Webcasters Assail Fee Decision

Internet radio took a tough punch yesterday when the Library of Congress finally set Webcasting royalty rates. It cut the rates that had been proposed by the Copyright Arbitration Royalty Panel for Internet-only radio and left the rates for terrestrial radio stations intact.

The new rate is 0.07 cents per-performance for both, half of the 0.14 cents that had been proposed by CARP for Internet-only radio, which was rejected by the Librarian in March. "The Librarian has abandoned CARP's two-tiered rate structure and decided that the 0.07 cents rate will apply to both types of transmission," yesterday's statement from the Library of Congress, part of the U.S. Copyright Office, said.

The decision was slammed by Internet-only Webcasters, who still feel the rates are too high. "It will put thousands of small Webcasters out of business," according to a statement released last night by Soma FM, an Internet-only station. It estimates it will have to pay more than $15,000 per month or $7.69 per listener, a fee it can't afford. "Internet radio is being taken away from the public and being given to the large media companies who can afford to pay the fees," it said.

But the decision doesn't just hurt Internet-only Webcasters. A report last night said Entercom, a chain of terrestrial radio stations, pulled its streams in response to the Librarian's decision. John Donlevie, Entercom's executive vice president, confirmed the report, saying the fees were "a signficant factor" in the company's decision. "It's a very complicated equation with the uncertainty and cost of the proceedings," he says. The situation is reminiscent of last year, when many Internet radio stations stopped broadcasting in response to the imposition of American Federation of Television and Radio Artists fees, payable to radio talent whose terrestrial commercials were rebroadcast online.

Webcasters had called for rates that would be based on a percentage of revenue rather than per-performance, but the Librarian refused, in part because "many Webcasters are currently generating very little revenue. A percentage of revenue rate would require copyright owners to allow extensive use of their property with little or no compensation."

The Librarian also established Sept. 1, 2002 as the effective date of the rates. Royalty payments must be made by then, with additional payments for prior Webcasting payable by Oct. 20, 2002. Fees are due for all Webcasts after Oct. 28, 1998, when the Digital Millennium Copyright Act was signed.

The imposition of the fees could be a death blow to Internet radio, but the situation is far from settled. Yesterday, U.S. Reps Jay Inslee (D-WA) and Rick Boucher (D-VA) criticized the decision, saying "it will lead to the elimination of hundreds of small businesses and does not provide a viable model to serve both the Internet radio industry and recording artists." The Congressmen say they are considering legislative action that could overturn or change the rate structure.

Indeed, there has been much talk in Washington about CARP reform, with Congress holding a recent hearing to debate the issue. Since 1993, the Librarian of Congress has had the power to appoint CARP panels to resolve disputes over copyright issues. But CARP's rate setting standards, which were used to determine the rates for Internet transmissions, have been attacked.

In the meantime, Webcasters will continue to fight back. Soma FM called on its listeners to continue their protests and The International Webcasting Association said it will "renew our efforts in support of our members and the Webcasting industry in search for a viable solution."

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