August 27, 2003 5:25 PM PDT

Small Webcasters sue RIAA

A group of small Webcasters on Wednesday filed an antitrust suit against the Recording Industry Association of America, alleging that the trade association tried to push independent music stations offline.

The Webcaster Alliance has been threatening to sue the RIAA for months, after Congress ratified royalty rates for Internet radio stations that many small operators said will drive them out of business. The existing rates were negotiated between a small, unrepresentative group of Webcasters and the RIAA and are aimed at eliminating competition, the alliance members said.

"We have watched the RIAA's actions...(which) have the effect of wiping out an entire industry of independent Webcasters who represent freedom of choice and diversity for Internet radio listeners," Ann Gabriel, president of the Webcaster Alliance, said in a statement. "It is time for the RIAA to be held accountable for years of manipulating an entire industry in order to stifle the growth of independent music and control Internet content and distribution channels."

Webcasting royalty rates have proved to be an enormously contentious topic for years. Congress passed new copyright rules in 1998 that created a new royalty structure, unknown in traditional radio, under which Internet radio stations would pay record labels and artists a fee for playing their music online. Lawmakers didn't specify how much this fee would be, kicking off years of battles.

In June 2002, the Library of Congress finally set the rate at about 0.07 of a cent per song, with the fees retroactive to 1998. Small companies protested, saying that rate would put them out of business. Congress intervened, and after several start-and-stop initiatives, passed a bill that's aimed at protecting small Net stations.

Like the original legislation, no set amount was included in the new bill, but it effectively ratified private negotiations between a small group called the Voice of Webcasters and the RIAA, which set royalty rates at a percentage of revenue instead of a flat fee per song. Larger companies such as America Online would continue paying the fee determined by the Library of Congress.

Some Webcasters found the new model better, but others--particularly those who had been left out of the negotiations--cried foul. They sought a new agreement with the RIAA, but the record label group said it had already settled the issue.

Saying they lacked any other avenue, the alliance members threatened to sue, a promise culminating in Wednesday's lawsuit.

The Webcaster Alliance suit alleges that the big record companies and the RIAA conspired with each other and ultimately with the Voice of Webcasters group to eliminate small Net radio stations that play independent music.

The alliance lists 198 member stations, many of them individuals, on its site. Gabriel said that the actual membership numbers have recently risen to more than 400 stations, however.

The RIAA said the lawsuit was groundless without commenting on the details.

"This lawsuit is a publicity stunt that has no merit," an RIAA representative said. "Record companies and artists have worked earnestly to negotiate a variety of agreements with a host of new types of radio services, including commercial and noncommercial Webcasters."

 

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