The annual cost of operating WOXY.com could more than double under new rates that Internet radio stations must pay to play music.

"This absolutely would have killed WOXY as a stand-alone operation without a doubt," said Bryan Jay Miller, general manager of the Cincinnati-based online radio station. "We're in a little better position than most Webcasters because we are owned by LaLa. We don't rely on just advertising sales."

WOXY.com was acquired in October by LaLa.com, a CD trading Web site created by Silicon Valley entrepreneur Bill Nguyen.

Despite the station's commerce-based support, Miller is alarmed by the proposed "per-performance" rates issued in March by the federal Copyright Royalty Board.

The rates represent a 30 percent increase in royalties paid to the record labels and artists retroactively to January 2006, and 30 percent again in the following three years, according to the Digital Media Association.

"We do think artists should be compensated for their work," said Miller, a Dayton native. "But you could go from collecting some royalties now to collecting no royalties, because you just killed off the whole industry."

Increased royalties and a $500 minimum fee per Web channel could silence small Internet radio stations and drive big companies out of the business, said Jonathan Potter, executive director of DiMA. "Paying royalties of 30 or 50 or 75 percent of revenues is not a viable business for a Yahoo or for a Pandora, which is one of the larger Internet Webcasters," Potter said.

John Simson, executive director of SoundExchange, the group that collects royalties from online radio and distributes them to labels and performers, said that online advertising revenue is growing dramatically. "I think that the judges' determination was that these were rates that services could pay, or should pay, in a free market," he said.

Miller, whose online alternative rock station had ceased broadcasting for financial reasons before being acquired by LaLa, disagreed. "Most Internet radio that I know of, especially little independent Internet radio operators, are barely struggling to stay alive," Miller said.

Online broadcasters have challenged the CRB ruling, which only applies to digital transmissions of music.

"I suspect you'll see a lot of pressure on Congress to take action," Potter said.

Rep. Ed Markey (D-Mass.), chairman of the House Subcommittee on Telecommunications and the Internet, said at a hearing that the ruling "represents a body blow to many nascent Internet radio broadcasters and further exacerbates the marketplace imbalance between what different industries pay."

Miller said that it's in the best interest of the artists, record labels and Internet radio operators for the emerging industry to grow. "Because if it grows, everyone wins," he said. "If you kill it, nobody wins."

Contact this reporter at (937) 225-2419 or dlarsen@DaytonDailyNews.com.