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RIAA: 'Webcasters Engaging in Propaganda Campaign'

The war of words been Webcasters and the recording industry over a proposed fee structure for royalty payments has escalated with the Recording Industry Association of America (RIAA) claiming it is the target of an "intense misinformation and propaganda campaign."

With the May 21 deadline fast approaching for the Library of Congress Copyright Office to decide on an arbitration ruling on royalty fees, the RIAA has gone on the offensive, claiming a misinformation campaign "ginned up by sophisticated lobbyists in D.C." has not told the full story.

The Copyright Arbitration Royalty Panel (CARP) recommendation, which has been roundly criticized by nervous Webcasters, has set royalty fees at 14/100 of a cent per performance, retroactive to October 1998.

Even as Webcasters big and small continue to argue that the fee structure effectively bankrupt all but a handful of Internet radio stations, the RIAA insisted the CARP rates would allow Webcasters to thrive.

"Contrary to what has been reported in the news media and circulated on the Internet, the RIAA and its member companies want ALL Webcasters, large and small, to succeed," the Association said in a statement posted on its Web site.

In what appears to be a slap at the 'Save Internet Radio' drive by nervous Webcasters and the growing media interest in the Copyright Office decision, the RIAA said: "The goal is to scare non-commercial Webcasters -- including college radio stations and so-called hobbyists -- and their members of Congress into thinking that the CARP rates are going to drive non-commercial Webcasters out of business."

"Contrary to press reports, the CARP rates will not put Webcasters out of business. Many of the non-commercial Webcasters will actually only be required to pay the minimum (and minimal) annual fee of $500," the association argued.

Noting that its royalty calculations differ dramatically from the claims of the Webcasting community, the RIAA said most of the fee projections reported in the news media make the erroneous assumption that every listener who ever logs into a given non-commercial Webcast remains logged into the site 24 hours per day, 7 days per week, 365 days per year.

"This assumes that no one ever logs off and listeners only visit that particular site. While no one can say for sure what the actual listener's time is, the notion that they stayed logged on 24 hours a day, 7 days a week, is preposterous and the subject of gross exaggerations," the association argued, adding it was open to treating hobbyists differently.

However, the voices behind the 'Save Internet Radio' campaign have challenged the RIAA's statement, lashing back at the Association's attempt to "obfuscate the facts."

Responding to calculations from the RIAA that shows some commercial stations would only pay a small amount of royalties under the current CARP ruling, supporters of the Webcasting community say those rates were computed for "noncommercial" stations.

Paul Maloney, one of the loudest voices in the anti-CARP lobby, said the use of the "hobbyist" argument is a red herring.

"It's true that noncommercial services will pay a lower rate (0.02 cents per performance, plus 9 percent for ephemeral charges). But most of the anti-CARP arguments we've seen plead that the determination will crush the Webcasting business, not "hobbyists." Certainly there are many Webcasters who aren't running ads at this time -- but that doesn't mean they don't intend to, or don't hope to develop their service into a profitable business. The "hobbyist" argument is a red herring. The Webcasters who've become visible in crying out against CARP, as far as we know, are businesspeople," Malone said in his Radio and Internet Newsletter.

"A little math shows that a noncommercial Webcasters would have to have an average audience of less than 18 people to qualify for the $500 minimum. Remember, "performances" on which the royalty rate is based is songs multiplied by listeners. If a Webcaster averages 15 songs per hour, they'll play about 131,400 songs per year. Multiply that by an average audience size of 18 to determine the total "performances" for the year -- in this case 2,365,200."

Multiply the "performances" total by the $0.0002 royalty rate (notice we converted to dollars here), to yield a song royalty rate of $473.04. Add in the 9% additional ephemeral fee ($42.57) and oops...we're more than $15 over the $500 minimum fee," Maloney added.

Amidst the verbal jousting between the two sides, another big-name 'Net radio station has gone silent, partially in reaction to the CARP recommendation. The latest casualty is RadioCentral, a San Francisco-based B2B Webcaster which shut off most of its streams and pink-slipped its entire staff.

RadioCentral, which raised more than $14 million in funding to build and deploy Webcasts for companies like About.com, EarthLink and Terra Lycos, said blamed its demise on the slowdown in online ad spending and the potential ramifications of the looming royalty rates.

Other streaming media plays that have shut down or tinkered with its business model in recent months include MediAmazing, Cablemusic.com and LiteRock 101.9.