At what cost pleasure?

The House has passed a bill permitting Pandora and other internet radio webcasters the right to negotiate with the music industry over royalty rates.

Such "performance royalties" — fees webcasters must pay music owners each time a listener streams a song on their network — are currently determined by the Copyright Royalty Board.

In March 2007, the Board endorsed the proposal brought by major music labels (via the RIAA-associated SoundExchange royalty organization) that set royalty rates through 2010.

The rates, which started at $0.08 per performance in 2006 (retroactively billed) and were projected to $0.19 in 2010, spelled disaster for internet radio profits.

According to calculations by the Radio and Internet Newsletter (RAIN), even the 2006 rates would means that 100 percent of the station's revenues from advertising would go toward paying royalties.

Costs will always exceed revenues, no matter how much internet radio has to pay the music industry, pipes Silicon Alley Insider.  Ad support is simply not enough to cover the expenses of internet radio, let alone generate "real" revenues.

In the meantime, the new bill — called the Webcaster Settlement Act of 2008 (H.R. 7084) — would give webcasters and SoundExchange a legal way to negotiate agreements and implement them while Congress is out of session.

All webcasters would benefit, including NPR, college webcasters, small webcasters and broadcasters who put their stations on the Internet, said the Digital Media Association (DiMA).

The bill is expected to clear Congress in the next few days. The National Association of Broadcasters (NAB), which represents AM, FM and other broadcasters, officially opposed the bill, saying it would lead to unfair competitive advantage from webcasters. See the Wired blog for the full update.