Battle Looms In US Over Royalty Fees For Internet Radio

By Dugie Standeford for Intellectual Property Watch
Webcasters across the United States fell silent on 26 June in an effort to influence the passage of legislation reversing royalty rate increases many say will kill radio delivered over the Internet. The “Internet Radio Equality Act,” introduced in the Senate and the House of Representatives, responds to a ruling by the US Copyright Royalty Board (CRB) that webcasters claim will raise payments for digital public performances of sound recordings by 300 percent to 1200 percent.

The bill has attracted strong interest in the House, and is the subject of a 27 June hearing by the Small Business Committee.

Under the 2 March CRB order, commercial Web radio companies will be charged a per play rate of $.0008 per song for 2006, $.0011 for 2007, $.0014 for 2008, $.0018 for 2009, and $.0019 for 2010, beginning 15 July and retroactive to January 2006. Non-commercial webcasters would pay an annual per-station or per-channel rate of $500 for digital audio transmissions of not more than 159,140 aggregate tuning hours (ATH), and commercial rates for anything over that cap.

(The US Copyright Office defines ATH as the total hours of programming transmitted during a reporting period to all listeners within the United States minus the actual running time of tracks for which the service directly obtained licenses or which do not require a license).

Webcasters, who had floated various permutations of revenue-based or flat-rate royalty assessments, were irate at the CRB’s choice of a per-performance fee. The Digital Media Association sought an emergency stay of the order from the District of Columbia Circuit Court of Appeals but is hoping Congress resolves the problem before then, it said. The SaveNetRadio campaign, a coalition of Internet radio listeners, music companies, artists and webcasters, was launched in April to lobby Congress.

The proposed legislation essentially orders the copyright royalty judges back to the drawing board. It sets transitional rates for commercial webcasters, for the five years from 1 January 2006, of $0.33 per hour of sound recordings transmitted to a single listener or 7.5 percent of a service’s revenues directly related to digital transmission of sound recordings. For non-commercial stations offering digital sound tracks, the rates are 1.05 times the amount they paid in 2005.

SoundExchange, which collects digital performance royalties for artists and record labels, offered in late May to extend the terms of the earlier Small Webcaster Settlement Act to small services. The 2002 law, which expired in 2005, set temporary below-market royalty rates for small Internet radio stations to give them time to build their businesses, SoundExchange said. The offer was driven by a congressional request, the organisation said. “No one is questioning the integrity of the CRB process,” General Counsel Michael Huppe said at the time.

The organisation is now in “active negotiations” with small and non-commercial webcasters, a SoundExchange spokesman said. The bills introduced in Congress not only attempt to vacate the CRB ruling but also roll back old rates by 75 percent, he said. Since 95 per cent of webcast royalties are paid by the 20 largest webcasters, “this amounts to a cash grab by BigNetRadio,” the spokesman said.

Categorising a national effort by webcasters of all sizes, models and genres to preserve not only their industry but their livelihoods as a cash grab is “disingenuous,” said SaveNetRadio spokesman Jake Ward. The organisation believes artists should be fairly compensated for their work, but Internet radio already pays the highest recording royalty rate of any medium, he said.

“Dead webcasters will pay no royalties and the tens of thousands of artists that depend on the ‘Net for airplay and promotional value will be left with nowhere to go” if Congress does not act, Ward said.

Anti-Piracy Enforcement Campaign

Another recent copyright-related development was the 14 June launch of the “Campaign to Protect America,” an effort by the US Chamber of Commerce and the Coalition Against Counterfeiting and Piracy (CACP) to help law enforcement better combat intellectual property violations.

The groups’ agenda includes boosting resources at the US Departments of Homeland Security and Justice; beefing up border enforcement; stiffening penalties; improving federal government coordination; reforming the civil and judicial process, and educating consumers, it said. The coalition wants customs and immigration agents, FBI agents and federal prosecutors specifically dedicated to handling intellectual property crimes, and designated offices created within Homeland Security and Justice to lead enforcement efforts.

Piracy caused $40 billion in software losses in 2006, while motion picture piracy cost US workers $5.5 billion in lost wages, Copyright Alliance Executive Director Patrick Ross said. Cooperation between rights holders and law enforcement such as that proposed by the CACP is critical to protecting domestic employment in the intellectual property sector, he said.

Dugie Standeford may be reached at info@ip-watch.ch.