Columns Archive

Internet Radio May Stream North to Canada

Appeared in the Toronto Star on April 9, 2007 as Web Radio May Stream North To Canada

Online radio is one of the Internet's quiet success stories.  While podcasting and Internet video garner the lion share of attention, webcasting has emerged as a major force with millions tuning in daily to thousands of services that freely stream their signals online.

Internet radio consists of several types of "stations" including conventional radio stations that simulcast their signal on the Internet, community and college radio stations that use the Internet to extend their signals from small communities to the entire world, and Internet-only stations that broadcast exclusively online.  The Internet-only services are particularly intriguing as they include niche webcasters focused on content not found on mainstream AM/FM stations as well as customizable services such as Pandora and, which help users identify new music personalized to their tastes.

Despite their popularity, there is growing fear that a recent U.S. royalty decision could effectively shut down thousands of webcasting services.  The U.S. Copyright Royalty Board recently established a new royalty scheme that dramatically increases the fees that webcasters will be required to pay to stream music online.  

The rates include a minimum fee of US$500 per year, per channel with escalating fees for each song played.  In 2006 (the decision is retroactive), the applicable fee would be US$0.0008 per performance.  Since a performance is defined as streaming one song to one listener, a webcaster with ten thousand listeners would pay 10,000 times the going rate for every streamed song.  The fee structure increases each year with rates that more than double by 2009.

The decision, which has faced objections from both commercial and non-commercial webcasters, is likely to cost large webcasters such as AOL, which averages more than 200,000 listeners per hour, millions of dollars each year in royalty fees. Smaller webcasters, such as the popular Radio Paradise, may find themselves liable for royalties that exceed their total revenues.  

Given the concern about the future viability of Internet radio in the U.S., there has been mounting speculation that some webcasters may consider setting up shop in Canada, where the U.S. rates do not apply.  For example, Mercora, a service that allows individuals to launch their own webcasts, has established a Canadian site that falls outside U.S. regulatory and royalty rules.

Webcasters considering a move to Canada will find that the legal framework for Internet radio trades costs for complexity.  There are two main areas of concern from a Canadian perspective – broadcast regulation and copyright fees.

Those expecting strict broadcast regulation from the Canadian Radio-television and Telecommunications Commission will be pleasantly surprised to learn that webcasters operate outside of conventional broadcast regulation in Canada.  The 1999 CRTC New Media Decision exempts webcasters, thereby relieving them of the need to obtain licenses or meet Canadian content requirements.

The copyright concerns associated with webcasting are far more challenging.  While there are options that allow non-commercial webcasters to stream music without paying significant royalties – Soundclick lists more than 350,000 songs that are freely available under Creative Commons licenses – streaming commercial music will require royalty and license payments.

The Canadian fee structure is still under development with webcasters likely to face several charges.  Next week, the Copyright Board of Canada begins hearings on Tariff 22, a tariff proposed by SOCAN to cover the performance of music online.  The tariff actually dates back to 1995, when SOCAN endeavoured to hold Internet service providers accountable for the music available on their networks.  The ISPs challenged the tariff, leading to nine years of litigation that culminated with a Supreme Court of Canada decision that exempted Internet intermediaries from liability.

Undeterred by the decision, SOCAN restructured the tariff by identifying an extensive list of online uses of music, including on-demand streaming, webcasting, music streaming on gaming sites, and other services that potentially include podcasting.  SOCAN has asked the Copyright Board to grant a tariff that features a minimum monthly fee of $200 and establishes a royalty rate that runs as high as 16.7 percent of gross revenues (or gross operating expenses if those are higher) for on-demand streaming.  The webcast rates vary from three to nine percent of gross revenues, depending on the type of webcaster.  Several groups are challenging the SOCAN tariff request and a final decision from the Copyright Board is not expected for months.

In addition to the Tariff 22 royalties, there are at least two other potential licenses.  The Canadian Musical Reproduction Rights Agency Ltd. (CMRRA) licenses the music reproduction right.  CMRRA proposed a webcasting tariff in 2005 that sought five percent of gross operating revenue (or expenses if greater) with a minimum monthly payment of $200.  CMRRA voluntarily withdrew its tariff application last year and is now negotiating individual licenses for Internet-only radio stations.

The Audio-Visual Licensing Agency (AVLA), which licenses the duplication of master sound recordings, has also created a license for webcasters that copy music onto Canadian servers for webcasting to Canadians.  The agreement establishes transmission and subscriber fees as well as sets limits on the number of songs that can be webcast for any individual artists (no more than four in a three hour period) and prescribes the quality of the transmission (no greater than 96 KPBS).

The net effect of these tariffs and licenses is that webcasting in Canada can get expensive, particularly for non-commercial and niche webcasters.  By wisely focusing on a percentage of revenue model rather than the U.S. per-stream approach, the Canadian framework may enable webcasters to get off the ground, yet a streamlined system for streaming will be needed before Canada develops into a genuine Internet radio haven.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at or online at


  1. There is only one problem I see with this ideology. Organizations such as Sound Exchange will still impose the per performance rates for every US listener that listens to a particular station. As of right now they not enforcing this stipulation but as soon as the new rates which were approved by the CRB go live in July, you will bet that they will. So in theory international stations will be hit with a double taxation, a) the rates set forth by the country in which the feed initiates from b) the US royalty per performance from every US listener who listens to the feed. The only way to get around that completely would be to encourage all US listeners to use a foreign proxy such as Tor to connect to the feed, so there is no reasonable evidence that a listener is actually listening to the feed from a US based IP address.

  2. I think, Bill ,that your under the assumption that a country, independent of American Law, would really care what Sound Exchange or the CRB thinks. I am very curious to know how you figure they would enforce said US royalty fees without identical legislation in the country of origin. Just because Canada is so close to the US does not mean that its government has to comply with everything the US says is right. And what about any other country around the world? I personally know several people that run internet radio stations in Sweden and Norway. When you ask them what they think of these inflated rates being unjustly forced upon small webcasters, they just laugh. Let them try to make me pay is usually the answer I receive. Now I am not opposed to giving something back to the artists that work so hard to give us something beautiful, but I will be damned if I am going to sit back and help the music producers buy that second $100,000 Maserati. This, I believe, is at the heart of the music royalty battle going on in the US right now. Its not an issue of protecting the artists and the music. Its the record company fatcats teamed up with organizations like the IRAA that are simply trying to line their pockets by extorting a medium that, up to this point, has been untouched by corporate America. But thats an entirely different can of worms. Being a Small Webcaster here in Canada I have been watching this story unfold with great interest. I only hope and pray that my Country has the foresight, lacked by the CRB and our American neighbors, to not kill such a pure medium before it has a chance to grow to it full fruition.

  3. Canada
    agreed Loach. The US gov. does NOT dictate or set the tone for Canada. Go bully a 3rd world country.

  4. Proud to be CANADIAN says:

    I hope that the reason will come back to
    I’m cooking a internet radio station right now and I hope that I will be able to complete and enter the market with my project. I’m sure that Canada will not bow to the US dictatorship. It is time to make a stand!!!!!
    It feels so GOOD to be CANADIAN!!!!!!!

  5. Director of Education
    Would these restrictions on internet radio apply to religious, non-profit organizations that webcast original content?