Web Radio to Battle New Royalty Ruling

Earlier this month, the Copyright Royalty Board, the oversight body created by Congress to settle royalty disputes in the music business, issued a higher fee structure for web music broadcasts, and web radio executives plan to fight it.

For small, publicly funded stations and web radio startups, the new structure could mean the end of their business, writes CNN.com. Roger LeMay, general manager of WXPN-FM, a web-based radio station, says that his station could be paying about $1 million a year in royalties under the new ruling.

National Public Radio spokeswoman Andi Sporkin said it would cost stations 20 to 30 times what they are paying now in royalties. To fight the new fees, NPR officials will file a petition for reconsideration. If that fails, NPR has said that it will bring whatever legal challenges necessary to overturn the decision.

Web broadcasters want the royalty fees that were established in 2002, when the Copyright Arbitration Royalty Panel set them at 0.07 cents per performance for radio signals that also aired online, and at 0.14 cents for performance for internet-only broadcasts.

Under the new guidelines, which would be set retroactively for 2006, the fees would be set at 0.08 cents per performance and would climb to 0.19 cents by 2010.

Public broadcasters would pay $500 per month, but only for a set number of listening hours, which LeMay says his station exceeds by nearly four times. Beyond that, the station must pay commercial fees.

Adam Jaffe, dean of arts and sciences at Brandeis University, said the underlying logic behind the decision, which likened listening to a song on an internet radio stream to buying a CD, was faulty. For radio play, stations pay royalty fees only to composers and publishers, not to artists and record labels.

“The RIAA (Recording Industry Association of America) and the record companies basically want to make the argument that this web-based streaming is like selling CDs or downloads of MP3 files and they should be compensated at the same rate. I think that’s the wrong way to look at it,” Jaffe is quoted as saying.
The music industry sees it as much like what happened when webcasting rates first took effect in 2002.
“The webcasters then were saying that they were going out of business, and I think instead what you’ve seen over the last five years has been an explosion of webcasters who have come online. You’ve seen a tremendous jump in both listenership and also in revenue,” said Willem Dicke, spokesman for SoundExchange, a performance rights organizations that collects royalty payments for entertainers.

Dicke pointed out that web radio revenues have increased 10-fold over the past four years. With the new CRB ruling, SoundExchange stands to profit $2.3 billion annually in royalties come 2008.