(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
tel: (203) 791-2650 fax: (203) 790-6350

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:


Save Internet Radio:

RAIN - Radio & Internet Newsletter:

Many thanks to John Schneider for keeping us up-to-date. We encourage you to go to the links mentioned. Let's hope that the good thing coming out of this will be that with so many people worldwide being informed, it will make it harder for the issues to be suddenly imposed without public reaction! The 'authorities' involved must be pretty sure how the listening public will respond. However, let's not sit back just yet – oppose this issue and support Internet Radio in any way you can.
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