From The New York Times: "An arbitration panel is to rule this week on the amount that Internet radio stations must pay recording companies for songs played online. The ruling could clear up one of the more nettlesome issues facing the Internet radio business...

"The online audience levels of some Internet stations, and some terrestrial stations that also broadcast over the Web, now rival those of modest-size offline broadcasters, with tens of thousands of listeners tuning in at any given moment. (The biggest offline stations, like Clear Channel Communications' KIIS-FM in Los Angeles, attract roughly 100,000.)

"Even so, Internet radio 'is at the stage where FM was in 1970,' said Kurt Hanson, an Internet radio consultant.

"'The audiences are growing,' he said, 'but they're too small for advertisers to pay attention to.'

"There are some exceptions, of course, most notably at the online portals operated by AOL Time Warner, Microsoft's MSN and Yahoo. AOL Time Warner, for instance, is attracting well-known advertisers and making money with its online radio division, which is led by Spinner.com, and Radio@AOL. But AOL, like the other portals, has an advantage over radio-only companies: it can offer music- minded advertisers sponsorship packages that include media beyond online radio...

"Kevin Conroy [left], a senior vice president at AOL Music, is not convinced that even if marketers warm to the idea of Internet radio advertising, the independent Webcasters will thrive...Because of the scope of the America Online operation, the company can market news, music and sports radio stations in their respective AOL 'channels,' Mr. Conroy said, while working with advertisers on promotions that bridge various media within the AOL Time Warner empire. Such 'efficiency,' as he put it, is hard to replicate in a stand-alone Internet radio operation.

"But some industry executives, like Zack Zalon [right] general manager of Radio Free Virgin, a subsidiary of Richard Branson's Virgin Group, disagree. Mr. Zalon, whose Web station attracts about 20,000 listeners during peak times of the day and employs seven people, began running advertisements last week for the first time...

"'It's true that the biggest advertisers aren't beating down the door, Mr. Zalon acknowledged. 'But they're also not kicking people to the curb...'"

Read this entire piece in today's New York Times, or click here to read it online.

...

... I'm not sure the New York Times is making a correct distinction between AOL Music "bringing in revenues," which I'm sure is true, and "making money with its online radio division" -- i.e., revenues being higher than costs, which frankly seems hard to believe. Also, note that if Zack's audience size claim is correct, that would mean that Radio Free Virgin's audience is about 150% larger than the largest Measurecast-rated aggregator (WARP Radio) and almost 300% larger than the largest Measurecast-rated webcaster (Virgin Radio UK). Impressive if true! -- KH ...

From the San Jose Mercury News columnist Dan Gillmor: "If the business people who rule the entertainment industry had been as powerful 25 years ago as they are today, you'd be breaking the law if you set your videocassette recorder to tape your favorite Olympic event for later viewing. The VCR, assuming the entertainment industry would have allowed a manufacturer to sell it, would not have a fast-forward button because it would let you skip through the commercials without viewing them. As for tape recorders, you would not have been able to make a copy of the music you just bought so you could play it in your car.

"If all this sounds fanciful, you should note the latest news from the copyright front. Hollywood has launched a new legal barrage against the makers of personal video recorders, while the record companies are getting ready to put copy protection on CDs...

"One of the new lawsuits is breathtaking in its arrogance. According to the Los Angeles Times, MGM's lawyers whine that the ability of ReplayTV customers to use the keyword function would 'cause substantial harm to the market...'

"The studios and TV networks are also whining about the feature that lets users fast-forward through commercials or skip them entirely...

"You may think Hollywood is overstepping with such tactics. Unfortunately, the industry and its allies, including those in the software business, are winning every legal battle they fight. They're winning because they wield the infamous 1998 Digital Millennium Copyright Act, or DMCA...

"It's what the record companies used to stomp out Napster, and a key weapon in their new campaign to encrypt CDs or otherwise protect them against what they consider unauthorized copying. Never mind that Congress previously gave customers the explicit right to make personal copies of the music they'd purchased..."

Read this article in last Tuesday's edition of the San Jose Mercury News, or read it online here.