RealTime IT News

Webcasters Call CARP Rates Astronomically High

Internet radio broadcasters brought their two-week Washington lobbying campaign against proposed royalty rates to a U.S. Senate Judiciary Committee meeting Wednesday, arguing that a potential May 21 ruling by the Librarian of Congress would critically cripple the fledgling industry. On the heels of a 'Day of Silence' protest last week, the webcasters have descended on Congress to petition for the controversial Copyright Arbitration Royalty Panel (CARP) ruling be dismissed or modified.

At issue is a ruling that was handed down by CARP in February suggesting a royalty fee of .0014 cents be paid to the Recording Industry Association of America (RIAA) per listener per song played by webcasters, and .0007 cents be paid by offline radio stations that maintain online webstreams.

This would mean that on an average day, if an Internet radio station streams 15 songs to 1,000 listeners it would owe $21 in royalties for an hour of webstreaming, a rate the Internet radio stations say will drive them out of business.

"For webcasters large and small, large media companies or local entrepreneurs, the CARP recommended royalty is astronomically high, and bears absolutely no rational relationship to traditional copyright licensing benchmarks -- rates set in the marketplace or by rulemaking bodies for analogous rights, or the costs of the business that is using the specific right at issue," Jonathan Potter, executive director of the Digital Media Association, told the committee members. "It is no exaggeration to state that this decision holds in the balance the future of all of today's webcasters and the nature of webcasting itself.

The Internet radio industry currently pays no royalties to record labels pending a final decision from the Library of Congress on a set royalty standard that would be retroactive to the date of any particular company's inception.

It appears momentum is on the side of the Internet radio stations. The group has already won support from 20 House representatives who dispatched a letter to the Library of Congress arguing that the CARP recommendation went against the intent of Congress' general policies.

The letter, drafted by Congressmen Jay Inslee of Washington, Chris Cannon of Utah and Rick Boucher of Virginia, described the CARP recommendation as "both contrary to the intent of the DMCA and Congress's general policy not to stifle innovation on the Internet."

The Congressmen mirrored the anti-CARP argument that the proposed rate structure would "stifle the industry and force hundreds of small Webcasters out of business." Webcasters want royalty rates to be set as a percentage of revenue.

"Congress intended the statutory license process to be fair and efficient so that the Webcast industry -- both Internet-only programming and terrestrial radio retransmissions -- could be free of legal uncertainty, grow quickly and pay creators increasing amounts as the industry developed," according to the letter.

While the show of support from Congress could be seen as an attempt to prod the Library of Congress into overruling the CARP recommendation, the Recording Industry's SoundExchange agency has launched a grassroots campaign of its own to support the recommended rate structure.

SoundExchange, the royalty-collection agency of the RIIA, has launched a letter-writing and has purchased ads accusing Webcasters of launching a campaign of misinformation.

"Despite the fact that the rate is closer to their proposal, Webcasters and simulcasters have launched a campaign to undermine the arbitration process. They are inundating Congress with complaints that they cannot afford to pay for the music -- even though they pay market value for things like bandwidth and rent," SoundExchange said.

"Some of these complaints are based on confusion. Some are based on misinformation, resulting in grossly exaggerated projected fees. Others seek to perpetuate the royalty-free status enjoyed by broadcast radio, arguing that artists and labels shouldn't be fairly compensated even when their music is performed by those building businesses on recordings," it added.

The Webcasting lobby disagrees. ""We are at the crux of a pivotal time in this industry. Internet radio Webcasters are banding together with their allies in the digital media industry, large and small, to fight for fair royalty rates that will ensure diversity and minority ownership in this new form of 'broadcasting'," said Kurt Hanson, who is leading the fight for the Net radio group.

"If Internet radio is allowed to survive, it will obviously be a 'win' for consumers, but it will also be a 'win' for artists and creators, keeping alive new venues for their work," Hanson added.

(InternetNews editors Grethen Hyman and Ryan Naraine contributed to this report.)