Is Peace Breaking Out In US Internet Radio Royalty Rates Battle?

By Dugie Standeford for Intellectual Property Watch
A Saturday agreement between US webcasters and SoundExchange, which collects digital royalties for artists and record labels, appears to have cooled some of the heat surrounding a 2 March decision by the US Copyright Royalty Board (CRB) setting new rates for Internet radio performances.

With the new rates scheduled to come into effect 15 July, the Digital Media Association (DiMA) said Saturday that it is prepared to accept an offer floated by SoundExchange at a roundtable last week with US House of Representatives Telecom and Internet Subcommittee Chairman Ed Markey (a Massachusetts Democrat). Under the agreement, the annual minimum statutory license fee for the 2006-2010 license term for commercial webcasters not covered by a “small webcaster” license is capped at $500 per channel subject to an annual cap of $50,000 per license, DiMA said. Webcasters have claimed the CRB’s 2 March decision would raise payments by as much as 1200 percent. (IPW, Copyright Policy, 26 June 2007).

For its part, DiMA and its members agreed to revamp their statutory royalty reporting schemes to enable all webcasters to report uniformly so that royalties can be distributed more efficiently and accurately. Webcasters also said they would investigate the prevalence of “stream-ripping” – where Internet radio users turn performances into digital music libraries – as well as potential technologies record companies or webcasters might use to limit or end the activity.

SoundExchange expects large commercial webcasters such as Yahoo! and AOL to pay the new rates beginning 15 July, Executive Director John Simson said. The organisation has been talking with small and non-commercial webcasters about royalty rates and would continue to do so, it said. DiMA Executive Directive Jonathan Potter said Saturday he looked forward to a 17-18 July meeting in New York City to continue negotiations. “All six major DiMA webcasters are committed to attend the meeting,” he wrote Simson.

The agreement follows the introduction last week, by leaders of the US House of Representatives Small Business Committee, of a measure to delay imposition of the new rates for 60 days, until 13 September. That move came after 11 July ruling by the District of Columbia Court of Appeals rejecting calls for a stay of the CRB order. Although the court declined to issue an emergency stay of the rates, an appeal on the merits of the CRB decision is pending.

Potter voiced disappointment over the appeals court’s decision at the time, but said it is “hopeful that Congress will take steps to ensure that Internet radio is not silenced.” SoundExchange’s Simson, however, said it “vividly demonstrates that the Copyright Royalty Judges got it right when they set royalty rates and terms for the use of music on Internet radio.”

There are bills pending in the House of Representatives and the Senate to reverse the royalty rate increases. The Senate version has so far garnered five cosponsors, the House 134. Potter said his organisation appreciated the action, but agreed that “negotiation is the preferred alternative.”

While webcasters argue over what fees to pay for digital performance, MusicFIRST (Fairness in Radio Starting Today) last Friday renewed its push for royalties for music played on AM and FM radio stations. In Frequently Asked Questions on its website, the organisation, which launched in June, said existing US law grants artists a digital performance right in their recordings only when they are played on satellite radio, cable services or Internet radio. “Corporate Radio” should play by the same rules as other music platforms, it said.

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