Internet Radio Loses Rate Hike Appeal

May 14 will be day the music dies on Internet radio. So say webcasters.

The gloomy pronouncement comes just one day after the U.S. Copyright Royalty Board upheld a March 1 decision to nearly triple the royalty rates for music played over Internet radio stations.

The three-judge panel denied motions by Internet radio stations and the Corporation for Public Broadcasting (CPB) for a rehearing on performance royalty rates from 2006 to 2010. The Royalty Board said none of the motions “made a sufficient showing of new evidence or clear error or manifest injustice that would warrant a rehearing.”

The Royalty Board also denied motions to stay the implementation of the new royalty rates until all legal appeals have been exhausted. “Congress determined that these rates would go into effect, notwithstanding any pending motions for rehearing,” the Royalty Board wrote in its decision.

Andi Sporkin, a spokesman for CPB, said in an e-mail to the next step for webcasters is likely to be a court challenge before the U.S. Court of Appeals.

“We have said all along that we would actively pursue [the case] in appeals court, and that we are speaking with members of Congress about this. So all that remains true,” Sporkin wrote in the e-mail.

According to the March ruling, commercial and larger non-commercial webcasters will pay a rate of $.0008 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 Royalty Board rates are retroactive to Jan. 1 of 2006 and payable on May 15 of this year. According to the newly formed SaveNetRadio coalition, the retroactive payments alone could bankrupt many Internet radio stations.

“This is just devastating,” said Maura Corbett, a spokesman for SaveNetRadio. “No one is saying artists shouldn’t be paid. They should. But, the playing field isn’t level since terrestrial radio stations don’t pay royalty rates.”

SoundExchange, which collects royalty rates for performing artists, hailed the decision as a victory for artists and music labels.

“We are gratified that the [Royalty Board] has upheld its decision,” Michael Huppe, SoundExchange’s general counsel, said in a statement. “With the resolution of these motions, it is time to move forward with business. It’s in everyone’s best interest to ensure a vibrant and thriving marketplace for Internet radio.”

In the same statement, the American Federation of Television and Radio Artists (AFTRA) also applauded the Royalty Board decision.

“Internet radio is growing and successful because fans want to listen to the music created by artists,” said Kim Roberts, AFTRA’s national executive director. “The [Royalty Board] decision recognizes that as these businesses grow, both featured and non-featured artists should be compensated at fair market rates for their contributions to growth of these companies.”

According to Arbitron and Bridge Ratings and Research, between 50 million and 70 million Americans a month listen to Internet radio. Bridge estimates that audience will double by 2010 and grow to nearly 200 monthly listeners by 2020.

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