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The legitimate business webcasters have never objected to paying ASCAP/BMI extortion fees. By the way, if you think that the artists actually get compensated properly for airplay of their work by ASCAP/BMI, you don't know how that racketeering, shake-down enterprise works. In any event, compensation for artists isn't the question with legitimate webcasting businesses.

The problem with the current situation is that the RIAA is trying to eliminate competition for the over-the-air outlets that they control through a mechanism of third-party payola. They don't like it that their control is being diluted by the fact that webcasters offer more choice to the listener. They're asking that webcasters pay not only the ASCAP/BMI fees, but an ADDITIONAL fee to RIAA which is designed to put webcasters out of business. The webcasters offered to pay a percentage of profit but this wasn't good enough for RIAA because all they want to do is eliminate competition for their controlled outlets.

All of this is based on the premise that webcasters are doing the same thing as mailing CD's with music on them to their listeners - which is ridiculous - rather than doing the same thing that over-the-air broadcasters are doing.

This is nothing but a monopoly operating on a pre-historic business model that refuses to change and prefers to squash its competition.

I was familiar with a couple of web-based "pirate" radio operators. They hosted music that (in their opinion) wasn't receiving much airplay. They derived no income from their program - and in fact lost money. They were, after all, paying for their webspace & bandwidth had purchased virtually all of their material.
The net effect of their programs was to heighten public awareness to the artists featured - no doubt stimulating further interest to hear more from those artists (spelled CD SALES).
They were harassed by RIAA goons, and shut down by court ordered injunctions before the merits of their respective cases were resolved.
They won't be back.
Who is the loser here?

If you can't get past the broken link to Scotty's blog, here's an explanation of the issue from somebody in the business. Basically, the problem is that the RIAA wants webcasters to pay a much higher rate than incumbent over-the-air stations:

The RIAA concept would hit small enterprising webcasters hard, not to mention that they are being held to a double-standard, since regular broadcasters don't pay the fee at all. RIAA has proposed that those on-air stations that also stream onto the Internet should pay half of the fee they propose for Web-only stations.

Congress does not have blanket authority to pass copyright-style legislation. Its authority is solely to promote the sciences and useful arts by giving authors and inventors, for limited times, the exclusive use of their writings and discoveries.

Much of what the RIAA et al. are trying to use new copyright legislation and regulations to do is to stifle the arts by granting copyrights for what is essentially an infinite duration. I hope the Supreme Court can see this overreach of power for what it is.

Small webcasters paying royalties for playing music on the Internet? Yes, it’s only fair.

No, it's the farthest thing from fair, and here's why. Previously, a radio station would pay ASCAP or BMI or one of the others a fixed percentage of the station's total revenue from advertising per year regardless of the number of times the song was played or how many people were estimated to have listened to it. Along comes web radio and downloadable songs. Certain very large companies, TIME/Warner one of them, were afraid that they would be liable for that percentage of their respective company's entire revenue per year, not just that revenue limited to the part of their business devoted to that particular music-related activity. Because of this, these companies got the law written so that they would have to pay only on a per use or per listener basis. This would then be a very small yearly cost compared to a fixed percentage of their revenue. However, it put small web radio stations into the position of having to do something that no broadcast radio station has to do.

So we have the situation where one large broadcast radio station has to pay a few thousand per year for song licensing (a small fraction of its revenue) and one small web radio station would have to pay what would amount to several times its entire operating budget (tens of thousands of dollars)--not its ad revenue--for playing exactly the same songs, exactly the same number of times, over exactly the same period of time. The two activities, differing only in the technology by which the signal is transmitted to the listener, are being subjected to two entirely different methods of calculating payment, one of them being so costly that it is driving small companies out of business. Call this equal protection under the law? I don't. The only justification for it is that a few large corporations think they'll be protected from having to shell out. Meanwhile, many, many small web-radio stations, which could be generating income for the various artists in exactly the same way that broadcast radio stations do, are prevented from doing so. Web-radio stations that are put out of business by a grossly unfair method of calculating payment won't be around to generate revenue.

There goes my awesome new wave nobody ever heard of them but a few of us nuts music. Got a good new source for me to listen too now, seems the music companies don't bother pushing them anymore. BTW. not the top 40 new wave but the underground stuff remixes ect.. Stuff like: Taras Bulba, The Essence, Red Box, The Light, Industry, Captain Sensible, Furniture, China Crisis, Alternative Radio, Altered Images, A Drop in the Grey, BEF, St. Etienne, Kissing the Pink, Illustration, older Runrig, ect...