News Blog

Now that Blu-ray has won the high-definition disc format war, the industry is moving on to the next step: recruiting companies to produce players and media.

And to help that process along, MPEG LA, the standards and licensing group, is floating the concept of a creating an organization that will be able to license all of the patents necessary to make Blu-ray products.

The idea was discussed back in early 2007 during a meeting of 18 of the holders of necessary Blu-ray patents. With the format war over, MPEG LA is once again talking up the concept. The mechanisms and rates for Blu-ray licenses have yet to be fully hammered out, industry sources say.

While Blu-ray backers talked up customer convenience and experience, royalties were at the heart of the Blu-ray push. A successful standard can result in millions of royalties every year for patent holders. The licensing fees for making an individual DVD player totaled $15 to $20 a few years ago. (For those of you who believe manufacturers should only adopt free and open standards, please feel free to spend 10 years of your life inventing a complex optical storage and retrieval standard.)

Philips and Sony garnered millions in revenue from CD licensing.

If one-stop shopping becomes a reality for Blu-ray, it would prevent one of the major headaches of the DVD world from repeating. To make a DVD player or disc, manufacturers have had to ink deals with three separate organizations, which represented various patent holders. There is DVD 6c (Hitachi, Panasonic, JVC, and six others), DVD 3c (Philips, Sony, Pioneer), and MPEG LA (representing encoders and decoders). To make a DVD player, manufacturers have to pay $4 to DVD 6c per player, $2.50 to MPEG LA, and I'm not sure about the amount to DVD 3c.

For DVD movies, DVD 6c charges about 4 cents per disc and MPEG LA charges 3 cents. I wrote an article last month on the subject but low-balled the royalties required.

Large digital media companies, small Webcasters and National Public Radio on Wednesday asked a federal appeals court to stall scheduled to kick in next month.

In a filing with the U.S. Court of Appeals for the D.C. Circuit, the Webcasters argued new royalty rates scheduled to take effect July 15 are "radical and arbitary" and requested an emergency stay of the decision by a three-judge copyright panel.

The SaveNetRadio Coalition, whose members include prominent Net radio operators RealNetworks, Yahoo, Pandora and Live365, said it hoped the move will allow Congress more time to act on two similar proposals that would reverse the royalty rate increases.

The new rules, announced in March by the U.S. Copyright Royalty Board, enjoy support from the record industry group SoundExchange, which collects the payments and maintains the changes are necessary to ensure artists are adequately compensated. Facing pressure from Congress, the non-profit group last week offered a deal that it said would allow small Webcasters the option of paying existing fees.

But Webcasters promptly blasted SoundExchange's latest offer as vague and potentially limiting to the growth of the Internet radio industry. They have vehemently opposed the rate increases all along, claiming the rate hikes will cripple their businesses by forcing them to hand over 300 to 1,200 percent higher fees through 2012.

Congressional momentum appears to be building in support of overturning a contentious ruling that Webcasters argue could cripple their services.

On Thursday, U.S. Sens. Ron Wyden (D-Ore.) and Sam Brownback (R-Kansas) introduced a bill that would repeal a U.S. Copyright Royalty Board decision scheduled to take effect July 15. The rules would raise the rate per song and per listener retroactively to 2006, and then in each year until 2010. It would also require each Internet radio "channel" to make a $500 minimum payment.

Opponents of the new rules, which include large and small commercial Internet radio companies, National Public Radio, and other public broadcasters, say the decision would lift the existing required rates by 300 to 1,200 percent, potentially putting some operators out of business. They have been lobbying Congress for relief, and some have indicated court challenges are also imminent.

SoundExchange, the non-profit entity that collects the fees on behalf of the record industry, has continually defended the changes as fair and necessary to provide adequate compensation to artists.

Called the Internet Radio Equality Act, the Senate measure is similar to a House of Representatives bill introduced in late April by Reps. Jay Inslee (D-Wash.) and Don Manzullo (R-Ill.).

Like that bill, the Senate version would place Internet radio services on the same level as satellite radio services, which are currently required to pay royalties equivalent to 7.5 percent of their revenue. It also proposes a method for calculating royalties required of non-profit broadcasting entities like NPR, including limiting their required payments to no more than $5,000 per year--unlike the House bill, which calls for a report to Congress on public broadcaster obligations.

The senators said they feared that without congressional action, Internet radio--in particular, smaller Webcasters with limited revenue streams, Brownback said--will not be able to flourish.

"Keeping Internet radio alive is part of a broader issue that is important to me--keeping the e-commerce engine running by preventing discrimination against it," Wyden said in a statement.

Pandora, an Internet service that lets people listen to streaming music, is shutting its service to non-U.S. listeners, according to several reports.

The ban is due to new regulations that will raise royalty fees that Webcasters must pay to record labels, Pandora founder Tim Westergren told The Register. The ban, he said, "follows months of pressure from record labels."

Pandora representatives told Techcrunch that they have been working on obtaining international licenses for nearly two years and are close to deals in the U.K. and Canada.

The service has always been intended for U.S. users, but until now, all that was required to sign up was a ZIP code. Now the site will block IP addresses located outside the States.

Blog community response:

"Anyone who's used Pandora for more than about five minutes realizes what a great service it is for the entire recording industry. It really does a good job of recommending new music to listeners -- the type of new music that fits in with what they like, and that they're much more likely to support with money. However, rather than recognizing the numerous ways that Pandora can grow their overall market, the recording industry has to shut it down since it won't pay them even more than they're already being paid. This harms the recording industry in numerous ways, and it's amazing they haven't figured that out yet."
--Techdirt

"The company's decision comes in the wake of a stupid decision by the U.S. Congress to slap far-too-high royalty rates on streaming music - rates that are much higher than traditional and satellite radio. And you wonder why Web-savvy consumers, who love being able to discover lots of new music online, are still being tempted by P2P services!"
--Mark Evans

"Pandora surely did not decided for themselves to limit their services which leads to the question why the Music Industry is trying everything to stop people from listening to music which they probably would have bought. But you won't buy something that you don't know, don't you think ? Did not think the Music Industry could get any lower than they already are. They apparently can."
--Ghacks.net

The U.S. Copyright Royalty Board has pushed back the date on which a contentious fee hike for Internet radio broadcasters takes effect.

In a 32-page final rule (PDF) formally published Monday, the three-judge panel within the Library of Congress set July 15 as the date that the new royalty rates required of Net radio operators will kick in--two months later than the original deadline.

After more than a year of vetting outside submissions, the judges issued an initial ruling on March 2, drawing widespread outcry from large and small commercial Webcasters and the public radio community.

The board prescribed rate hikes of .08 cents per song per listener retroactive to 2006 and then 30 percent each year until 2010, when they would climb to .19 cents per song per listener. It also said each station would have to hand over a minimum $500 royalty payment.

SoundExchange, the non-profit entity that collects the fees and supported the hikes, has said the CRB's changes are necessary to compensate artists adequately.

A group called SaveNetRadio, whose members include Internet radio listeners, Webcasters and artists, says the decision will cripple the Internet radio medium if left untouched. It is supporting a new House of Representatives bill that would invalidate the board's decision in favor of setting a level rate for all digital music services, including satellite, cable and Internet radio and Internet-based jukeboxes.

The group said in a statement Tuesday that it would spend the next 45 days lobbying Congress to enact that bill. "We feel strongly that Congress could not possibly have intended a structure whereby Internet radio services pay 60% to 300% of their revenue in royalties," the group wrote.

The courts may also have a say in the debate, as the formal publication of the CRB decision in the Federal Register opened a 30-day period for notices of appeal. An National Public Radio representative said late Monday that the organization still intends to take such a step.