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Webcasting Royalty Plan Due Out

Finally, after four years of negotiations to determine royalty rates for Internet radio streams, the Library of Congress is set to announce a statutory "sound recordings performance royalty" rate that settles the issue once and for all.

On Thursday, Librarian of Congress James Billington will issue a rate structure that puts an end to the Copyright Arbitration Royalty Panel (CARP) process that caused a deep rift between the Webcasting lobby and the Recording Industry Association of America (RIAA).

The rate, which will be determined by Register of Copyrights Marybeth Peters and U.S. Copyright Office general counsel David Carson, will cover the period from October 1998 through the end of 2002 and Webcasters believe there are enough hints the new rate structure will work in their favor.

The first hint came last month when the Copyright Office rejected the original CARP recommendation had fixed royalty fees for Web radio stations at 14/100 of a cent per performance, retroactive to October 1998.

That rejection was seen as a clear indication that the Library of Congress will dismiss the per-performance rate structure and implement a royalty rate based on a percentage of revenue.

Legally, the decision by the Library of Congress must reflect a rate that a "willing buyer" and a "willing seller" would both find favorable and, because the RIAA and the Webcasters are miles apart on the fee structure, it further complicates the issue.

Kurt Hanson, who has led the Save Internet Radio campaign, believes the Library of Congress "fully understands" the ramifications of a per-performance fee on Internet radio sector.

"If they follow the precedent of composers' royalty in the U.S. for the last three decades or sound performance royalties for traditional broadcast radio around the world, then they will have an option that is based on a percentage of revenues. Ideally, we would like to see it set in the range of 3-5 percent of revenues," Hanson told internetnews.com.

He said a recent announcement from the Copyright Office on what the reporting requirements are likely to be was a sign Thursday's final decision would be Webcaster-friendly.

"They seem to be taking into account the concerns of small- to mid sized Webcaster and made it as simple as reasonably possible. I think that's an indication they are certainly understanding (our) concerns," he said.

"Almost any royalty expressed as a percentage of revenues keeps the industry from being bankrupted. If it gets into the double digits, you can expect broadcasters might quit streaming and some Webcasters might choose to fold," Hanson added.

But, even if the percentage of revenue rate is set in the double digits, Hanson said it "would not totally destroy the industry."

However, if the Library of Congress opts to follow the CARP method of setting a rate as a flat fee per song streamed (per listener), he argued that the decision would effectively destroy the Internet-only radio industry.

The RIAA has maintained a low public profile throughout the proceedings but, based on statements when the CARP decision was rejected, it is clear the Association was unhappy.

"The Librarian has rejected the arbitration panel's determination, but we do not know why or what decision the Librarian will ultimately make based on the evidence presented," said RIAA president Cary Sherman. "Since both sides appealed the panel's determination, anything is possible. We look forward to the conclusion of this process on June 20th, and to the day when artists and labels finally get paid for the use of their music.

SoundExchange, the RIAA-sponsored outfit responsible for royalty collection, called for long-term "creative solutions" between the recording industry and the Webcasters.

"Given the complexity of the issues, I am not surprised by the Librarian's decision. I remain confident that we can find creative solutions to enable Webcasting to thrive while providing recording artists and those who invest in sound recordings a fair and equitable royalty in return," said John Simson, executive director of SoundExchange.

"Over the past three years, Webcasters have paid for bandwidth, rent, hardware, software and other business expenses. 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," he added.