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An off-guard comment by an attorney for the Recording Industry Association of America (RIAA) - revealed here for the first time - shows how sanguine the lobby group is about the destruction of diversity in the nascent Net radio scene.

It's often overlooked - perhaps because it's hidden in plain sight - that AOL Time Warner owns lots of content for net radio, a vast potential distribution channel, and also the very tools that many netcasters depend on.

Um, you do remember that Shoutcast and Winamp are owned by AOL Time Warner, too? Good.

So there's much more to Thursday's sweetheart deal over net radio royalties than first appears. A proposal was agreed by RIAA members AOL-TW and...AOL-TW.

Although this was a proposal, and the ultimate arbiter will be the Copyright Office at the US Library of Congress, AOL Time Warner was essentially agreeing the proposed rates with itself. The media behemoth owns Warner, and its nine record labels are RIAA members, as we reported here.

If you're puzzled, here's some important context.

A comment by the RIAA attorney Gary Greenstein at a recent meeting with the Webcaster Alliance - representing a range of netcasters, including the smaller 'casters and nonprofits - puts AOL's strategy into perspective. The meeting took place at the RIAA's office on January 29.

According to two people present at the meeting, Greenstein explained that the RIAA didn't care if 25,000 webcasters in the US went out of business because AOL streams 200 channels of music, and the streaming media listener would then have to get their music from AOL. And AOL pays its bill to the RIAA.

We were unable to contact Greenstein to discuss this chilling remark, which David LeGrand, Webcaster Alliance attorney, confirmed for us. We spoke to Ed Hahn, assistant to RIAA attorney Steven Marks, who was also at the meeting, and Hahn felt unable to comment. We'll bring you Marks' response as soon as we hear it.

Some other pieces of context are very important here.

Internet broadcasters are burdened with royalty payments that traditional radio stations don't need to make. That barrier is set pretty high, too.

"In the United States we have a history of trying to make sure markets aren't monopolized," David LeGrand told us. "If you put the barrier to entry so high you're preventing people from developing the businesses, something's wrong."

Even if a non-profit exemption is passed, and there's little hope for this in the near future, small commercial casters face serious disadvantages compared to their traditional counterparts.

"It discourages people from growing their businesses," says LaGrand. "If you had made radio pay 12 per cent of its gross revenue, would radio be what it is today?"

There appears to be little relief in sight. According to a report in the Washington Post John Simson, the executive director of SoundExchange, the principal royalty collector for the recording industry, downplayed the likelihood of continued negotiations with small webcasters.

"I really feel like we have a deal through 2004," Simson said. "There's plenty of options that people now have" to pay royalties.

Beethoven.com's Kevin Shively recently teamed up with other similar-sized stations including Boomer Radio, under the umbrella of the Internet Radio Marketing Group. The Group thinks it vital that the smaller commercial interests pool their advertising leverage, with AOL and Microsoft looming on the horizon.

As we have discussed in recent stories - we need to have integrity in the tools we use. There may be alternatives, of course, and at the NAB Convention yesterday Microsoft announced that it will promote its audio tools to the streaming industry.

AOL Time Warner owns Spinner.com, which it "merged with Nullsoft", but this is a ghost station. Its most recent most played list features a small number of AOL Time Warner artistes.

Meanwhile - standby for the AOL Time Warner superportal! reg;

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