RealTime IT News

Court Denies Webcasters' Stay Appeal

Webcasters suffered a major blow in their effort to rollback new royalty rates late Wednesday when the U.S. District Court of Appeals denied their appeal for an emergency stay of relief.

The stay would have delayed the July 15 due date for the new royalties, which triple the rates for streaming music over the next three years. The court decision does not preclude the court from ultimately ruling in favor of the webcasters. The May appeal, filed by the Digital Media Association (DiMA), is still pending.

Webcasters claim the new rates are simply unaffordable for many Internet radio stations and will put a number of them out of business.

"DiMA members and all webcasters are disappointed by the court's decision and are now forced to make very difficult decisions about what music, if any, they are able to offer," Jonathan Potter, DiMA's executive director, said in a statement. "The result will certainly be fewer outlets for independent music, less diversity on the Internet airwaves and far fewer listening choices for consumers."

U.S. Rep Jay Inslee (D-Wash.), who has introduced legislation to vacate the March Copyright Royalty Board's decision, vowed in a statement to continue to push his bill.

"If Internet radio goes silent, I will fight to make sure the silence is brief. One thing is sure: After July 15, national pressure for a resolution of this travesty only will increase," Inslee said. "We are not going away."

Inslee's Internet Radio Equality Act (IREA) would set a 2006-2010 royalty rate at the same level currently paid by satellite radio services, which is 7.5 percent of revenues. The new royalty fees for Internet radio call for $.0008 per song streamed for 2006, $.0011 for 2007, $.0014 for 2008, $.0018 for 2009 and $.0019 for 2010. Most webcasters now pay a rate of $.0012 per stream.

The IREA has gained 128 co-sponsors since it was introduced in April. Similar legislation is pending in the Senate.

"We are disappointed that the court failed to acknowledge the irreparable and, quite frankly, devastating effect these new royalties will have on the Internet radio industry," Jake Ward, a spokesman for SaveNetRadio, said in a statement. "This is a setback, but it is certainly not the end of the road."

Ward told internetnews.com that SaveNetRadio would be rallying Internet radio stations and their listeners to "get the phones ringing on Capitol Hill today." The organization hopes to pressure Congress to step in and resolve the dispute between webcasters and SoundExchange, which collects the royalty rates for the music labels and artists.

"The court's failure to act has put the ball squarely in the hands of Congress, and members of Congress work for the people, many of whom enjoy net radio everyday," Ward said. "Congress has already received more than a half million messages in support of Internet radio and the IREA. In light of the court's decision, I would certainly expect that members in the House and Senate will hear from their constituents today."

A SoundExchange spokesman said Thursday morning the group had not read the one-line decision by the court but would issue a statement when it did.

Earlier this week, SoundExchange said negotiations over the new rates were ongoing. Since the new rates were announced, SoundExchange has offered several compromises to both small and large webcasters.

Under SoundExchange's latest proposal, small webcasters would continue to pay the same rates they have since 2002: royalty fees of 10 percent of all gross revenue up to $250,000 and 12 percent for all gross revenue above that amount. Small webcasters are defined as having revenues of $1.4 million or less.

For large webcasters like Rhapsody, Pandora, Live365, AOL and Yahoo, SoundExchange has proposed capping annual payments for each station streamed at $2,500. Originally, SoundExchange proposed a $500 fee per station, per year though 2008.