RealTime IT News

Webcasting Royalty Rates Sliced in Half

The Library of Congress Thursday slashed the Copyright Arbitration Royalty Panel (CARP), cutting Webcasting royalty rates by half, setting the per-performance fee at 0.07 cents per performance.

In a landmark decision four years in the making, the Copyright Office said it would abandon the recommendation by CARP for a two-tiered rate structure of 0.14 cents per performance for Internet-only retransmissions and 0.07 cents for retransmissions of AM/FM radio broadcasts.

Instead the Copyright Office Librarian ruled that the rate of 0.07 cents would be implemented for both types of transmissions.

"Some of the rates for noncommercial broadcasters have also been decreased, and the fee Webcasters and broadcasters must pay for the making of ephemeral recordings has been reduced from 9 percent of the performance fees to 8.8 percent. The minimum payment for business establishment services was increased to $10,000," the Copyright Office ruled.

Immediately after the ruling was posted late Thursday, Internet radio broadcasters slammed the decision, arguing the 0.07 cents per performance (per listener) fee would further strangle the streaming media sector, which is already struggling though a tough advertising market.

"This is disappointing because it is still about 100 percent of revenues for most Webcasters," said Kurt Hanson moments after seeing the Copyright Office ruling.

"The Librarian was probably constrained by the instructions from Congress which was to base a decision on marketplace deals, of which there was only one," Hanson told internetnews.com, referring to a deal inked in 2000 between the Recording Industry Association of America (RIAA) and Yahoo that set a benchmark for Web radio royalty payments.

"This decision isn't based on fairness," Hanson declared.

According to the ruling, the Copyright Office accepted the CARP's conclusion that the RIAA/Yahoo! agreement represented "the best evidence of what rates would have been negotiated in the marketplace between a willing buyer and a willing seller."

Despite that acceptance, the Librarian ruled that CARP "misinterpreted" some aspects of the RIAA/Yahoo! agreement. "One of the most significant errors by the CARP was its conclusion that the parties must have agreed that radio retransmissions have a tremendous positive promotional impact on sales of phonorecords -- an impact that it did not find Internet-only transmissions have -- and that this promotional impact explained the decision of RIAA and Yahoo! to set a higher rate for Internet-only transmissions," according to the decision.

In fact, the Librarian said both the broadcasters and RIAA agree that there was no evidence in the record to support the conclusion that RIAA and Yahoo! considered and made adjustments for promotional value for radio retransmissions.

"The Librarian agreed with the Register of Copyrights that the CARP's conclusion about promotional value was arbitrary and was not supported by the evidence in the record, which provided no basis for concluding that radio retransmissions provide a promotional value that Internet-only transmissions do not provide," it added.

The Copyright Office ruling ends four years of bickering and testy negotiations to determine royalty rates for Internet radio streams and it is sure to further deepen the rift between the vocal Webcasting lobby and the RIAA.

Officials from RIAA could not be reached for comment late Thursday but it is known the Association was also critical of the earlier CARP ruling, claiming that the 0.14 cents per performance rate was too little.

The Copyright Office had earlier rejected the original CARP recommendation, which is retroactive to October 1998, raising hopes among Webcasters that the per-performance rate structure would be tossed out and a rate based on a percentage of revenue would be implemented.

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 were miles apart on the fee structure, it further complicated the issue.

* For extensive coverage of the CARP rate structure controversy, click here.