[FA Worldmusic] Internet radio broadcasters dealt setback

[Mark Gorney]

What looked like a shining star (ref. Tom Frouge's recent post about
streaming audio) just got substantially dimmer. Who does the Copyright
Royalty Board really represent, and who does this ruling benefit in the long
term? 

 

Internet radio broadcasters dealt setback

POSTED: 9:32 a.m. EDT, April 17, 2007 

Story Highlights
. Judges' panel says new, higher royalty rates will stand
. Internet radio broadcasters had protested new rates
. They say rates will mean cutbacks or shutdowns

LAS VEGAS, Nevada (AP) - Internet radio broadcasters were dealt a setback
Monday when a panel of copyright judges threw out requests to reconsider a
ruling that hiked the royalties they must pay to record companies and
artists.

A broad group of public and private broadcasters, including radio stations,
small startup companies, National Public Radio and major online sites like
Yahoo Inc. and Time Warner Inc.'s AOL, had objected to the new royalties set
March 2, saying they would force a drastic cutback in services that are now
enjoyed by some 50 million people. (Time Warner is also the parent company
of CNN.)

In the latest ruling, the Copyright Royalty Board judges denied all motions
for rehearing and also declined to postpone a May 15 deadline by which the
new royalties will have to be collected.

However, they did grant leniency on one point, allowing the webcasters to
calculate fees by average listening hours, as they had been, as opposed to
the new system of charging a royalty each time every song is heard by an
online listener. That exemption counts for last year and this year. After
that, the new per-song, per-listener fee structure goes into effect.

Many webcasters say the sharply higher royalty fees will put them out of
business. Talk of the ruling dominated a one-day meeting of Internet radio
broadcasters being held in Las Vegas alongside the annual conference of the
National Association of Broadcasters, a group representing local radio and
TV stations.

N. Mark Lam, the CEO of Live365 Inc., a privately held company that
aggregates audio streams from thousands of radio stations and other small
webcasters, said that under the new royalty rules, "there is no industry."

Lam, who joined the venture capital-backed company about two years ago, said
Live365 just barely broke even last year and had about 4.5 million unique
listeners every month.

Also on Monday, several Internet radio broadcasters announced a campaign to
raise awareness of the issue and encourage listeners to write to their
representatives in Congress.

Small broadcasters have received relief from Congress in the past,
benefiting from a law passed five years ago that gave them a break on
royalty rates. The legislation allowed them to pay about 12 percent of their
revenues instead of having to calculate per-song, per-hour rates like larger
companies had to.

David Oxenford, a lawyer representing several webcasters, said the next step
was likely an appeal to the U.S. Court of Appeals for the District of
Columbia Circuit, but he noted that process could take at least a year.
Meanwhile, he said, the prospects of successfully getting a court to block
the decision of the royalty board judges is slim.

SoundExchange, a nonprofit group that collects the online royalties from
webcasters and distributes them to record labels and artists, hailed the
ruling in a statement and said it looked forward to working with Internet
radio companies in order to ensure that the industry succeeds.

Jonathan Potter, the head of the Digital Media Association, which represents
several large webcasters including Yahoo, AOL and Microsoft Corp.'s MSN
network, said his group was not currently in talks with SoundExchange but
may be soon. He said his group and other webcasters would be turning to
Congress, where he said he sees "a lot of legislative support."

The royalties in question only cover digital transmissions of music, and
don't apply to terrestrial radio stations, as traditional radio play is seen
as a benefit for record labels by promoting sales of recorded music. Both
digital broadcasters and regular radio stations pay a separate royalty to
the publishers and composers of music.

Copyright 2007 The Associated Press