Webcast Royalty Fees Plan Rejected
Internet music lovers, fearful that their favorite Web broadcasters will go out of business, won a reprieve Tuesday when the government rejected proposed royalty rates that webcasters considered too high.
Librarian of Congress James H. Billington, who oversees the U.S. Copyright Office, said he would issue a final decision by June 20 laying out the royalty fees to be imposed. He did not explain why the proposed rates were rejected.
Webcasters had sought lower rates than those proposed in February by a government panel. They said those rates — up to $1.40 per song heard by one thousand listeners — would cost larger webcasters hundreds of thousands of dollars annually, more than they get from advertising or listener contributions. The fees would have been retroactive to 1998.
Many webcasters said they would have to shut down if the proposed rates were approved.
"We would not be in existence any longer," said Kevin Shively of Beethoven.com, a classical station based in Hartford, Conn. He said he was cautiously optimistic that Billington's final ruling would be fair, but "if a decision comes down that does not allow webcasters to survive, there certainly will be appeals."
Opponents can appeal to the U.S. Court of Appeals for the District of Columbia Circuit within 30 days of the final ruling. The court could modify or set aside the decision if it finds Billington was highly unreasonable.
The Recording Industry Association of America had sought higher royalties than those proposed by the arbitration panel, saying more was needed to compensate artists for using their music.
Cary Sherman, RIAA president, said he did not know what the final rates would be. "Since both sides appealed the panel's determination anything is possible," he said.
Internet radio now is popular in offices and is gaining wider use in homes as more people get high-speed connections. It is expected to become even more mainstream as wireless devices proliferate, allowing listeners to tune in while walking or driving.
Webcasters, as well as over-the-air radio stations, already pay composers and music publishers royalties for the music they play, based typically on a percentage of their revenues.
But traditional radio broadcasters have been exempt from paying the royalties for each song played that now are being applied to webcasters. Broadcasters successfully argued before lawmakers that they already were promoting the music.
After the recording industry failed to impose those new royalties, which would go to music labels and musicians, on traditional broadcasters, the industry turned to webcasters. A 1998 law granted the industry its wish.
"It is time that they finally start to pay the artists and record companies whose creative output is the most important component of their business," said John Simson, executive director of SoundExchange, a group formed by the recording industry to administer royalties.
Earlier this month, hundreds of Internet broadcasters quieted their operations in a "Day of Silence" to protest the proposed royalties. Many of them said the royalties would have harmed the musical diversity the online world offers as an alternative to a few large outlets playing the same roster of Top 40 hits.