A startup indie radio station gains a toehold in an unfriendly universe

Storefront booths, such as East Village Radio in New York, reach millions online – if they can cut legal static.

If you were walking in New York's East Village this past August, you might have passed by indie-rock legend Dean Wareham – the mastermind behind the seminal 1990s dream-pop bands Galaxie 500 and Luna – giving an in-studio performance at East Village Radio (EVR).

For fans who were looking for a glimpse, radio show host Delphine Blue entreated: "We're in a storefront on First Avenue, so if you're walking by, you can stick your face up to the window."

"It's fun, isn't it?" chirped Ware­ham, who after more than 20 years in the music business seemed bemused by the throwback nature of the street-level radio booth.

It conjures up images of Wolfman Jack in "American Graffiti," or Samuel L. Jackson as the storefront DJ Love Daddy in Spike Lee's "Do the Right Thing," where Jackson's character comments on the weather and the passersby, and, in a sense, is also a player in the theater of the street.

For EVR, that "fourth wall" is often further blurred, as friends, neighbors, and even strangers regularly pop in to say hello, and will likely find their way onto the air.

On a recent Thursday afternoon during "Pizza Party" (an EVR show that plays jangly pop and alt-rock obscurities), the electro art-punk duo A.R.E. Weapons came by to drop off a record to a friend hanging out in the booth. Impromptu, show hosts Kevin Pedersen and Max Wowch slapped the record onto the turntable, cued it up, and had the duo introduce their own song.

"Matt and Brain from A.R.E. Weapons are here, and they got a new record," Wowch said into the mike. "Tell us what it is."

"It's called 'Radio, Radio,' " said Matt, and just like that, A.R.E. Weapons got some precious airtime with a radio audience.

It's a refreshing change from the "payola" practice of commercial radio, where big labels offer favors (and sometimes, illegally, cash) to program directors in exchange for preferential treatment, resulting in a canned mix of commercial music fighting for airtime between commercial jingles.

With EVR, DJs are given a two-hour time slot and carte blanche.

How a start-up like EVR can gain a toehold in an industry that for decades has been unfriendly to the little guy can be summed up by a slight tweak to the illuminated sign hanging in the booth: In place of the familiar "ON AIR" is a sign that reads "ONLINE."

"Clear Channel" – the multibillion-dollar radio conglomerate – "kicked out a lot of people wherever they could, and just beamed in from another city," says Wareham. "Now, with the Internet, you don't have to have this huge transmitter."

With more than 1 million listeners a month, EVR is at the forefront of this emerging medium. In addition to fostering more independent voices and breaking underground acts, EVR has become a must-visit for big-label stars like Wareham and, more recently, Big Boi of the Grammy-winning, platinum-selling hip-hop group Outkast.

You'd think the sky might be the limit for an organically grown station such as EVR deftly leveraging street cred, an easy relationship with artists, and the identity of a bohemian counterculture neighborhood into a burgeoning Internet audience. But EVR general manager Peter Ferraro has to be very careful when it comes to growing his business. The way the current performance-royalty pay structure is set up for webcasters, if EVR's audience numbers do in fact reach the sky, so, too, do their operating costs.

Under the Congressional Digital Music Copyright Act of 1998, Internet broadcasters are required to pay a digital performance royalty for each and every listener, making it very difficult to scale up their business. By contrast, their terrestrial counterparts benefit from a flat royalty rate: As their audience grows, the cost per listener falls.

"The very existence of EVR in the current royalty climate is pretty punk rock," says Mr. Ferraro, who is trying to avoid the same fate as WOXY, an independent rock webcaster that was forced to shut down earlier this year for ostensibly becoming too popular.

Unlike WOXY, Ferraro is going to great lengths to make sure EVR's revenues – a mix of Web advertising, show sponsorships, and events with corporate sponsors – keep pace with their growing music-licensing costs. As of now, 30 percent of EVR's annual operating costs goes to paying performance royalties. As their audience grows, theoretically that percentage will increase until EVR is potentially snuffed out.

But there is hope: Pending legislation in Congress (the Performance Rights Act) would compensate artists when their performances are played on terrestrial radio (currently, only the composer and music publisher are paid), and offer fixed, discounted royalty rates to small terrestrial broadcasters. Last year, at a meeting of the Senate Judiciary Committee on the bill, Sen. Dianne Feinstein (D) of California said she believed "strongly that parity and fairness require that we provide the same discounts for small webcasters."

Currently, the National Association of Broadcasters and the Record Industry Association of America are negotiating the terms of the proposed legislation. Though a Senate Judiciary Committee source told the Monitor that webcasters shouldn't rely on the NAB to carry their water, the source did say that Senator Feinstein remains committed to webcasters.

If webcasters are included in the bill, Ferraro says there might be a "small business explosion" in the Internet radio space, "a sector that will pay royalties and expose people to music that is often characterized as existing in the 'long tail.' "

For young performers like Theo­philus London and Yelawolf, breakout artists who exist in the alternative or "long tail" space, stations like EVR are integral to success.

"It's like getting on the front cover of a magazine, being interviewed on EVR," says London, an alt-pop artist from Brooklyn whose "Flying Overseas" record will be released by Warner Bros. next month. "They're very pivotal."

Yelawolf, an underground hip-hop artist from Alabama whose appearance on the October/November cover of Fader magazine marks a watershed moment in his career, echoes the sentiment: "These Internet DJs are especially important to underground artists," he says. "They're going to give you the opportunity. They're willing to take risks and put their own opinions and tastes out there.

"EVR was the first radio station and only radio station that fully supported me," Yelawolf says. "If it wasn't for them, I wouldn't be where I am."