• by Ken Liebeskind , June 10, 2002

Webcasters and members of Congress have teamed up to oppose the proposed royalty fees on Internet radio broadcasts and their efforts may be working. Late last month, the Librarian of Congress rejected the Copyright Arbitration Royalty Panel's royalty rate proposal. A final ruling is scheduled for June 20.

In February, CARP recommended rates of .14 cents per song per listener for Internet-only Webcasters and .07 cents per song per listener for broadcast radio simulcasts. The proposed rates riled the industry, which feared financial ruin, especially for the Internet only stations that would have to pay higher fees and hadn't been in business long enough to be able to afford them. The fact the fees are per song instead of a percentage of a company's revenue is another sticking point. A revenue based fee would be affordable for stations with low revenue, plus other industry fees paid to ASCAP and BMI songwriters are revenue based.

Last month, Webcasters held a day of silence to protest the fees and 20 members of the House of Representatives sent a letter to the Librarian of Congress stating that the rate proposal was "contrary to the intent of the DMCA (Digital Millennium Copyright Act) and Congress' policy not to stifle innovation."

What impact these efforts had on the Librarian of Congress' decision is debatable. The Librarian of Congress' office had no comment when MediaDailyNews called. "They can't act on anything other than the CARP proceeding," says Paul Maloney, editor of RAIN, an Internet radio newsletter published by Saveinternetradio.org. By law, the Librarian of Congress cannot consider public protest or the letter from Congress, but "Congress has said the DMCA was not intended to stop development of Internet radio and they may have followed that," says Richard Fusco, founder of Global New Media Consultations, a consulting company.

The next question is what will happen on June 20 when the Librarian of Congress will issue a final ruling. It's no longer a question of whether the original fees will be instated, because they've already been rejected, so "the decision could be a wide range of possibilities," Fusco says. "They could say the fees should be half as much, they could throw them out or they could say there should be a moratorium on fees for a few years." "There could be different plans for different Webcasters," Maloney says. "Different rates for non-commercial stations, educational stations, college stations and another commercial rate." They could also change the rate structure and make it revenue based. "Webcasters would prefer fees based on a portion of revenue, two or three percent," says Susan Pickering, executive director of the International Webcasting Association.

The June 20 decision is huge and will undoubtedly impact the future of Internet radio. Since it's so huge, there may be a lot going on behind the scenes. Fusco says large radio station groups might want to preserve the fees to eliminate Internet only Webcasters as a threat. Similarly, the largest Internet radio players, AOL, Yahoo and MSN might be in favor of the fees "to get the smaller guys out to get their audience numbers bigger for advertising revenue." The issue has also riled the music industry which is "shaking at its roots," Fusco says. The Recording Industry Association of America is the major player behind the fees, seeking to get them for performers. It has been forced to defend itself amidst public protest and continues to assert the fees are fair. Meanwhile, thousands of Webcasters are hoping for small or no fees so they can continue broadcasting. Stay tuned.