Internet radio is in trouble. New rates set by the Copyright Royalty Board (CRB) may force many independent Internet radio stations out of business due to increased royalty fees. This includes Web 2.0 Internet radio companies like Last.fm and Pandora, although since Last.fm is in the U.K., it may be able to escape these fees.

Kurt Hanson’s Radio And Internet Newsletter (RAIN), does a really good job of breaking down the proposed rates and what webcasters may pay.

In an opinion piece by Bennett Lincoff, he says that the battle is between the record labels, backed by the RIAA, and the webcasters. While webcasters may succeed in lowering some of the fees, he says that the RIAA will impose other burdensome requirements if they bypass Sound Exchange. He writes:

However, in exchange for direct licenses at reduced fees, the record labels will demand certain non-financial concessions from webcasters. These will include, for example, that webcasters not stream music as MP3 files or in any other file format that cannot be configured to prevent unauthorized downloading of the music being transmitted. Webcasters will also likely be required to employ filtering and other DRM technologies.

Bonus: Read Lincoff’s White Paper–in PDF format–on a way to help save Internet radio.