(This is John Schneider's report on the state-of-play as at the start of April 2002)
Written
by John Schneider Founder & President Radiopoly.Com
www.radiopoly.com
tel: (203) 791-2650 fax: (203) 790-6350
schneider@radiopoly.com
In accordance with the
Digital Millennium Copyright Act (DMCA) of 1998, the Copyright Arbitration Royalty
panel (CARP) has recommended a new "performance royalty fee" for webcasters
(businesses that stream music on the Internet). The issue went to CARP after
the recording industry (whose lobbying efforts are largely responsible for the
very existence of the DMCA) and webcasters could not agree on terms. This fee
would be charged to terrestrial radio stations that simulcast their signal on-line,
in addition to Internet-only radio stations. Instead if a rate based on a percentage
of revenue (as are the already existing ASCAP & BMI fees), the recommended rate
for terrestrials that simulcast is .07 cents per listener, per song. For Internet-only
webcasters, the rate is doubled, to .14 cents. Although research shows tremendous
potential for the success of independent webcasting, it is nonetheless a fledgling
industry, and very few operators have yet to make any substantial revenue, let
alone profit. The adoption of this proposed royalty fee would mean an instant
end to independent webcasting. A little perspective: If the new fee were applied
to terrestrial radio, the amount due to the recording industry would be well
over 3 BILLION DOLLARS per year.
The issue of payola in the radio industry is nothing new. Record companies have
always compensated large radio groups in various ways, in return for the ability
to dictate what gets played on the radio. Financially, the proposed fees would
have little, if any, effect on the large terrestrial radio groups that simulcast
on-line, other than to basically take the illegal record company compensation
out of their pockets. Independent webcasters, on the other hand, benefit from
no such collusion. In addition to being faced with a monthly bill to the RIAA
that would in most cases be many times total revenue, independents are faced
with the fact that, if adopted, the new fee will be retroactive to October 1998.
This would mean an immediate payment due of more than $500,000 dollars in some
cases. That may not seem like much to AOL, Yahoo!, MSN or Clear Channel, but
to small business independent webcasters it means immediate bankruptcy. This
is precisely the goal of the recording industry. If there are no independent
webcasters, there will be no broadcast distribution outlet for independent artists,
other than the virtual impossibility of getting their songs added on terrestrial
radio. Artists will be forced to deal with record companies to have any hope
of mainstream market success, and the RIAA will be able to drop their expensive
battle against the "Napsterization" of their industry (the unauthorized downloading
and distribution of MP3 music files), knowing it's one they cannot win.
The RIAA facade includes the argument that the new webcasting fees would represent
long overdue additional compensation for artists. This "concern for the artists"
might be believable, if not for the fact that for years artists have been fighting
with the recording industry for fair treatment. Royalty payments continue to
be withheld through the "creative accounting" efforts of record companies. The
RIAA also continues to force artists into unreasonably long contractual obligations,
which preclude them from changing record companies in the event of a dispute.
For complete information on the recording artists' issues with the RIAA, see
the Recording Artists' Coalition web site: www.recordingartistscoalition.com
OTHER POINTS OF REFERENCE:
Save Internet Radio: www.saveinternetradio.org
RAIN - Radio & Internet Newsletter: www.kurthanson.com