Yahoo and AOL Hint at Shutting Down Web Radio Services

Bloomberg reports more bad news for the more than 50 million U.S. consumers who listen to Internet Radio. What has become a string of bad news for the last six months, Yahoo and AOL both warn that, if royalty rates remain the same, it is likely they will shut down their radio web services. Royalties to stream music have increased 38% since July 2007. While debate is still ongoing at a Federal level, it is unlikely Internet Radio stations will see relief anytime soon. Because of the rate hike, Yahoo and AOL have stopped directing users to their radio sites. This has resulted in a reduction of listeners.

While bad for Internet radio, the continued financial struggle is beneficial for other sources of radio. One less competitor helps terrestrial radio continue its transition to HD radio. If approved, the merger between XM and Sirius looks to continue being a viable source of pay radio. For more analysis of the radio space, look for the new Parks Associates report Music to Consumers’ Ears: Next Generation Radio, available in December 2007.