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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.

One Response to “Citing Steep Royalty Payments, AOL And Yahoo Could Consider Dropping Streaming Radio Services”

  1. Today AOL shutters Radio KOL, the most innovative programming to come out of AOL in years. The show, (hosted by Rick Adams), has a loyal following, and as of last week, 700,000 streams. This not only makes it AOL's most successful streaming programming by far, but also a potential solid advertising platform. Radio KOL broke new ground, both creatively and from a business point of view. It would seem everything that was built by AOL programming is either being killed or allowed to die. What is left for AOL to sell advertising against? Serious questions have to be asked of the new AOL management, their strategy [is there one], ability to execute and any application to build this business? Questions also have to be asked about Jeffery Bewkes rational for putting such an inexperienced management team into AOL, as he is now going to be leading the whole company? It seems the board of directors at TW are happy to see the share price drop, fall, drop some more, then plummet, then drop to an astounding level, (below $17 this week to a 52 week low). So what have we got…share price in the crapper, AOL pretty much dead,(you wouldn't see google paying $1BN for 5% today!!), Time magazines dying, Cable urrrg, HBO lost to Showtime, Turner somewhat stable apart form Cartoon Network that is ill and needs an injection, but don't worry, Bewkes got how many options in his new deal…what's the strike price Jeff?