By SETH SUTEL, AP Business Writer
Internet radio broadcasters were dealt a setback Monday when a panel
of copyright judges threw out requests to reconsider a ruling that
hiked the royalties they must pay to record companies and artists.
A broad group of public and private broadcasters, including radio
stations, small startup companies, National Public Radio and major
online sites like Yahoo Inc. and Time Warner Inc.'s AOL, had objected
to the new royalties set March 2, saying they would force a drastic
cutback in services that are now enjoyed by some 50 million people.
In the latest ruling, the Copyright Royalty Board judges denied all
motions for rehearing and also declined to postpone a May 15 deadline
by which the new royalties will have to be collected.
However, they did grant leniency on one point, allowing the webcasters
to calculate fees by average listening hours, as they had been, as
opposed to the new system of charging a royalty each time every song
is heard by an online listener. That exemption counts for last year
and this year. After that, the new per-song, per-listener fee
structure goes into effect.
Many webcasters say the sharply higher royalty fees will put them out
of business. Talk of the ruling dominated a one-day meeting of
Internet radio broadcasters being held in Las Vegas alongside the
annual conference of the National Association of Broadcasters, a group
representing local radio and TV stations.
N. Mark Lam, the CEO of Live365 Inc., a privately held company that
aggregates audio streams from thousands of radio stations and other
small webcasters, said that under the new royalty rules, "there is no
industry."
Lam, who joined the venture capital-backed company about two years
ago, said Live365 just barely broke even last year, and had about 4.5
million unique listeners every month.
Also on Monday, several Internet radio broadcasters announced a
campaign to raise awareness of the issue and encourage listeners to
write to their representatives in Congress.
Small broadcasters have received relief from Congress in the past,
benefiting from a law passed five years ago that gave them a break on
royalty rates. The legislation allowed them to pay about 12 percent of
their revenues instead of having to calculate per-song, per-hour rates
like larger companies had to.
David Oxenford, a lawyer representing several webcasters, said the
next step was likely an appeal to the U.S. Court of Appeals for the
District of Columbia Circuit, but he noted that process could take at
least a year. Meanwhile, he said, the prospects of successfully
getting a court to block the decision of the royalty board judges is
slim.
SoundExchange, a nonprofit group that collects the online royalties
from webcasters and distributes them to record labels and artists,
said all parties had ample opportunity to be heard by the
board. SoundExchange has said it wants to see Internet radio thrive.
Jonathan Potter, the head of the Digital Media Association, which
represents several large webcasters including Yahoo, AOL and Microsoft
Corp.'s MSN network, said his group was not currently in talks with
SoundExchange but may be soon. He said his group and other webcasters
would be turning to Congress, where he said he sees "a lot of
legislative support."
The royalties in question only cover digital transmissions of music,
and don't apply to terrestrial radio stations, as traditional radio
play is seen as a benefit for record labels by promoting sales of
recorded music. Both digital broadcasters and regular radio stations
pay a separate royalty to the publishers and composers of music.
On the Net:
SoundExchange: http://www.soundexchange.com/
Internet radio campaign: http://www.savenetradio.org
Blog by lawyer representing webcasters: http://www.broadcastlawblog.com/
Copyright 2007 The Associated Press.
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Seth Sutel, AP (ap@telecom-digest.org)