Webcasting Royalty Plan Due Out

Finally, after four years of negotiations to determine royalty rates for
Internet radio streams, the Library of Congress is set to announce a
statutory “sound recordings performance royalty” rate that settles the issue
once and for all.

On Thursday, Librarian of Congress James Billington will issue a rate
structure that puts an end to the Copyright Arbitration Royalty Panel (CARP)
process that caused a deep rift between the Webcasting lobby and the
Recording Industry Association of America (RIAA).

The rate, which will be determined by Register of Copyrights Marybeth Peters
and U.S. Copyright Office general counsel David Carson, will cover the
period from October 1998 through the end of 2002 and Webcasters believe
there are enough hints the new rate structure will work in their favor.

The first hint came last month when the Copyright Office rejected
the original CARP recommendation had fixed royalty fees for Web radio
stations at 14/100 of a cent per performance, retroactive to October 1998.

That rejection was seen as a clear indication that the Library of Congress
will dismiss the per-performance rate structure and implement a royalty rate
based on a percentage of revenue.

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 are miles apart on the fee structure, it
further complicates the issue.

Kurt Hanson, who has led the Save
Internet Radio campaign, believes the Library of Congress “fully
understands” the ramifications of a per-performance fee on Internet radio
sector.

“If they follow the precedent of composers’ royalty in the U.S. for the last
three decades or sound performance royalties for traditional broadcast radio
around the world, then they will have an option that is based on a
percentage of revenues. Ideally, we would like to see it set in the range
of 3-5 percent of revenues,” Hanson told internetnews.com.

He said a recent announcement
from the Copyright Office on what the reporting requirements are likely to
be was a sign Thursday’s final decision would be Webcaster-friendly.

“They seem to be taking into account the concerns of small- to mid sized
Webcaster and made it as simple as reasonably possible. I think that’s an
indication they are certainly understanding (our) concerns,” he said.

“Almost any royalty expressed as a percentage of revenues keeps the industry
from being bankrupted. If it gets into the double digits, you can expect
broadcasters might quit streaming and some Webcasters might choose to fold,”
Hanson added.

But, even if the percentage of revenue rate is set in the double digits,
Hanson said it “would not totally destroy the industry.”

However, if the Library of Congress opts to follow the CARP method of
setting a rate as a flat fee per song streamed (per listener), he argued
that the decision would effectively destroy the Internet-only radio
industry.

The RIAA has maintained a low public profile throughout the proceedings but,
based on statements when the CARP decision was rejected, it is clear the
Association was unhappy.

“The Librarian has rejected the arbitration panel’s determination, but we do
not know why or what decision the Librarian will ultimately make based on
the evidence presented,” said RIAA president Cary Sherman. “Since both
sides appealed the panel’s determination, anything is possible. We look
forward to the conclusion of this process on June 20th, and to the day when
artists and labels finally get paid for the use of their music.

SoundExchange, the RIAA-sponsored
outfit responsible for royalty collection, called for long-term “creative
solutions” between the recording industry and the Webcasters.

“Given the complexity of the issues, I am not surprised by the Librarian’s
decision. I remain confident that we can find creative solutions to enable
Webcasting to thrive while providing recording artists and those who invest
in sound recordings a fair and equitable royalty in return,” said John
Simson, executive director of SoundExchange.

“Over the past three years, Webcasters have paid for bandwidth, rent,
hardware, software and other business expenses. It is time that they finally
start to pay the Artists and record companies whose creative output is the
most important component of their business,” he added.