Update On The Broadcast Copyright Front
By Steve Harvey

Thanks to recent legislation, the legalities of webcasting are getting a lot more complicated

You can be sitting at a computer anywhere in the world and listen to a live broadcast from a radio station anywhere in the world with just a few clicks of the mouse. But your favorite radio station on the Internet may be going away soon, if it hasn’t already.

Many politicians appear to equate digital music over the Internet with what might be considered the less legitimate means of delivery. It’s a hot-button issue that, with the highprofile legal battles involving Napster and its peer-to-peer file-sharing scheme, has not helped the perception that “music” and “Internet” used together means somebody is not getting compensated somewhere.

WHERE IT STARTED

In October 1998, the passing of the Digital Millennium Copyright Act (DMCA) set in motion a chain of events that now threatens the continued existence of many webcasters and the livelihood of many musicians. In amending U.S. law to bring it into line with international copyright treaties, the DMCA attached new rights to the digital performance of sound recordings. Those rights greatly favored the record labels, especially the “Big Five” multinational conglomerates who, represented by the Recording Industry Association of America (RIAA), fought their corner hard and caught webcasters napping.

As a result, those five label groups, partly in response to the proliferation of digital copies of copyrighted works that were considered to adversely affect retail sales of CDs and other media, were granted the right to levy royalties for copyrighted music played via digital media. The law requires Internet-only webcasters, as well as webcasting broadcasters, to acquire compulsory statutory licenses in order to stream music over the Internet. Complex rules and regulations were attached to these licenses. And notably, the royalty rates were held in abeyance pending industry-wide negotiations.

That’s where things stood until February 2002, when an arbitration body put forward a recommendation that a royalty rate of 14/100ths of a cent per listener per song be levied on Internet-only broadcasters. The U.S. Copyright Office, in accordance with the provisions of the DMCA, established that body known as the Copyright Royalty Arbitration Panel, or ‘CARP’ for short (although, if abbreviated accurately, the acronym would really be ‘CRAP’ - Editor). The panel’s recommendation was subject to the final approval of the Librarian of Congress.

The RIAA had initially proposed a royalty rate of 15 percent of gross revenue. Webcasters countered with a rate closer to the three percent fee that is paid to composers by over-the-air radio stations. The CARP ruling also recommended rates of 7/100ths of a cent for commercial radio station simulcasts and 2/100ths of a cent for non-commercial station simulcasts.

A few months later, the Librarian of Congress and the U.S. Copyright Office rejected this proposal, cutting in half the fees proposed by the CARP. The Librarian stipulated that webcasters must pay the record labels 7/100ths of a cent per song played, whether for Internet-only or simulcast radio transmissions. A fee of 2/100ths of a cent was to be levied on archived retransmissions.

But the big problem all along was that the first payment, due October 20, 2002, was to cover the period since the passing of the DCMA. For many small webcasters, this initial fee for music played since October 1998, based on the royalty rates proposed, was likely to put them out of business. Unable or unwilling to come up with sufficient funds for the retroactive payments, a good number of conventional broadcasters ceased webcasting.

Then it really got fun. Enter the lawyers, politicians, lobbyists... But broadcast webcasters were once again missing in action.

GETTING SQUEEZED

The start of January 2003 saw the publishing into law of HR 5469, a measure from the U.S. House of Representatives known as the Small Webcaster Settlement Act (SWSA), which had evolved out of the Small Webcasters Amendments Act (SWAA). That latter bill was introduced by House Judiciary Committee chairman Rep. James Sensenbrenner (R-WI) as the Relief for Small-Business Webcasters bill, which proposed a six-month stay on the Librarian’s June decision to allow further negotiation. Sen-senbrenner had taken his lead from legislation proposed by U.S. Reps. Jay Inslee (DWA), George Nethercutt (R-WA) and Rick Boucher (D-VA) in their Internet Radio Fairness Act, which sought to bring the labels and Internet broadcasters back to the negotiation table.

The SWAA, incorporating a brokered agreement between small webcasters and the record industry, passed on a voice vote in the House on October 7, 2002, but was blocked in the Senate by Senator Jesse Helms (R-NC). According to reports, Helms felt that the SWAA was not in the interests of all webcasters. Helms’ staff called all parties into negotiations and emerged with the final bill, which passed both Houses in November.

The new measure’s terms allow eligible small webcasters to obtain a license to stream copyrighted music based on paying a percentage of revenues or expenses, rather than the per performance, per listener model originally proposed. The new royalty terms stipulate that webcasters with annual revenues under $1.25 million may choose to pay eight percent of revenue or five percent of expenses, whichever is higher, for the period retroactive to October 1998. For 2003 and 2004, going forward, small webcasters may pay 10 percent of the first $250,000 in revenue, then 12 percent of additional revenue, or seven percent of expenses, whichever is higher.

But the law differentiates between Internet-only webcasters and broadcasters streaming their programming. As Jennifer Long, director of Aritaur Communications, Inc., which owns and operates WMVY/Martha’s Vineyard and mvyradio.com, observes, “It was so interesting to see how the small commercial Internetonly webcasters really rolled up their sleeves and got involved in creating legislation that allowed them to do what they needed to do.”

In contrast, broadcast webcasters, she says, “took a look at the fees and, instead of trying to negotiate a better structure, backed off, turned off their streams and decided to wait until it gets fixed.” Consequently, the new legislation imposes a double handicap on broadcast webcasters, who must pay based on the per performance, per listener model. “Internet-only commercial webcasters are no longer paying based on how many listeners they have, so growing an audience is not an expense to them. Every time I add a listener, I add expense. And they don’t have to incur that expense, so they win twice,” Long says.

IS IT FAIR?

With a new CARP coming up to discuss royalty rates for the future, Long is trying to get broadcast webcasters to band together and fight for their cause.

She and other broadcast webcasters are somewhat critical of the industry’s trade organization, the NAB (National Association of Broadcasters), for not helping more. The NAB says that’s because it’s fighting the fundamental issue, not just the particulars. Dennis Wharton, senior vice president of corporate communications for the NAB says, “We have put our eggs in one basket. We sued against the Copyright Office to overturn an interpretation they made that was requested by the recording industry and appealed the decision of the Copyright Office to a federal judge who ruled against us. We took it to the Fourth Circuit Court of Appeal. The oral arguments have been heard and we’re awaiting the decision by the appellate court.”

The suit goes to the heart of the matter, which is the fairness of the imposition of any levies on webcasting broadcasters. “We already pay about $300 million a year to organizations like ASCAP and BMI to compensate songwriters for their work. The recording industry now wants to ‘double-dip’ and create a new revenue stream off the backs of radio broadcasters who we think deliver hundreds of millions in revenue to those record companies through the airplay of music.”

As it now stands, the law makes it nearly impossible for webcasters to grow, since once the company gets to a certain size and revenues exceed the amount stipulated in the legislation, a higher royalty rate kicks in. That effectively caps the size of the business, critics claim.

Record labels pay a lot of money in marketing to get records played on over-the-air radio. Webcasting insiders claim that the new legislation is payback. “The record companies have a long-standing grudge over broadcasters not having to pay these type of performance royalties for their AM and FM broadcasts, based on the argument that their broadcasts provide significant promotional value to copyright holders,” explains Kevin Shively, business and web development manager for Beethoven.com.

The RIAA claims that Internetonly stations do not provide that same promotion, he says. “That doesn’t make much sense if it’s a broadcaster streaming their content if the same content has promotional value over the airwaves.” Many artists are equally unhappy. In a commentary piece recently appearing in the Los Angeles Times, singer/ songwriter Janis Ian points to the value of the Internet to artists outside the mainstream. She notes a recent ruling in favor of the RIAA by the U.S. District Court for the District of Columbia, which states that anyone suspected of downloading so-called ‘infringing’ files on the Internet could be sued. “No evidence is required,” she states. “An accuser fills out a form for a court clerk and the machinery is set in motion.”

The Internet may be one of the few places where an artist’s work can be heard, whether through downloadable files or streaming. “The Internet means exposure, and these days, unless you’re in the Top 40, you’re not getting on the radio,” Ian says. “With the court’s decision, the RIAA didn’t just defeat Verizon, the Internet service provider that the RIAA sued. It damaged the viability of recording artists who don’t conform to the mainstream musical tastes of the moment.”

Expect to read more in the press over the coming months as webcasters duke it out with the labels. It’s not clear whether or not you will hear her streaming over the Internet, but the fat lady has not yet sung.

Steve Harvey serves as LSI’s broadcast sound editor in addition to covering all aspects of the audio business. He can be reached at sharvey@livesoundint.com.