Internet Radio has stay of execution -- for now

May 21, 2002
The United States Copyright Office on Tuesday rejected an arbitration panel ruling on Webcasting royalty rates, a decision that brought smiles to the face of Internet radio executives nationwide.

In a brief note posted on its Web site, the Librarian of Congress rejected the recommendation by the Copyright Arbitration Royalty Panel (CARP) that would have set royalty fees at 14/100 of a cent per performance, a price tag denounced by Webcasters as prohibitive.

"The Register of Copyrights recommends, and the Librarian agrees, that the CARP's determination must be rejected. A final decision will be issued no later than June 20, 2002," the Copyright Office said.

"In accordance with 17 U.S.C. 802(f), the Librarian is given 90 days from date of delivery of a CARP report to review the determination and issue a decision setting forth the final royalty fee and terms of payment. However, if the Librarian rejects the CARP's determination, section 802(f) provides an additional 30 days for the Librarian to render his final determination," it added.

Kurt Hanson, who led a grassroots campaign to have the CARP recommendation thrown out, was positively giddy in reacting to Tuesday's rejection.

"This was what Webcasters had hoped for when we originally objected to the CARP recommendation. I think the decision (on a royalty rate structure) is in good hands. I think they understand the legislative intent of a statutory royalty, which is to encourage the growth and diversity of the industry," Hanson said.

"I have confidence that whatever mechanism they use, it won't destroy the industry," he added.

For its part, the Recording Industry Association of America (RIIA) said today's rejection should not be automatically seen as an automatic win for Webcasters.

"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," Sherman added.

SoundExchange, the RIAA-run group responsible for royalty collection, seemed more resigned to the fact the structure would be modified in favor of the Webcasters.

A statement from SoundExchange executive director John Simson was suggesting 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," Samson said.

"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.

Samson called for the two sides to find "long term solutions" but did not address the potential of a reduced rate structure from the copyright office.

Regardless of the RIAA spin, Tuesday's landmark decision is seen as a massive win for the Webcasting community, which spent the last few months in a bitter campaign to have the CARP ruling thrown out.

Earlier this month, the anti-CARP lobby took its campaign to Washington to protest the royalty rate structure they believe would have "effectively bankrupt" the entire sector.

The original CARP recommendation had fixed royalty fees for Web radio stations at 14/100 of a cent per performance, retroactive to October 1998.

Wow, I thought republicans were in favor? Every internet radio broadcast I ever listened too still had the commercials in it? So what if the demographics are of target, thats not the advertisers demise, it's up to the radio stations too adapt and form solutions to charge more money. Right? So what's the damn fuss over anyway...

Some radio stations have a contract with ASCAP and BMI which is called a Per-Program contract. These are usually talk stations which do not play music. This sort of contract only costs the stations a small set fee each month. But if they play any songs they have to pay a fee for each song. The cost can be as much as several hundred dollars for each song in morning drive. Needless to say, stations with this type of contract do not play any music.

Why should a no-music radio station have to pay boo to ASCAP or BMI?

"...so Rush is actually funneling his money to NARAL and Planned Parenthood."

Actually, Rush is meeting his legal obligations. Then, WB and Hynde are free to do as they wish with what is their money.

It's the way things work in US of A.

To be legal there's a middle layer that gets paid by the record companies which then pays the radio stations to play certain music libraries. A record company can't pay for a specific song to be played but pay all the time for airtime for their libraries. Most radio station revenue comes from this arrangement, not from advertising as the radio stations claim. They want us believing the crap they play is popular, and don't want us to know they are getting paid to fill our heads with commercial music.

You have no idea what you are talking about.

Why should a no-music radio station have to pay boo to ASCAP or BMI?

Because it is the law. They have to. Just as it will be the law that Internet stations will have to pay. All that will have to be determined is how much.

I may be wrong, but I don't think bumper music is subject to royaly rules. I forgot what the term to describe it is (the prof who taught my Broadcast Management class in college will kill me!), but if the selection is less than a specified time (again, the exact time allowed escapes me), it's considered something akin to public domain. The various music stations I've worked at in the past have had to submit logs to ASCAP, but never the newstalkers.

Also, welcome aboard. How you liking Freep so far?

Scouts Out! Cavalry Ho!

"Actually, Rush is meeting his legal obligations. Then, WB and Hynde are free to do as they wish with what is their money. It's the way things work in US of A."

Excellent comment okie01!

I once worked at a talk radio station and they paid ASCAP "licensing" fees. I was told it covered bumper music and music used in commercials.

"I was told it covered bumper music and music used in commercials."

Correct. Even the "generic" music recorded only for commercial beds that are employed in the production of local advertiser spots involve licensing fees to the musicians/composers/producers involved.

You have no idea what you are talking about.

Here's an enlightening article written by someone in the music business known for her bluntness. If I'm wrong, care to explain this quote:

"The record company spends $300,000 on independent radio promotion. You have to pay independent promotion to get your song on the radio; independent promotion is a system where the record companies use middlemen so they can pretend not to know that radio stations -- the unified broadcast system -- are getting paid to play their records."

Here's an enlightening article written by someone in the music business known for her bluntness. If I'm wrong, care to explain this quote?

(From Courtney Love)"The record company spends $300,000 on independent radio promotion. You have to pay independent promotion to get your song on the radio; independent promotion is a system where the record companies use middlemen so they can pretend not to know that radio stations -- the unified broadcast system -- are getting paid to play their record

Some of the record companies employ independent promoters to promote their records. These promoters travel to the top radio stations and try to persuade the Program Directors and Music Directors to add their records. Yes, sometimes money changes hands from the promoters to the PD's and MD's. But that is against the law. The radio station is not going to risk their license by accepting the money. Every radio station employee has to sign a "Payola-Plugola" form every year stating that they have not accepted any money or services in this way. If they do and are caught, the station could lose it's license. I'm sure it sometimes happens, but there is no payments made to radio stations for play of records.

You've been fooled. Commercial music radio stations make most of their money from paying record companies, not from playing commercials. The music is the main commercial. You hear the paid advertisement on the radio, and if you like it you buy the CD. Why shouldn't the radio station get paid? They are generating CD sales for the record companies.

Radio stations make their employees sign those payola agreements every year because accepting money to play a song would be employee theft. The radio station deserves the money, not the employee. There is a law saying radio stations can't be paid to play a specific song, hence the middleman industry, which asks the radio stations to randomly play from libraries, which is legal.

Internet broadcasting of music is free advertising to the record companies. The big record companies are being cut throat in letting these businesses grow then stealing the businesses away via invoking their copyright. They are trying to choke off alternatives to the commercial music since it eats into sales. It's all mafia-like, and their behavior does not benefit any musicians.

I hope you're being facetious. If not, you're incredibly mis-informed.

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