UPDATE: Live365 closed on January 31, at about 10pm EST. (See the latest news HERE.) The page you are on now contains most of the comment discussion around the Live365 crisis and shut-down (scroll down to see comments). For all of RAIN News’ leading coverage of the Copyright Royalty Board music rates, and the expiration of the Webcaster Settlement Act which led to Live365’s closure, GO HERE. Subscribe to our daily free newsletter HERE.

Thousands of webcasters are bearing an uncertain holiday season, their businesses threatened by the imminent expiration of legislation which provided below-market royalty rates. Internet radio hosting platform Live365, one of the most venerable brands in this industry, is affected by shifting regulations that change the cost of music on January. In addition, the company’s investors have pulled support from the company, forcing an immediate financial crisis. RAIN News has learned that as a result, nearly the entire staff was laid off this week. The company vacated its office space, and the few remaining personnel are working from their homes.

The company is publicly appealing for investment funding.

Live365 was founded in 1999, and hosted small online radio stations free of charge. Payment plans were soon installed, and the ad-supported model added a commercial-free “VIP” membership in 2003 which persists today. RAIN News recently covered Live365’s launch of Podcast2Radio in partnership with the Blubrry podcast network, designed to expand audience development for podcasters by inserting their programs in streaming platforms.

The U.S. audio webcast industry is rocked by the music licensing regulations which change every five years — most recently on December 16 when the Copyright Royalty Board (CRB) released webcast rates for 2016-2020. At the same time, a special provision called the Webcaster Settlement Act of 2009 is set to expire in the new year, ending a 10-year period in which low-revenue online radio stations could pay lower royalties to labels than those paid by Pandora and other big webcast brands. With no word yet on its renewal from SoundExchange, which is sanctioned by Congress to negotiate special licensing deals with industry groups, small webcasters are scrambling to map survival strategies.

Live365 pays the licensing fees for webcasters in the platform’s Pro plan. The platform hosts many webcasters who pay their own licensing obligations. So, Live365’s dilemma is twofold — how to afford higher rate obligations for the Pro group, and whether the platform will retain non-Pro webcasters faced with dramatically higher cost. In a cruel ironic twist, it could be the most popular stations that will experience and deliver the most pain — successful stations with more listening hours than the company’s Pro threshold cannot get into Pro, and therefore might go out of business, removing large blocks of ad inventory from Live365.

As the company shops for a new influx of venture capital, director of Broadcasting Dean Kattari emphasized the potential loss of unique musical variety: “The true value of Live365 lies in it’s diversity of content – it’s a sanctuary where you can hear music and other content that it so unlike the template broadcasting that is heard on most terrestrial radio. These stations are the hard work of real human beings who use Live365 to share their vision with the world. It’s a home for musical discovery because many of these stations play emerging artists that terrestrial stations are reluctant to take a chance on. It would be a great loss for this to all go away.”