Bill Could Keep Internet Radio on The Air

Webcasters found possible legislative help Thursday in their fight against a dramatic increase in music royalty rates, but they still have no solution for Internet radio’s most pressing problem: the bills are due on May 14.

Earlier this month, the U.S. Copyright Royalty Board (CRB) upheld a March 1 decision to nearly triple the royalty rates for music played over Internet radio stations, retroactive to January of last year. The first payments are due in three weeks.

Reps. Jay Inslee (D-Wash.) and Don Manzullo (R-Ill.) filed the Internet Radio Equality Act, which would vacate the CRB decision and apply the same royalty rate-setting standard to commercial Internet and satellite radio.

According to webcasters, the new rates will force them out of business.

“This titanic rate increase is simply untenable for many Internet radio broadcasters,” Inslee said in a statement. “There has to be a business model that allows creative webcasters to thrive, and the existing rule removes all the oxygen from this space.”

But the legislative process takes time, which is running out for webcasters.

“Webcasters face the decision as to whether to pay the royalties or not pay the royalties,” Jake Ward of the SaveNetRadio coalition told “If they don’t, they could get sued.”

The Corporation for Public Broadcasting (CPB) has already promised to press the issue in the courts if rate relief is not granted. “We have said all along that we would actively pursue [the case] in appeals court,” Andi Sporkin, a spokesman for CPB, said in an e-mail to earlier this month.

Ward added that it still was possible webcasters and SoundExchange, which negotiates and collects the royalty rates for the music industry, could reach a settlement over the rates. SoundExchange said last week it was “reaching out” to the webcasters.

“Our continued outreach reflects our long-standing position that these are two businesses — webcasting and creating music — that are joined at the hip and that need each other,” John Simson, executive director of SoundExchange, said in a statement. “We recognize that there may be certain needs and expectations, as expressed by webcasters in recent days, that might possibly be addressed through direct discussions.”

SoundExchange did not return calls for a comment.

Webcasters are also considering a “Day of Silence” on May 8 to underscore the issue for Internet radio listeners. The protest could take several forms, Ward said, with some stations “going dark” while others would play public service announcements all day about the royalty rate hike. Still others may host day-long discussions.

“The illogical and unrealistic royalty rates set by the CRB have placed the future of an entire industry in jeopardy,” Ward said in a statement praising the Inslee-Manzullo bill. “The Internet Radio Equality Act is the last best hope webcasters, artists and listeners have to keep the music playing.”

After more than a year of deliberations, the CRB in March raised the royalty rate for Internet radio to $.0008 per song played 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 changes amount to a 300 percent increase for large webcasters and as much as a 1,200 percent jump for smaller operations.

By contrast, commercial radio stations pay no royalties, and satellite radio has a rate of half of that paid by Internet radio. According to Nielsen Media Research, 70 million Americans listen to online radio every month.

“Our legislation overturns the huge rate increases and sets up a system that is fair to webcasters, Web users and the artists whose music we all enjoy,” Manzullo said. “The Internet has provided us with amazing opportunities to enjoy music, and this unfair action by the CRB threatens to take it all away.”

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