Even though Internet radio has a collective audience of 54 million listeners, it has been put under constant threat from the Recording Industry Association of America (RIAA) and other trade group organizations.
Pandora, an Internet radio company based in the San Francisco Bay Area, is the latest high-profile radio service under threat by the RIAA. The online service has become an instant hit among Apple iPhone owners looking for ways to listen to streaming music through their phone.
Pandora representatives said they openly support paying royalties to the musicians and RIAA, but believe the current pay structure is unfair to online music streamers. The site is close to closing down because of the "unfair" pay structure, with 70 percent of the company's $25 million in revenue going to the music trade industry.
As it currently stands, each online radio station paying royalties pay the money to SoundExchange, the organization responsible for collecting all money for the RIAA. The broadcasters pay royalties based on each song for each listener who is listening to the station. Although this number was acceptable, the rate will soon increase from 8 one-hundredths of one cent to 19 one-hundreds of a cent in just two years.
Along with Pandora founder Tim Westergren, other broadcasters have said it's becoming too difficult for them to make a profit because of the drastic increase in royalties that looms on the horizon.
AccuRadio, a smaller, independent radio station, has to pay around $67,000 per month in royalties, except the site only makes $40,000 to $50,000 per month.
The RIAA and radio broadcasters are going to continue to battle one another while Internet radio continues to have a possibly bleak future even with record numbers of listeners.
Yeah, I've been keeping track of this saga for awhile. Pandora is one of my favorite sites on the net. A simply awesome service. They are trying to get the fee structure changed before 2010, when the rates are supposed to get hiked, but it sounds like they have been able to make zero progress so far.
Most internet radio companies are going to close down by 2010 if the fee structure isn't changed. Talk about shooting yourself in the foot. Internet radio attracts millions of users, many of whom discover new artists (especially on Pandora) and could then go out and buy new songs. Instead, Sound Exchange/RIAA is forcing these awesome tools to shut down due to their greed.
The article also failed to mention that terrestrial radio pays ZERO fees per played song and Satellite radio pays less than what they are charging internet radio. It's all complete bull and greed by the Music Industry cartel.
Similar to Blu-rayFreak, Pandora also has been one of my favorite web sites over the past couple of months. I'll be sad to see it taken offline by the RIAA. I hope they are able to work something out, but the pricing scheme simply is too ridiculous for many sites to pay.
It's even a bigger shame that a lot of smaller sites have already been knocked offline by the RIAA.
I would hear Mr. Spock say, "Logic dictates..."; but in this situation, logic is nowhere to be found. It would seem that it would be better to get "something" instead of "nothing" from forcing a business to close its doors. But hey, what do I know right. Hey RIAA, it is simple economics: Profits=Revenue-Costs!! If your costs are more than your revenue, it is bye bye. Personally, I would go into another business and not give these self-righteous bastards anything!!
personally, I believe all radio stations (over the air, and internet) should start sending a montly advertisment bill to the RIAA and it's affiliates. The reason I say this, is every time they play a song, they are advertising that song for the RIAA, which will get people to run out and purchase the single or album.
It's a shame the RIAA wants to increase the royalties so much in 2010, because too many decent radio stations will be forced to shut down! 
I'm not trying to say they shouldn't get paid, but it is getting kind of ridiculous...
Long live P2P! This greedy mafia crap is what has kept me from buying any CDs for the last 15yrs.
I see it as two opitions.
1. They ask a reasonable royalty fee and make money.
OR
2. People will setup off-shore international stations and the RIAA will get nothing.
this shows how the music industry is crumbling!!!
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