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Fighting rages over Internet radio fees
Thursday, August 08 2002
by Matthew Clark


Both the record industry and Internet broadcasters are displeased with a decision
on per-song royalty rates, and both sides plan to mount court challenges. 

On 20 June 2002 the Librarian of Congress set a rate that Internet broadcasters
would have pay to stream copyrighted music over the Internet, .07 of a cent per
song per listener, or USD0.70 for every 1,000 listeners of a song. That decision
was based in part on a previous resolution that related to Yahoo's streaming of
Internet audio. 





But many musicians and record companies claim that the Librarian's new rate is
too low, while the broadcasters say the rate is too high. 



"The Librarian's decision was based on a misguided reading of the record,"
said Hilary Rosen, chairman and chief executive officer of the Recording Industry
Association of America (RIAA). "Not only was improper weight given to the
testimony of Yahoo, but some 140 separate licensing deals were thrown out by the
Librarian. The end result significantly undervalued the music used by Internet
radio companies." 



Those 140 deals include 25 licensing deals the RIAA stuck with other Webcasters,
as well as 115 similar deals cut by individual record companies, which the
organisation insists set fair market value for streamed music. And although the
RIAA says it is unwilling to settle with the rate, it is worth noting that many
record labels say the Librarian's rate is satisfactory. 



Now, the RIAA, the American Federation of Recording and Television Artists and
the American Federation of Musicians are appealing the Librarian's decision
through the US court system in order to get higher rates installed. 



But on the other side of the argument lies the Digital Media Association and the
law firm Shaw Pittman, who are fighting on behalf of broadcasters to have the
rate lowered, claiming that the USD0.70 figure will put many Web broadcasters out
of business. Some reports claim that around 300 small Internet broadcasters have
shut down since the USD0.70 rate was set, in anticipation of the large fees due
to go into effect this September. 



"I am hopeful that a negotiated resolution will enable the industry to withdraw
this appeal, but there has been no indication that the RIAA or SoundExchange are
seriously interested in royalty rates that will enable thousands of small
Webcasters to survive, or that will enable music lovers to continue enjoying the
diverse Internet radio experience that promotes myriad artists whose music is
never performed on traditional radio," Jonathan Potter, executive director of
the Digital Media Association, said in a statement. 



Indeed, RIAA critics also note that although the recording industry struck deals
with Internet broadcasters, many of these business have since gone under or never
launched their Internet music services. Moreover, Internet broadcasters point out
that traditional radio stations pay nothing to broadcast music over AM/FM
frequencies. And many of these same radio stations are now lobbying to be exempt
from the new rates. 



There have been other moves afoot to settle the issue, including discussion by a
Senate judiciary subcommittee. The issue is also dealt with in a new bill in
Congress that would repeal the rate for small, independent Webcasters. Whether
the issue is resolved through the courts or in Congress, few are optimistic that
a resolution will surface quickly.