April 17, 2007 by Nick Farrell
Internet Radio broadcasting is history
THE SHORT ERA of small internet radio stations is over after the Copyright Royalty Board have given the thumbs up to new fees to broadcast copyrighted material.
The fee structure has been kept low for a number of years, as the music industry came to terms with the new Internet technology.
But last year a new fee structure was imposed which Internet broadcasters tried to oppose. Now the CRB has said that it will not rehear appeals from Interweb companies and is saying that all royalties will have to be collected by May.
The pay by song structure has been modified for two years to allow webcasters have to calculate fees by average listening hours. After next year they will have to pay on a per-song, per-listener basis.
Webcasters say that the sharply higher royalty fees will put them out of business. Mark Lam, the CEO of Live365 which aggregates audio streams from thousands of radio stations and other small webcasters, said that under the new royalty rules, "there was no industry." As it is most Internet broadcasters don't make much money.
April 16, 2007 On April 16, right in the midst of the NAB2007 broadcasters conference, the Copyright Royalty Board upheld its earlier decision to impose higher royalty rates on Web radio stations. The stations will have to cough up these royalty payments – 300% to 1,200% higher than the fees they are used to paying -- retroactively. Unless Congress gets involved, that will mean the death of many Web radio stations, whose revenues will fall short of these royalty payments.
The Death of Web Radio?
But larger companies not currently thought of as broadcasters will suffer as well: Today, the CRB clarified that its decision applies not only to Web-based radio stations, but also to any company broadcasting music over cellular networks. That means that its decision can be applied very broadly. In effect, the CRB has imposed high royalties, payable to a company formed by music labels, on everyone from Mercora, which allows users to download its radio-playing software onto smartphones for listening to Webcasts via cellular, to music services powered by wireless carriers themselves. Until now, these carriers have negotiated for royalty rates with individual content owners directly. These business arrangements have not been disclosed, but there is a chance that the telcos’ payments will now increase.
Now that the CRB decision affects not just the little guys – Webcasters – but also some of the telecom world’s giants, that makes me more sure than ever that Congress will have to get involved before the decision goes into effect May 15. Remember, Congress got involved in figuring out what fair and reasonable rates were the last time the royalty rates were renegotiated. Now, there are enough small and large Webcasters out there – wireless and Web-based -- to claim legislators' attention. Already, today, a number of broadcasters kicked off SaveNetRadio.org grassroots campaign. I wouldn’t be surprised if telcos join in this effort.
Sydney Morning Heraldby Nick Farrell
April 17, 2007
Copyright Royalty Board rejects appeals from Internet radio broadcasters
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, hailed the ruling in a statement and said it looked forward to working with Internet radio companies in order to ensure that the industry succeeds.
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.
Internet radio campaign: http://www.savenetradio.org
Blog by lawyer representing webcasters: http://www.broadcastlawblog.com
© 2006 AP DIGITAL
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