14 DAY TRIAL // Get to work, put on your headphones and tune in to your favorite radio station. Does that sound right? It's what more than 40% of the people who have an office job do every working morning according to a research conducted a couple of months ago. We'll just hope that the "favorite station" I mentioned isn't Yahoo!'s or AOL's because you're in for a world of disappointment if that is your case.
Despite being announced nearly eight months ago, the royalty fees and their increase of 38% have only just struck the two mammoths as being exaggerated. "We're not going to stay in the business if cost is more than we make long term," Ian Rogers, general manager at Yahoo's music unit, told Bloomberg. The rates have been retroactively upped from 2006 through 2010. Betsy Schiffman of wired.com reports that "For 2007, webcasters must pay $.0011 to stream one song to one listener; and that rate will jump to $.0014 in 2008; and to $.0018 in 2009. The fee structure was expected to drive hundreds of net radio stations out of business with the exception of deep-pocketed businesses such as Yahoo and AOL."
Of course the two companies aren't going to give this up without a fight and the webcasters are scheduled to begin their appeal of the rate structure starting in February and by the looks of it the whole process will most likely carry on through most of 2008.
Jordan Rohan, an analyst from RBC Capital Markets said about the possibility that this closure hurt Yahoo!'s financial plan that "I've never met anybody, ever, that's a subscriber to Yahoo's radio service," Rohan says. "With the abundance of free or relatively free music available, shuttering the service won't cause that much of a disruption in the market."
The sad news for the two in question is that in case they have to close down their radio services they will probably never see the cash they invested in them, and they are not small figures: AOL spent 400 million $ and Yahoo! 172 million $ just on acquiring Spinner.com and Nullsoft, respectively Launch.com and Musicmatch.