complex business transactions involving many parties and many interests. Classic "I Pencil," right—complex in form, yet simple in principle. Yet here we have each and every party lobbying for the government control the terms of the transaction. Practically no one argues in favor of voluntary negotiations and voluntary exchange; here everyone seeks to compel everyone else.
So how then did coercion come to define new media? How did the ideas animating this industry become so corrupt that solution is little better than the problem? In my view, the net radio debate underscores one of the most vexing problems of our times: almost every transaction has an element of coercion attached to it and practically no one has a problem with it. In fact, it seems the more novel the transaction or new the technology, the more likely someone will demand the right to impose his will upon others without consent. We live in an era where web-browsers and search engines are scrutinized by government regulators, where medicines are authorized for use only after some regulator gives his blessing, and the royalty paid to a copyright holder is determined by the czars of royalty payments.
I can't blame net radio for this. They are responding to the status quo in intellectually property and government regulation thought, not setting it. Nevertheless, their mantra "save net radio" rings a little hollow for me. Their real headline ought to be "save the free market."