Court rejects Webcasters' plea for relief

A federal appeals court has declined to grant a petition by Webcasters to delay the onset of new royalty fees that they argue could imperil their offerings.

In a one-page order filed late Wednesday, the U.S. Court of Appeals for the District of Columbia said the opponents of the fees "have not satisfied the stringent standards required for a stay pending court review" and rejected their request for an emergency stay.

Barring an 11th-hour agreement, then, between Internet radio operators and the music industry, the new fees are scheduled to kick in on Sunday.

Jonathan Potter, executive director of the Digital Media Association, whose members include larger Internet radio operators like Yahoo, Live365, Pandora and RealNetworks, said he was hopeful Webcasters could still reach a compromise with the music industry.

But until then, Webcasters will be "forced to make very difficult decisions about what music, if any, they are able to offer," he said in a statement. "The result will certainly be fewer outlets for independent music, less diversity on the Internet airwaves, and far fewer listening choices for consumers."

The new rules (PDF) issued by the U.S. Copyright Royalty Board earlier this year prescribe rate hikes of 0.08 cent per song per listener retroactive to 2006. They would also climb to 0.19 cent per song by 2010. According to the advocacy group SaveNetRadio, smaller Webcasters could face payment increases of up to 1,200 percent of what they owed before, while larger ones could owe up to 300 percent more.

Each station would also have to hand over a minimum $500 royalty payment per "channel" under the ruling, which DiMA says could cost the three largest Net radio operators--Yahoo, RealNetworks and Pandora--more than $1 billion in the first year alone.

SoundExchange, the nonprofit entity that collects the fees, was not immediately available for comment on the decision Thursday.

The group has offered two attempted compromises to the Net radio industry, but they haven't gone far enough to meet the Webcasters' wishes thus far. First, it attempted to extend a peace offering to smaller Webcasters by saying it would freeze through 2010 the "below-market" rates they have been paying since 1998. But Net radio advocates said that would effectively discourage smaller firms from growing their operations. More recently, the group also reportedly to cap at $2,500 the $500 per "channel" minimum fee for all Webcasters but, according to DiMA, only through 2008.

If an accord can't be reached, Congress may need to step in and pass a bill that would overturn the CRB's ruling, said Rep. Jay Inslee (D-Wash.), one of the sponsors of the House of Representatives version. His bill proposes leveling the royalty rates for all digital broadcasters--satellite, cable and Internet--at 7.5 percent of their revenues.

"I hope a compromise between online radio broadcasters and record labels can be reached before then, but if the hammer drops, urgency for congressional action only increases," he said.

Update at 11:20 a.m. PDT: It's worth noting that the appeals court's denial of the emergency stay doesn't mean the entire legal challenge to the CRB's decision has been dismissed. David Oxenford, an attorney representing some of the Webcasters in that suit, said in a blog entry that "the appeal will continue and be fully briefed and argued over the course of the coming year," although the court hasn't set any timeline for that process yet.

Oxenford added that the looming due date doesn't necessarily mean that "lawsuits will follow the next day if a Webcaster does not pay on time." But Webcasters will be responsible for determining what they owe, he said, and such lawsuits certainly are a possibility if they don't pay on time.

Update at 12:55 p.m. PDT: SoundExchange has issued a statement applauding the appeals court decision. According to Executive Director John Simson, it "vividly demonstrates that the Copyright Royalty judges got it right when they set royalty rates and terms for the use of music on Internet radio."

Simson called the denial of the stay "a major victory for recording artists and record labels whose hard work and creativity provides the music around which the Internet radio business is built." He added that his group was nonetheless still actively negotiating with Webcasters over their concerns about the new fees.

[Abuelita8733]

Music Industry Greed

The title says it all. The self-important, arrogant music (and video) industry is at it again making sure they suck the life out of every single thing that comes in contact with their precious "art". Something needs to break to rein in these "legal" extortionists. The public buys, buys and buys every time the industry creates a new format. What do they give.....NOTHING!

[timbern]

End to US Webcasting

Well sounds to me like they really are bent on fighting technology. They will destroy this before it ever takes off. They are eliminating the possibility of small players, in the end this means webcasting will be a business run in other countries but not the US.

[eljoubert]

We should be outraged...

...by the fact that these indistry giants are (effectively) eliminating our access to alternative sources for music distribution. If the webcasters have to discontinue operations, these companies are forcing the public to go back to buying the crap that they are selling rather than listening to what we want to hear.

I think it is in our best interests as consumers to stop supporting such monopolistic practices by refusing to purchase music. These industry giants need to understand that they need to cater to us not the other way around. Maybe when their sales drop far enough, they will get a clue.

[DraconumPB]

Music industry...

...is hopeless.

As an artist who may someday look into getting signed to a label of some sort, I'm utterly determined that it will be an independent one. I cannot stand the bulk of the music industry.

[hassan_bin_sober]

Compromise?

I'll give them a compromise... You back off trying to screw these small stations and I won't hunt you down and kill you. CLEAR ENOUGH?

[michaelo1966]

Business loves globalization

So companies should just "globalize" 'net radio. "Broadcast" it from Eastern Europe, or Africa, or somewhere that charges reasonable fees. Broadcasters can't control where listeners are. In much the same way that big business loves and the Bushies embrace the low-cost manufacturing of China and low-cost services of India I'm sure they'll also love the low-cost royalty rates of other countries.

[gfolkert]

Yes, you are right. Only thing...

Just like the WTO got pressured into allowing Russia into its fold *IF* they quashed allofmp3.

So, how long will it take to just quash allofinternetradio?

[novelator]

One More Reason...

This attempted rape by another bunch of greedy corporations working together (collusion, which was a crime until recently when the Supreme Court struck down that almost century-old law) is just one more reason we Americans should have a national referendum, a vote once a year to decide whether we want to let this kind of greed continue. Waiting for Congress to get off their corporate-sponsored duffs and do something, anything, on our behalf is like watching a rock--sure, someday the weather might erode it, but you and your children, even your children's children's children won't be alive to record the change.

I'm sick of this crap, all of it. Aren't you?

M.L. Bushman

[ballssalty]

Below Market Rate?

I'd like to know what they believe is an open market rate since they don't use the market to make the rates. Clearly the rates proposed are severely above what the market would pay, so I don't think they're getting below market rates now. They're probably still paying above market rates.

Here's some advice for SoundExchange, since you like to throw around the term Market Rate, how about you actually let the market set the rate instead of you actually setting it? I mean do you actually know how an open market works? Or do you just like to use the term to spin things so it looks like you're being fair?

[spruceman]

Destruction of music on the web

Of course the gov't will side with the RIAA and whoever else is in collusion with wanting everyone to be subjected to the limited formats and playlists that slither from FM radio stations. Listening to the same few songs over and over again is in the govt's interest as it can make us all mindless zombies who will follow BuSh and company's program without question.

[SeizeCTRL]

NEGATIVE!

This also applies to FM stations who broadcast their stations over the internet as well.

The real kicker is we are already paying the fees to place the songs over the air for radio listeners, yet we still have to pay a separate fee to play the exact same songs over the web... one would assume that paying a fee to play music would encompass any means of listening.

Right now we are waiting to see how this effects our FM stations that are being streamed.

I think you will see a lot of ShoutCast and other music services turning off their Public listing and streaming to private listeners.

Just another reason why our politicians (of BOTH parties) are so out of touch with the people... Personally I won't vote for anyone who is currently in office during the next few elections.

[seidolce1960]

FM Radio

Anne --nice story.

I was wondering if FM radio is subject to the same royalties. It was
not too long ago that music companies paid DJ's to play songs
(a.k.a. payola).

David Longstreet
www.SoftwareMetrics.Com