Thanks to a recent US Copyright Office ruling, webcasters will pay royalties to copyright holders at a rate nearly three times that paid in 2005, threatening their very ability to stay online.

In 2002, the Copyright Royalty Board set the royalty rate at $.0007 per song per listener. This may not sound like much, but if you listen to music online, your ear is almost certainly a net loss to the webcaster, and the fees add up quickly. To stream one day’s programming to 1000 listeners at that rate is $336. Webcasters are barely able to break even as it is.

In their latest ruling, the Board decided to throw economics out the window and demand more money beginning in 2006–that’s right, they’re increasing rates retroactively. (Eric Eldred must by banging his head against a wall.)

As Wired reports, fees will be due on this schedule:

2006: $0.0008 to stream one song to one listener
2007: $.0011
2008: $.0014
2009: $.0018
2010: $.0019

Radio And Internet Newsletter (RAIN) posts some scary calculations, illustrating how this will destroy the webcasting business model:

Because a typical Internet radio station plays about 16 songs an hour, that’s a royalty obligation in 2006 of about 1.28 cents per listener-hour.

In 2006, a well-run Internet radio station might have been able to sell two radio spots an hour at a $3 net CPM (cost-per-thousand), which would add up to .6 cents per listener-hour.

Even adding in ancillary revenues from occasional video gateway ads, banner ads on the website, and so forth, total revenues per listener-hour would only be in the 1.0 to 1.2 cents per listener-hour range.

That math suggests that the royalty rate decision — for the performance alone, not even including composers’ royalties! — is in the in the ballpark of 100% or more of total revenues.

I hope this will wind up in the DC Circuit Court; the retroactive application seems especially problematic, but I suspect there are additional angles to be played.