April 29, 2002 4:00 PM PDT
Net radio to fall silent for a day
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The independent Webcasters are protesting a royalty fee proposed by the Copyright Arbitration Royalty Panel (CARP). Appointed by the U.S. Copyright Office, the panel recommended that Webcasters pay record companies a rate of 0.14 cents per listener per song and 0.07 cents per song for streaming an over-the-air broadcast online. Small Webcasters, however, say the fees would exceed their revenue, driving them out of business and stifling the industry.
Webcasting royalties have been hotly debated by record labels and small Net radio stations, with each side recommending wildly different rates. Record labels proposed a per-song rate that was about 100 times what the trade association for big Webcasters--including America Online, MTV and RealNetworks--say is reasonable. CARP's proposal is meant to be a compromise between the two groups.
The Copyright Office is expected to make its final decision by May 21.
Internet radio has "been one of the real success stories of digital music over the Internet," said Susan Kevorkian, a research analyst at IDC, a Framingham, Mass.-based research firm. But "the big issue is: Are many of the smaller online radio stations going to be able to stay in business given what they're expected to pay to stream online?"
Among other things, Webcasters are angry that CARP would charge them on a per-stream basis, rather than as a percentage of revenues, said Kevorkian, adding that the latter "is generally thought to be more of a fair approach."
Independent Webcasters have been making aggressive efforts to spotlight their concerns, including lobbying Congress. Last week, a group of 20 congressional representatives rallied in support of the independent Webcasters by urging CARP to set a fair royalty rate. The representatives said CARP's proposal is contrary to the intent of the statutory licensing provisions of the Digital Millennium Copyright Act (DMCA).
The DMCA, passed in 1998, essentially said that if a song were to be played on the Web, the record companies and artists would get a small fee, unlike traditional radio.
Independent Webcasters are hoping that the "Day of Silence" would encourage listeners to contact other legislators and ask them to deliver a message to the Librarian of Congress regarding the intent of the DMCA.
"One point of a statutory royalty rate is to encourage the diversity of the industry; it wasn't intended to be something that shut down the industry," said Kurt Hanson, a publisher for a radio and Internet newsletter called "RAIN" who is helping organize the event. "If the CARP recommendation is accepted, it is going to be a short-term victory for the record industry but a long-term loss."
Hanson said that if the proposed rates are approved, it will drive consumers back to illegal services such as file sharing. He added that the record industry would also lose the promotional value that online radio gives to dozens of genres such as bluegrass, electronica and traditional jazz. Hanson said all these formats give thousands of artists airplay online that they don't receive through traditional radio stations.
CARP could not immediately be reached for comment.
While some independent Webcasters are planning to go silent entirely, others say they will replace their music streams with periods of silence interspersed with public-service announcements regarding the issue. In addition, some major terrestrial broadcasters that also stream online are expected to support the effort with either silenced streams or a combination of banner ads, public-service announcements and information on their Web sites. Webcasters that plan to be involved in the "Day of Silence" include SomaFM, Ultimate-80s, Choice Radio and Village Voice Radio.
Drawing an unintended lesson from their proposed action, a representative for a record industry group that collects Webcasting royalties tried to turn the tables on the protesters.
"A day of silence is a perfectly appropriate message because the public should know what the world would be like without the music that everybody takes for granted," John Simson, executive director of Sound Exchange, said in a statement. "If the people who make the music don't get paid to do so, that's what we'll have--silence."
