Two years ago, when Neil Blake started an Internet radio Website out of the basement of his home in Massapequa, New York, he counted just one other listener. But since then Blakeradio.com has attracted music lovers across the globe--from as far away as Brazil and Australia. "I couldn't have imagined the type of response that we've been getting," says Blake, who, along with a private investor, started the station with $10,000. The 41-year-old Brooklyn, New York, native says people are turning to the Internet as a way of countering the slim rations that regular radio stations offer. Balancing a variety of musical tastes that range from Nina Simone, to Tupac Shakur, to traditional gospel, Blakeradio.com is a cultural mall that features a video lounge, four music channels, a kids' cafe, and a 24-hour channel devoted to talk radio.
According to a February 2003 study conducted by Arbitron and Edison Media Research, more than 100 million Americans have used Internet radio or video since the format became popular. Although those numbers are impressive, Internet radio is facing an uphill struggle. In 1998, because of heavy lobbying from the recording industry, Congress passed the Digital Millenium Copyright Act, which was designed to secure royalty payments from Webcasters. The law did not set a rate until early last year, when a three-member Copyright Arbitration Royalty Panel suggested a system of royalty payments that brought the Webcast industry to its knees. Facing a financial crunch as a result of retroactive royalty fees that initially counted each song and each listener as individual payment due, thousands of independent Webcasters simply threw in the towel. Those that managed to survive under the Small Webcaster Settlement Act, signed late last fall by President Bush, are still negotiating payment terms with SoundExchange, an entity formed and authorized by the Recording Industry Association of America. The law will define the industry's future growth by separating commercial from noncommercial Webcasters.
In addition, advertisers, who traditionally provided a hefty source of revenue for broadcasters, have yet to embrace Webcasters. …