How does this affect large webcasters?
Let's look at AOL as an example:

According to the comScore Arbitron ratings report for November 2006, the AOL Radio Network had a average audience ("AQH") between 6AM and Midnight of 210,694 listeners.  Multiplied by about 16 songs per hour, 18 hours per day, and 31 days per month, plus adding an additional 10% to account for overnight (Mid-6AM) listening, suggests that AOL played about 2.1 billion songs that month.  At the CRB's royalty rate ($0.0008 per play), I'm guessing that would create a royalty obligation to SoundExchange for the month of November of about $1.65 million. Annualized, that's about $20 million for 2006. 

Here at RAIN, we're guessing that Pandora has an audience approaching that size.  (Pandora founder Tim Westergren claims that Pandora now accounts for 1.5% of all Internet traffic.) Such a royalty obligation might exceed the total proceeds of all their recent rounds of venture capital plus all their sales revenues to date.

Since Last.fm is based in the U.K., another possible outcome is that Pandora dies and Last.fm becomes the "social music networking" player.

How does this affect medium-size webcasters?
Radio Paradise's Bill Goldsmith notes, "This royalty structure would wipe out an entire class of business: Small independent webcasters such as myself & my wife, who operate Radio Paradise. Our obligation under this rate structure would be equal to over 125% of our total income. There is no practical way for us to increase our  income so dramatically as to render that affordable."

And Radio Paradise is perhaps the most-successful webcaster in its class!  For most operators, this rate looks as if it would be >150-200% of total revenues.

How does this affect small webcasters?
Webcasters who stream through services like Live365 may be in jeopardy, as such firms' business models probably never envisioned a royalty rate this high. (Live365's royalty obligation for 2006 is running in the range of $350,000 per month, and that's not even addressing the question of the $500 per station mininum!)

How does this affect terrestrial broadcasters who stream?
The principles are the exactly same, but at the individual radio station level, the dollar amounts are of course are smaller. Clear Channel's total corporate obligation for November 2006 based on comScore Arbitron ratings and assuming 13 songs per hour,  would be about $500,000... but if that's for streaming, let's say, 500 stations, it would only be a royalty obligation of about $1,000 per station per month in 2006. Are those stations selling enough online spots and website banners and sponsorships to make that affordable?  I'm not sure.  (The decision has no impact on news and talk stations who stream.)

What about future years?
The rate of increase in future years is huge — faster than it would seem possible that advertising revenues could possibly keep up with, much less catch up with.  2007's rate is a 37.5% increase over 2006; 2008 and 2009's annual increases are about 28% per year; and 2010 adds another 5.5% increase.

Is this the end of Internet radio?
Although this is undeniably a huge victory for the legal departments of record labels (or at least for the lawyers at their industry trade association, the RIAA), I doubt that the heads of the record labels and their marketing executives actually want to see Internet radio driven out of business. (This may be a case of "Be careful what you wish for, you may get it.")

Last summer, there were rumors of seemingly productive negotiations going on between Sound Exchange and webcasters regarding a voluntary (i.e., not statuatory) percentage-of-revenues royalty rate. Everyone's best hope, I believe — for webcasters, labels, musicians, and consumers alike — would be if those negotiations could resume.

Links to previous royalty rate coverage in RAIN:

Feb. 20, 2002
CARP rec.'s .07-cent fee for radio webcasts, twice that for 'Net only

Feb. 21, 2002
Industry reacts to CARP royalty rates for Internet broadcasts

Feb. 25, 2002
Industry still stunned by CARP arbitrators' recommendation

Feb. 27, 2002
CARP arbitrators gave RIAA more than they asked for!

Here's feedback to today's Copyright Royalty Board decision...

"This...would wipe out an entire class of businesses... "