All quiet on the Webcaster front

Congress and the music industry fight over Internet radio

The Librarian of Congress means "Shhhh" when he says "Shhhh"The music industry is in free fall. Everywhere you turn, you find articles about how sales are shrinking faster than Jose Canseco's testicles. So what brilliant scheme does the Recording Industry Association of America -- a trade group that represents U.S. record labels -- have for solving this quandary? It's trying to shut down Internet radio, one of the few venues left that provide listeners with new, exciting music (therefore helping to expandsales).

Let's get you up to speed. As reported here (Pop Philosophy, Dec. 19, 2001, "Paying through the nose -- and the ears"), the RIAA scored passage of the Digital Millennium Copyright Act back in October 1998. The act stipulated, among other things, that Web radio stations needed to pay licensing fees for copyrighted songs. The legislation spent almost three years in the courts, until last August, when a judge ruled that the law would stand and stations must begin paying royalties retroactive to 1998.

When Webcasters were unable to agree on royalty rates with the RIAA (the latter wanted 15 percent of the station's gross revenues while the former pushed for three percent), the U.S. Copyright office set up a Copyright Arbitration Royalty Panel to determine the amount. Unfortunately, the CARP used the "willing seller/willing buyer" model rather than the percentage-of-revenues model, taking a September 2000 deal between Yahoo!'s streaming department and the RIAA as its precedent. In that transaction, Yahoo! accepted superhigh royalties in exchange for a two-tiered system of payment: one price for its Internet-only stations and one for its commercial streamer, Broadcast.com. So even though the CARP said it was setting its fees at lower than the Yahoo!/RIAA deal, the arbitration panel was still using as its yardsticks a company that had the resources to buy Broadcast.com for $5 billion (Yahoo!) and an organization bent on protecting major label interests (the RIAA). No one-man operation streaming Hawaiian favorites from a bedroom could match up with these heavyweights. In fact, two weeks ago Broadcast.com founder (and current Dallas Mavericks owner) Mark Cuban admitted in an e-mail to Kurt Hanson's Radio and Internet Newsletter that the Yahoo!/RIAA deal "was designed so that there would be less competition, and so that small Webcasters who needed to live off of a 'percentage-of-revenue' to survive, couldn't" (italics his). Yahoo! knew that if it stuck to the percentage-of-revenue model, no one would need to use its streaming services, since it would be cheaper for small Webcasters to go it alone.

In February of this year, the Copyright Arbitration Royalty Panel recommended rates of .14 cents per song per listener for Internet-only stations, .07 cents for commercial station simulcasts, and .02 cents for college and noncommercial station streams. In June, the Librarian of Congress, James H. Billington, rejected the Internet-only rate as too steep, knocking the cost down to .07 cents. But even these levels are too high for the average independent station to bear. A mid-size Internet-only Webcaster averaging 1,000 listeners per hour over the past three years would owe $275,940 -- all of it due by October 20. Considering how little income these sites bring in, only the biggest corporate broadcasters would be able to remain online. (Hordes of sites, such as the popular local Somafm.com, have already thrown in the towel.)

Fortunately, several Congressmembers disagree with the numbers. Two of them, Rep. Jay Inslee (D-Washington) and Rep. Rick Boucher (D-Virginia), made this statement after the librarian's decision became public: "We will be considering legislation to change the standard from 'willing-buyer/willing-seller' for Internet radio to the traditional fair market formula used by other CARPs. In addition, we want to ensure that all future CARPs must take into consideration small business concerns and allow effective participation of small, niche, and noncommercial entities." As we all know, though, the wheels of Congress move slowly. Ballsy Webcasters might want to follow the lead of Steve Taiclet, general manager for KFJC-FM (89.7), who says, "Our plan is to keep on streaming. We're not going to change a damn thing. ... It's just a matter of principle with us."

To yell in someone's ear about Web streaming, go to www.saveinternetradio.org.

 
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