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America's fledgling Internet radio industry continues to react in shock to the recent Copyright Arbitration Royalty Panel ("CARP") decision that Webcasters should pay "performance rights" fees to record labels that are so high that they are currently more than 100% of most Webcasters' gross revenues!

The royalty rates are perceived
by most observers as so high that they will effectively kill Internet radio as an industry if they're accepted by the U.S. Copyright Office. (The Copyright Office will decide whether to accept, reject or modify the rates and terms set forth in the report within the next 75 days.)

The purpose of this website
is to help concerned individuals have a voice in trying to encourage the U.S. Copyright Office to reject the CARP recommendation — or Congress to amend the Digital Millenium Copyright Act (DMCA) — in time to prevent the industry from being effectively shut down.


Legislative history:

On October 28, 1998,
following its passage in the Senate and House of Representatives earlier that month, President Bill Clinton signed the "Digital Millennium Copyright Act."

Among other things, the act established a new principal that the owners of sound recording copyrights (i.e., record companies) are entitled to compensation when their works are performed on Internet radio.

(Under U.S. copyright law, broadcast radio stations pay royalties to the composers of the songs they play, but not to artists or record companies. For broadcast radio, Congress has always assumed that the promotional value of the airplay was sufficient compensation to those parties.)

Note that the DMCA's rationale for granting performance royalties in the digital world was based on the concept that digital copies are "perfect" copies and thus the sales of CDs (called "phonorecords" in the act) might be at risk in this new "digital millennium."
...



Click the screenshot above to bring up
the full 64-page document in the
Adobe Acrobat (.pdf) format.
xx
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Royalty negotiations:

The DMCA called
for the U.S. Copyright Office to determine the appropriate performance royalty, with the amounts due to be retroactive to October, 1998 (the date of the passing of the DMCA).

The Copyright Office gave
sound recording copyright owners (represented by the RIAA) and webcasters (represented by, among others, DiMA) the opportunity to negotiate a royalty among themselves.

When those negotiations failed,
the office authorized a Copyright Arbitration Royalty Panel (CARP) to determine an appropriate rate. From July 31st to September 14th, 2001, dozens of witness representing both sides testified before the CARP panel of three arbitrators.
x  

The CARP decision:

Most Webcasters had hoped
that the CARP's recommended royalty rate would be based on a percentage of revenues — somewhere between the 15% of revenues that the RIAA had been asking of Webcasters and the 3% that Webcasters had proposed (which would be more in line with their ASCAP, BMI, and SESAC royalties to composers).

On February 20, 2002, however, the CARP arbitrators issued their recommendation — .14¢ per song per listener for Internet-only webcasters, .07¢ per song per listener for broadcast radio simulcasts, and .02¢ per song per listener for non-commercial radio simulcasts. (Click screenshot at right or see RAIN here.)



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......
CARP rate implications:

While CARP's proposed royalty rate
might be manageable for Internet radio properties owned by multi-billion-dollar corporations like AOL, Yahoo!, and Microsoft, it seems as if it will effectively bankrupt the vast majority of Webcasters.

For example, for a mid-sized independent webcaster (e.g., two or three people working out of a home office or dorm room) that has had, say, an average audience of 1,000 listeners for the past three years, the bill for retroactive royalties -- which will come due sometime early this summer if the CARP rate recommendation is approved -- would be $525,600!

COMING NEXT: What are the best arguments to present to the U.S. Copyright Office (and/or Congress) to encourage them to reject or revise the proposed CARP royalty rates?

Good background material:
http://www.educause.edu/issues/dmca.html

INTERESTING QUESTION: Could Spinner buy 120 small AM radio stations and by doing so cut their license fees in half?

Letters from Webcasters to Congressmen (at Congress.org):

From CelticGrove.com to Sen. Fred Thompson (R-TN) here
From Tammi Franke of Kima to Sentator Richard Durbin (R-IL) here (based on Radio Paradise letter)
From a 3WK listener to Sen. Maria Cantwell (D-WA) here (based on 3WK letter)

Find and contact
local and national media using this guide from Congress.org.

What's wrong with broadcast radio?

Independent record promotion within Radio One -- L.A. Times story here

Nice interview from RadioWorld with Susequehanna's Dan Halyburton here
And with Cox's Gregg Lindahl here
RadioWorld
background article on digital broadcast radio (IBOC) here

Great piece from Tennesseean (2/3/02) on Sound Exchange here. (ASCAP-BMI-SESAC distribute $1 billion/year!)

The current Copyright Office response to e-mails from concerned citizens:

Subj: Re: Please don't kill the Internet!
Date: 3/7/02 3:19:16 PM US Eastern Standard Time
From: copyinfo@loc.gov (Copyright Information)
To: GTORadio@aol.com
We are responding to your recent communication regarding the Copyright Arbitration Royalty Panel ("CARP") report delivered on February 20, 2002. That report recommends rates and terms for the statutory license for eligible nonsubscription services to perform sound recordings publicly by means of digital audio transmissions ("webcasting") under 17 U.S.C. §114 and to make ephemeral recordings of sound recordings for use of sound recordings under the statutory license set forth in 17 U.S.C. §112.

The proposed rates and terms for webcasters operating under a statutory license announced on February 20, 2002, are the recommendations made by a panel of three independent arbitrators. The Panel made its recommendations after a six-month hearing. During this period, webcasters, broadcasters and copyright owners offered evidence for what the appropriate rates and terms should be for the public performance of a sound recording over the Internet. At the conclusion of this process, the Panel submitted its recommendations and a report explaining its rationale for the recommendations to the Copyright Office. The public version of the panel's report has been posted to the Copyright Office website.

The panel's recommendations are now being reviewed. Under the law, only parties to the proceeding may request that the panel's recommendations be modified or set aside. These comments will be carefully considered during the review process. There is, however, no provision in the law for comments from the general public. A final determination as to the rates and terms will be made when the review process is completed.

===========

"I read the summary which says that artists need to be compensated because permanent digital copies are involved. What this idea totally ignores is that the sound quality of 95% of streams because of bandwidth limitation is far inferior to the original CD and is in no real sense a competitive copy that anyone would want to listen to other than as a broadcast stream. They are out to get what they can. If they were genuinely concerned about competition with CD sales, they would have limited the levy to streams exceeding 64kbps which can reasonably compete with CD sound quality and they would have billed over the air FM stations because they can be input to a computer sound card to generate a much better quality digital file than almost all current streams available." -- Tony Carlson, Berkeley, CA (in Save-Our-Streams message board here)

============

Another perspective on the size of the royalties: A Webcaster with one listener (e.g., himself) listening all the time would have to pay $.0014 x 15 x 24 x 365 = $184 in royalties per year. (Assuming 15 songs per hour.) Invite some family and friends to listen, get an average audience size of 100 listeners, and you're up to an obligation of $18,400.


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