Yesterday, it was announced that CBS would be operating Yahoo’s Launchcast Internet Radio operations. This is ironic as the industry seems to have now come full circle, as Yahoo’s Internet Radio operations include the interests that they received when they purchased Mark Cuban’s Broadcast.com, which had a substantial part of its business in the streaming of terrestrial radio stations. While Yahoo long ago stopped streaming the broadcast signals retransmitted by Broadcast.com, it is ironic that a traditional broadcast company has now taken much of the control of not only the Internet radio operations of Yahoo, but also those of AOL and Last.FM (see our post on the AOL deal here). Explicitly blamed for Yahoo’s decision to turn its Internet radio operations over to CBS was, according to press reports, its concerns over the Internet radio royalties as set by the Copyright Royalty Board last year, a decision about which we have written extensively. How will this transaction affect the debate over those royalties?
Initially, this action once again shows that assumptions about the state of the Internet radio industry that colored the perception of the Copyright Royalty Judges in their determination of the royalty rates were incorrect. While not explicitly part of the grounds of the CRB decision on the webcaster’s royalty, there was much testimony in the CRB proceeding that suggested that Internet radio brought customers to portal sites, and that higher royalties were justified by the value that these visitors added to the portals when the listeners engaged in other activities at the portal. Yet, that model now seems in tatters, as both AOL and Yahoo have turned their operations over to CBS. This seems to emphatically demonstrate that the economics of Internet radio operations, whether stand-alone or as part of portals, simply do not justify the royalties that were imposed (see our discussion of the Pandora economic and the royalties here).