April 3, 2003 5:20 PM PST

Webcasters, RIAA propose new royalties

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Deal rescues fee break for Webcasters

November 15, 2002
The Digital Media Association and the Recording Industry Association of America agreed on Thursday to a proposal for royalty fees that Internet radio services must pay record companies for Webcasting their songs.

The proposal, submitted to the U.S. Copyright Office, will require large Internet companies such as America Online, Microsoft, Yahoo and RealNetworks to pay 0.0762 cent for each song that they Webcast from their radio services. The rate is an increase from the 0.07 cent a song established by the Librarian of Congress last year and would pick up where the previous one left off, spanning 2003 through 2004.

The 0.0762 cent rate, as well as a rate of 1.17 cents per aggregate hour, covers individual streams for subscription and nonsubscription services. The recording industry would also receive 10.9 percent of subscription revenue but no less than 27 cents a month per subscription.

The proposal, which must undergo public hearings before a decision is made, will not affect smaller Webcasters, such as college stations and start-ups. Congress last November approved a bill that would offer substantially lower rates for small Webcasters.

Despite the agreement, the outcome has not pleased everyone. The Digital Media group, which negotiated the proposal on behalf of the Internet giants, viewed the latest proposal as a "Band-Aid" that would avoid "millions of dollars of legal fees" that would arise from going through the arbitration process with the Copyright Arbitration Royalty Panel. The group said the negotiated rates underscored a system it considered broken.

"First, Webcasters remain at a competitive disadvantage to terrestrial radio by having to pay huge royalties for sound recordings that broadcasters get for free; and second...the arbitration process that determines these royalties is sorely in need of reform," John Potter, executive director of the Digital Media Association, said in a statement.

 

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