Internet radio services are usually accessible from anywhere in the world—for example, one could listen to an Australian station from Europe or America. Some major networks like Clear Channel in the US and Chrysalis in the UK restrict listening to in country because of music licensing and advertising concerns. Internet radio remains popular among expatriates and listeners with interests that are often not adequately served by local radio stations (such as progressive rock, ambient music, folk music, classical music, and stand-up comedy). Internet radio services offer news, sports, talk, and various genres of music—everything that is available on traditional radio stations.
Internet radio was pioneered by Carl Malamud. In 1993, Malamud launched "Internet Talk Radio" which was the "first computer-radio talk show, each week interviewing a computer expert. However, as late as 1995, this service was not available via multicast streaming; it was distributed "as audio files that computer users fetch one by one."
A November 1994 Rolling Stones concert was the "first cyberspace multicast concert." Mick Jagger opened the concert by saying, "I wanna say a special welcome to everyone that's, uh, climbed into the Internet tonight and, uh, has got into the M-bone. And I hope it doesn't all collapse."
On November 7 1994, WXYC (89.3 FM Chapel Hill, NC USA) became the first traditional radio station to announce broadcasting on the Internet. WXYC used an FM radio connected to a system at SunSite, later known as Ibiblio, running Cornell's CU-SeeMe software. WXYC had begun test broadcasts and bandwidth testing as early as August, 1994. WREK (91.1 FM, Atlanta, GA USA) started streaming on the same day using their own custom software called CyberRadio1. However, unlike WXYC, this was WREK's beta launch and the stream was not advertised until a later date.
Some of the first Internet-only commercial radio stations emerged in 1995. NetRadio "was one of the Internet's original Webcasters," eventually "streaming more than 100 channels including both music and spoken material." Nonetheless, NetRadio Corporation ceased operations in 2001.
In 2002, the Copyright Arbitration Royalty Panel (CARP) system was initiated by the United States Congress in order to oversee decisions regarding royalty rates and terms, particularly in regard to digital distribution of audio. Many webcasters believed the 2002 proposed royalty structure to be overly burdensome and intended to disadvantage independent Internet-only stations. CARP was later phased out in favor of the Distribution Reform Act of 2004.
On May 1, 2007, the United States Copyright Royalty Board approved a rate increase in the royalties payable to performers of recorded works broadcast on the internet. This was the result of a two year proceeding, with dozens of witnesses and hundreds of documents from over twenty different parties, including large and small webcasters, NPR, college stations, and SoundExchange. The CRB was privy to private financial records and business models of the webcasters, and after reviewing the evidence and testimony, issued their decision on May 1, 2007 (which is currently under appeal). If enforced, this decision will undermine the business models of many Internet radio stations, which had previously relied on the rate of $0.000768 per song that had been unchanged from 1998-2005. These rules were scheduled to go into effect on May 1, 2007, with the first due date being July 15,2007, and apply retroactively to January 1, 2006.
Due to these rate increases, it has been suggested that some U.S.-based Internet broadcasts should be moved to foreign jurisdictions where US royalties do not apply. "For example, Mercora, a service that allows individuals to launch their own webcasts, has established a Canadian site that they believe falls outside U.S. regulatory and royalty rules."
On 26 April, 2007, the Internet Radio Equality Act (HR 2060) was proposed to reverse the CRB's decision. This bill was introduced in the U.S. House of Representatives by Congressmen Jay Inslee (D-WA) and Donald Manzullo (R-IL). Its Senate counterpart was introduced on 10 May, 2007 by Senators Ron Wyden (D-Ore.) and Sam Brownback (R-Kansas). As of June 25 the legislation has over 100 Congressional co-sponsors.
US Internet broadcasters organized a nationwide coalition to oppose the rate hike and in support of the Internet Radio Equality Act. On June 26,2007 many of them participated in a "Day of Silence" — either shutting off their audio streams entirely, or replacing their streams with static, ocean sounds or other ambience, interspersed with brief public service announcements — to focus attention on the consequences of the impending rate hike.
Rhapsody, Live365, MTV, Pandora, and SHOUTcast were among the participants in the Day of Silence. Last.FM and Slacker did not participate, saying that they did not want to punish their listeners for the station's problems. SoundExchange, representing supporters of the increase in royalty rates, pointed out the fact that the rates were flat from 1998 through 2005 (see above), without even being increased to reflect cost-of-living increases. They also point to the fact that CBS recently purchased Last.FM for 280 million dollars, and if internet radio is to build businesses off of the product of recordings, the performers and owners of those recordings should receive fair compensation. Opponents argued that the purchase price paid for Last.FM reflected that it was primarily a social network service that included a radio service.
SoundExchange recently came to an agreement with certain large webcasters regarding the minimum fees that were modified by the recent determination of the Copyright Royalty Board on May 1, 2007. While the CRB decision imposed a $500 per station or channel minimum fee for all webcasters, certain webcasters represented through DiMA negotiated a $50,000 "cap" on those fees with SoundExchange. However, DiMA and SoundExchange continue to negotiate over the per song, per listener fees.
SoundExchange also recently offered alternative rates and terms to certain eligible small webcasters, that allows them to calculate their royalties as a percentage of their revenue or expenses, instead of at a per performance rate. To be eligible, a webcaster had to have revenues of less than $1.25 million dollars a year and stream less than 5 million "listener hours" a month (or an average of 6830 concurrent listeners). These restrictions would disqualify independent webcasters like AccuRadio, DI.FM, Club977 and others from participating in the offer, and therefore many small commercial webcasters continue to negotiate a settlement with SoundExchange.
An April 2008 survey showed that, in the US, more than one in seven persons aged 25-54 years old listen to online radio each week. In 2008, 13 percent of the American population listened to the radio online, compared with 11 percent in 2007.
An August 16, 2008 Washington Post article reported that although Pandora was "one of the nation's most popular Web radio services, with about 1 million listeners daily...the burgeoning company may be on the verge of collapse" due to the structuring of performance royalty payment for webcasters. "Traditional radio, by contrast, pays no such fee. Satellite radio pays a fee but at a less onerous rate, at least by some measures." The article indicated that "other Web radio outfits" may be "doom[ed]" for the same reasons.