The Royal Storm

The Internet radio royalty debate gathers steam on both sides with Netcasters and record labels gearing up for a battle that will set copyright fees for years to come.

To be sure, the Copyright Royalty Board’s new rates for Internet radio represent a hefty increase over years past, when Netcasters paid fees based on income. The new rates call for a pay-per-play listener situation – .11 of a cent for each song played this year, rising to .19 of a cent by 2010.

The new rates were originally to take effect earlier this year. However, after a panel of copyright judges denied a request that the Copyright Royalty Board reconsider the rate increase, the same panel postponed the date to May 15th. Recently that date was pushed to July 15th.

Netcasters call the new rates a death knell for Internet radio. Claiming the hike represents a markup of 300 to 1,200 percent, Internet broadcasters are predicting the new pricing system will quickly put all but the largest of companies out of business.

Now Congress has gotten into the act, with almost identical bills in the House and Senate. If passed and signed into law by President Bush, the bill will not only flush the new rates, but also set fees for Internet radio that are close if not identical to amounts now paid by satellite radio.

Called the "Internet Radio Equality Act," or "IREA" for acronym fans, the bill was introduced in the House of Representatives last month by Jay Inslee (D-WA) and Donald Manzullo (R-IL). One week later, Senators Sam Brownback (R-KS) and Ron Wyden (D-OR) co-sponsored the bill in the Senate.

"I am alarmed by the recent Copyright Royalty Board decision and the effect it will have on Internet radio – especially small Webcasters with limited revenue streams," Brownback said. "I am hopeful that with this bipartisan legislation Internet radio will continue to flourish."

SoundExchange, which collects online royalties, was hardly impressed by either House’s legislative efforts. As soon as IREA was introduced in the Senate, SoundExchange issued a retaliatory statement.

"In a blatant attempt to strip artists and record labels of their hard-won royalties for the use of their sound recordings on Internet radio," stated the press release, "proposed legislation in the U.S. Senate would not only invalidate the March 2, 2007 ruling of the Copyright Royalty Board (CRB), it would roll back by 70 percent pre-decision rates already paid by Webcasters."

But SoundExchange isn’t the only organization playing the press release game. In fact, no matter on which side one sits on in the Internet radio royalty debate, there’s plenty of chatter from people and organizations supporting or condemning the new fees.

"Since the CRB’s ruling, Internet radio listeners, Webcasters and artists they promote have joined together to urge Congress to prevent this vibrant industry from going silent on July 15th," said Jake Ward, a representative for SaveNetRadio. "On behalf of Internet radio’s 70 million monthly listeners, thousands of Webcasters, and the incredible diversity of talented artists it supports, we commend Senators Wyden and Brownback for their understanding of Internet radio’s importance and for their leadership in taking steps needed to save it."

SaveNetRadio describes itself as a "national coalition of Webcasters, recording artists, listeners and record labels." While most Webcasters and listeners are definitely in that organization’s corner, a closer look at the debate will find artists and labels on both sides of the issue.

For example, the Recording Artists’ Coalition, which isn’t exactly a fan of recording industry business practices, has come out in favor of the new rates.

"AOL, Yahoo, Microsoft and other big corporations are aggressively trying to cut Webcasting royalties to artists and labels by 70 percent," says the RAC on its Web page. "That means not only gutting the recent decision by the Copyright Royalty Board that set rates at fair market value, but rolling back rates already paid by Webcasters."

The RAC then goes on to slam the SaveNetRadio organization.

"Although the organization claims to represent artists, independent labels and small Webcasters, it is in fact funded by the big Webcasters, which they have admitted to publicly."

The "big Webcasters" reference is not an exclusive remark made by the RAC, but instead has been one of SoundExchange’s constant talking points.

"It just goes to show that big corporate Webcasters will go to any length to protect their outsized profits and unfairly low artists’ payments," said SoundExchange executive director John Simson in an April 30th written statement. "Using misinformation and blatantly false statistics, they are trying to recruit small Webcasters and even some artists to front for them, but their secret is out."

Whether "their secret is out" is debatable, for organizations opposing the new rates have not exactly been shy in announcing their backers, and Webcasters big and small have a stake in the new royalty fees. Every time SoundExchange refers to the lower rates proposed by the Internet Radio Equality Act as a "windfall" for major corporations, there’s someone on the other side predicting the "death of an industry" if the Copyright Royalty Board’s decision becomes the final say on the matter.

But in the end someone’s gotta give. Even if it’s .11 of a cent per song per person.


Radio Daze

While SoundExchange fights for higher Netcasting rates, there are rumblings that the recording industry is pushing for the same rates to be applied to terrestrial radio.

The recording industry has been out of the loop when it comes to radio, which pays fees to publishers and songwriters but zip to labels. It’s always been a quid pro quo situation for both sides, an arrangement where the stations get music to play while the labels get free promotion.

The National Association of Broadcasters isn’t wasting time and is already fighting any proposal to levy a "performance tax" on its members as the price of playing music. The NAB recently posted a form letter on its Web site for people wanting to urge senators to oppose the creation of a "performance tax" for broadcasters.

"Radio has prospered with the use of recorded music, and record labels and performers have benefitted from airplay and other promotional activities of local broadcasters," states the letter. "From this free airplay, the recording industry enjoys increased popularity, visibility and record sales."

Radio stations not paying labels for music has long been a sore point for the recording industry. But when one considers the payola scandals of the last 40-plus years, it’s difficult to ignore the irony that an industry that has, at times, illegally paid stations for air play might find itself in the position to legally charge those stations for the same action.



Online retailer Amazon will launch a digital music store later this year featuring MP3 downloads free of digital rights management technology.

Although Amazon is boasting that its new online music store will feature DRM-free music from more than 12,000 labels, so far only one major – EMI – has signed on for the action.

But that shouldn’t come as a surprise since EMI made news earlier this year when announcing its deal with Apple to sell unprotected MP3s on iTunes.

Amazon has not announced a pricing structure, but the EMI / Apple deal calls for a slightly higher price for DRM-free tracks. Customers wanting the 99 cent per track deal iTunes is known for will still be able to purchase copy protected tracks from its online store.

"Our MP3-only strategy means all the music that customers buy on Amazon is always DRM-free and plays on any device," said founder / CEO Jeff Bezos. "We’re excited to have EMI joining us in this effort and look forward to offering our customers MP3s from amazing artists like Coldplay, Norah Jones and Joss Stone."