RealTime IT News

CARP Controversy Back on Front Burner

The controversy over a royalty rate structure for Internet radio streams has again been pushed to the front burner with news that both the Recording Industry Association of America (RIAA) and a group of webcasters will appeal the CARP ruling.

There is no word on when the actual appeals will be filed but briefs are expected to be submitted to U.S. Court of Appeals for the D.C. Circuit later this year.

While the move by the Internet radio broadcasters to challenge the ruling had been expected, the RIAA decision to file a court appeal further adds fuel to the fire that has boiled since the Library of Congress accepted the CARP recommendation for a per-performance royalty fee of 0.07 cents.

"The RIAA intends to argue that the Librarian's interpretation of the deal with Yahoo! was incorrect, and that the Librarian improperly threw out 140 licensing deals that the record companies and RIAA signed with webcasters and other similar companies," the association said.

The CARP found 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."

Interestingly, both sides point to the CARP use of the Yahoo deal as creating grounds for an appeal. "The Librarian of Congress was duped by Yahoo's self-serving testimony in the CARP. Yahoo testified in the CARP for one reason, and one reason only -- to lower the rate that would be paid for Internet-only transmissions, Yahoo's principal business," the RIAA complained.

It plans to argue in the appeal that the Copyright Office mistakenly concluded that "Yahoo's business model is unique, unlike webcasters that create their own programming, Yahoo merely offers programming by AM/FM radio stations and other webcasters."

"Nothing could be further from the truth. At the time Yahoo! testified, it had already acquired Launch.com and intended to commit significant resources to Internet radio," the association said. It will argue in its court appeal that Yahoo downplayed its Internet-only business during the CARP process "to obtain a lower royalty rate, and in fact, days after the Librarian's decision, announced it was closing down its entire radio retransmission business."

"If the Librarian had correctly based his decision on Yahoo's actual business plans rather than the firm's self-serving testimony, the final royalty rate would have been significantly higher," the RIAA said.

RIAA CEO Hilary Rosen argued that the eventual decision was based on a "misguided reading of the record."

"Not only was improper weight given to the testimony of Yahoo! but some 140 separate licensing deals were thrown out by the Librarian. The end result significantly undervalued the music used by Internet radio companies," Rosen added.

On the other side, 19 small commercial webcasters led by ioMediaPartners have retained the law firm of Shaw Pittman LLP to handle its own appeal of the CARP process. The group of 19 includes Radio Free Virgin, Live365, Radioparadise, Chatmasters Streaming Network, SomaFM and WebMedia Consulting Inc. (DigitallyImported), according to RAIN, which has led the internet radio lobby.

The webcasters have long argued a per-performance rate structure would force them out of business and, with the admission from the Librarian that the CARP "misinterpreted" some aspects of the RIAA/Yahoo agreement, the Webcasters will argue that the process was flawed throughout.

"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," the Librarian said when its acceptance was announced.