Webcasting Royalty Rates Sliced in Half

The Library of Congress Thursday slashed the Copyright Arbitration
Royalty Panel (CARP), cutting Webcasting royalty rates by half, setting the
per-performance fee at 0.07 cents per performance.

In a landmark decision four years in the making, the Copyright Office said
it would abandon the recommendation by CARP for a two-tiered rate structure
of 0.14 cents per performance for Internet-only retransmissions and 0.07
cents for retransmissions of AM/FM radio broadcasts.

Instead the Copyright Office Librarian ruled
that the rate of 0.07 cents would be implemented for both types of

“Some of the rates for noncommercial broadcasters have also been decreased,
and the fee Webcasters and broadcasters must pay for the making of ephemeral
recordings has been reduced from 9 percent of the performance fees to 8.8 percent. The
minimum payment for business establishment services was increased to
$10,000,” the Copyright Office ruled.

Immediately after the ruling was posted late Thursday, Internet radio
broadcasters slammed the decision, arguing the 0.07 cents per performance
(per listener) fee would further strangle the streaming media sector, which
is already struggling though a tough advertising market.

“This is disappointing because it is still about 100 percent of revenues for
most Webcasters,” said Kurt Hanson moments after seeing the Copyright Office

“The Librarian was probably constrained by the instructions from Congress
which was to base a decision on marketplace deals, of which there was only
one,” Hanson told internetnews.com, referring to a deal inked in 2000
between the Recording Industry Association of America (RIAA) and Yahoo
that set a benchmark for Web radio royalty payments.

“This decision isn’t based on fairness,” Hanson declared.

According to the ruling, the Copyright Office accepted the CARP’s conclusion
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.”

Despite that acceptance, the Librarian ruled that CARP “misinterpreted”
some aspects of the RIAA/Yahoo! agreement. “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,” according to
the decision.

In fact, the Librarian said both the broadcasters and RIAA agree that there
was no evidence in the record to support the conclusion that RIAA and Yahoo!
considered and made adjustments for promotional value for radio

“The Librarian agreed with the Register of Copyrights that the CARP’s
conclusion about promotional value was arbitrary and was not supported by
the evidence in the record, which provided no basis for concluding that
radio retransmissions provide a promotional value that Internet-only
transmissions do not provide,” it added.

The Copyright Office ruling ends four years of bickering and testy
negotiations to determine royalty rates for Internet radio streams and it is
sure to further deepen the rift between the vocal
Webcasting lobby
and the RIAA.

Officials from RIAA could not be reached for comment late Thursday but it is
known the Association was also critical of the earlier CARP ruling, claiming
that the 0.14 cents per performance rate was too little.

The Copyright Office had earlier rejected
the original CARP recommendation, which is retroactive to October 1998,
raising hopes among Webcasters that the per-performance rate structure would
be tossed out and a rate based on a percentage of revenue would be

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 were miles apart on the fee structure,
it further complicated the issue.

* For extensive coverage of the CARP rate structure controversy, click here.

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