Citing Steep Royalty Payments, AOL And Yahoo Could Consider Dropping Streaming Radio Services

imageYahoo (NSDQ: YHOO) and AOL, (NYSE: TWX) claiming that higher royalty fees levied this past summer are turning their online radio operations into money-losing propositions, could contemplate closing down their webcasting music services if this continues, Bloomberg reports in a slightly speculative story.

Since the 38 percent increase in charges for playing music across their respective internet radio channels went into effect in July, Yahoo and AOL started to redirect users away from their streaming webcasts. Yahoo says it has been concentrating more heavily on its download music and video services, as opposed to its web streams on Launchcast, though Yahoo also said in Q3 earnings that it would be de-emphasizing subscription music for ad-supported, so not sure where this leaves the service overall. The amount of listeners to Launchcast dropped 11 percent to 5.1 million in October, according to ComScore, (NSDQ: SCOR) while AOL Radio’s audience fell 10 percent to 2.7 million from 3 million. Still, neither Yahoo nor AOL have said how long they plan to continue or when they would decide to abandon online radio.

For a while, it looked as if major webcasters like AOL and Yahoo would get a break from crushing fees after the RIAA’s royalty collector SoundExchange signed an agreement with webcast advocate The Digital Media Association to set a ceiling on per channel payments last August. Both Yahoo and AOL are members of the DiMA. In March, the U.S. Copyright Royalty Board said it would impose a royalty rate increase on webcasters of 0.11 cents for each song listened to from 0.08 cents last year. The rate will hit 0.19 cents in 2010.

Webcasters still have some hope, as Congress has threatened to act on pending bills designed to provide royalty relief if further compromises with the recording industry can’t be reached.

Staci adds: As fate would have it, the ad/promo running now at the bottom of my AIM (AOL instant messenger) panel is for AOL Radio. I’ve posted a copy here. Click on Yahoo’s front page music link and creating your own radio station comes up in a prominent “My Music” box. The portals and others have been making noises about shutting down the streaming services all along but they’re still trying to pull people in.