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Dead Air Ahead: Court Denies Webcasters' Appeal

Internet Radio Faces Huge Royalty Rate Hike

July 13, 2007

The U.S. Court of Appeals for the District of Columbia this week refused to delay implementation of the new royalty rates.

Webcasters are "disappointed by the Court's decision, and are now forced to make very difficult decisions about what music, if any, they are able to offer," said Jonathan Potter, executive director of the Digital Media Association, which represents large webcasters.

"The result will certainly be fewer outlets for independent music, less diversity on the Internet airwaves, and far fewer listening choices for consumers," said Potter.

Negotiations are, however, continuing behind the scenes. It's reported that Rep. Ed Markey (D-MA) organized a private roundtable discussion between webcasters and SoundExchange, the entity set up to collect and distribute digital music royalties.

A bipartisan bill that would vacate the Copyright Royalty Board's new rates -- the Internet Radio Equality Act -- is making its way through Congress, but is not likely to win final passage until later this year.

More than 2,000 students rallied earlier this week in support of the Congressional measure and petitions were delivered to Congress by a coalition of media public interest groups, including U.S. Public Interest Research Group (U.S. PIRG), Free Press, and SaveNetRadio.

"The Internet Radio Equality Act compensates rights holders but also encourages growth in Internet Radio and the greater media marketplace," said U.S. PIRG Staff Attorney Amina Fazlullah.

"The Copyright Royalty Board rates are a clear example of unfair and shortsighted regulation. These new rates will destroy this young and innovative industry if they are allowed to take effect," she said.

There are an estimated 72 million net radio listeners that support college and other independent stations streaming over the Internet as well as the airwaves along with new and innovative Internet-only outlets.

In the wake of massive consolidation of ownership of over-the-air radio, Internet Radio has stood alone as an outlet for diverse and independent musicians playing in formats from jazz and freeform to bluegrass and classical music that have been squeezed off the traditional radio dial, the coalition members said said.

"Internet radio offers an unprecedented and unparalleled level of accessibility and diversity to music lovers of every age, from every walk of life, in every region of the country," said SaveNetRadio coalition spokesperson, Jake Ward.

The rate increase would increase royalty payments between 300 and 1200 percent. The action could bankrupt Internet radio stations like Pandora, Live365, Rhapsody, MTVradio, and hundreds of smaller, regional, and local stations. Internet radio industry representatives estimate the new fees will cost companies $1 billion- a gigantic leap from the $200 million paid last year, noted Fazlullah.

"Students and young people have always supported independent musicians playing a variety of formats," added PIRG student volunteer Lauren Linville, "The Internet should make it easier for independent musicians to compete with big radio and big media, not harder."

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