February 25, 2002
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MusicMatch
"This ruling is extremely unfortunate for not only webcasters, but consumers, artists and record labels. While the decision has no immediate affect on MusicMatch due to a separate agreement with the RIAA, these rates will force most companies to close the free Web radio side of their business. Music fans worldwide be exposed to fewer artists, enjoying less music, and the labels will lose an effective exposure medium."
-- Dennis Mudd, CEO of MusicMatch
The Recording Industry Association of America (RIAA)
"Artists and labels, who have supported these new businesses from the start with their music are one step closer to getting paid.
"We would have preferred a higher rate. But in setting a rate that is about 10 times that proposed by the webcasters, the panel clearly concluded that the webcasters' proposal was unreasonably low and not credible.
"It is apparent to us, as it was to the Panel, that webcasters and broadcasters of every size will be able to afford these rates and build businesses on the Internet.”
-- Hilary Rosen, President and CEO of the RIAA
SoundExchange
“The decision today confirms our belief in the value of music and the community that creates it. We are pleased that many of the proposals we set forth were adopted by the Panel. The endorsement of our practice of direct payment to artists was among the most notable. This policy ensures that all artists will receive their royalties, whether or not their labels have signed with SoundExchange. It was also gratifying that we were awarded the right to collect for ‘non-members’ as we have put extraordinary effort into locating rights owners and artists whose music has been performed on the Internet.
“While SoundExchange was hopeful of receiving a higher rate, I am excited that the music community can move forward with the licensing, collection and distribution of performance royalties for webcasts. Artists and record companies have worked hand in hand for a long time to obtain this well-deserved right. I’m grateful to the Panel for helping us get one step closer to the implementation of this right.
“I salute the dedication and work of the RIAA, AFTRA and AFM in taking the lead on behalf of the music community to ensure the future of music is alive and well on the Internet.”
-- John Simson, executive director, SoundExchange
Beethoven.com
"As one of the first major Internet Radio stations to incorporate advertising insertion into our webcast, Beethoven.com has been in the forefront of making our industry a profitable medium. To date, however, we have yet to see any significant revenue of any kind and have yet to turn any profit. The recent rulings by CARP, which we feel equate to no less than a complete capitulation to the demands of the egregiously powerful RIAA, will eradicate any possibility of a profitable future for us and the vast majority of other webcasters. By dismissing the vastly more equitable solution of basing royalties on a reasonable percentage of revenue in line with other traditional media, the CARP ruling slams the door on the possibility of opening new markets to not only webcasters, but to the RIAA itself. It has created an impermeable and unsurpassable barrier to entry for only but the largest corporations to enter or operate in the webcasting domain.
"We feel very strongly that this ruling, in tandem with the Copyright office's ruling on reporting requirements, fly not only in the face of the needs of webcasters to survive, but are in direct conflict with the public's best interest and even those of the RIAA itself. By forcing these issues, the RIAA has made the grave error of focusing its energies on controlling the flow of its copyrighted information and the collection of enormous royalties instead of what its primary focus should be: selling its recordings to the public. In fact, the RIAA has already made millions more from Internet radio than anyone in our industry! We alone have created the sale tens of thousands of dollars of CD's to our listeners for the RIAA without making enough money from advertising to make ourselves profitable. And this comes at a time where one would think the RIAA should take every sale it can get! The truth of the matter is that they will NEVER be able to promote and disseminate their recordings anywhere near as well as a free-market driven Internet radio industry can.
"In short, these rulings, if fully instituted and enforced (which, in itself, may even prove to be prohibitively complex and expensive) will drive almost every Internet radio station out of business. Of this there can be no doubt or debate."
-- Kevin Shively, Director of Interactive Media, Marlin Broadcasting/Beethoven.com
Listen.com
"We're glad that the year-long arbitration process for setting Webcasting rates is over. This week's decision by the Copyright Office's arbitration panel removes many of the question marks about the real cost of building an online music business.
“The panel's per-song rate recommendation is higher than we had hoped, and will make it even more difficult to make a business out of stand-alone free Internet radio. That said, the panel's recommendation is within the range of what Listen prepared for in long-term projections for our business.
“We will continue to offer free Internet radio as one part of our Rhapsody music service, and in the future may also introduce paid subscription radio as another part of our overall suite of music services. In the future, Listen will continue to give music fans the best choice for legitimate online music."
-- Listen.com CEO, Sean Ryan
MeasureCast
“It is clear that the RIAA and the U.S. Copyright office don't understand the traditional radio business, or the streaming media business. The proposed rulemaking clearly seeks to impose cumbersome, unreasonable, and impractical tracking and record keeping on the part of streaming broadcasters. And, it requires them to take steps that, in some cases, are impossible. For instance, as a veteran broadcast station owner and operator, I see no way for broadcasters to track the UPC Code for every song streamed. Other requirements may even put streaming broadcasters in violation of Privacy Act rules. In addition, it is near impossible to ascertain the geographic location of every Internet radio listener.
“It's time for the RIAA and the U.S. Copyright Office to get real, and to understand that putting streaming broadcasters out of business will put zero dollars in their royalty coffers. But then maybe that's their end game; making certain that only major record labels control every piece of music streamed on the Internet. Perhaps it's time for the Department of Justice to look into this issue.”
-- Ed Hardy, CEO, MeasureCast
Digital Media Association (DiMA)
"We are pleased that the arbitration panel has recommended royalty rates for Internet radio broadcasting, and that its recommendation is much closer to the royalty rate proposed by the webcast industry than was proposed by the recording industry. We are extremely disappointed, however, that the Panel's proposed rate is not significantly lower, as a lower rate would more accurately reflect the marketplace for music performance rights and the business
environment of the webcast industry.
"We believe that the Digital Millennium Copyright Act webcast sound recording statutory license reflected Congress's effort to ensure fair compensation for creators and a reasonable and competitive business environment for webcasters.
"America deserves an equitable royalty formula so that both creators and consumers can continue to benefit from the advantages of Internet-based broadcasting and the innovation that continues to be developed by DiMA companies.
"For webcasters, an equitable royalty structure means more time developing and delivering new services to consumers and less time focused on uncertainty, litigation and regulation.
"The Copyright Arbitration Panel's recommendations are a first step in a process designed to bring stability to the webcast radio industry. Webcasters will study the panel's decision further, and provide analysis and recommendations to the Copyright Office for consideration during that Office's statutory review period."
-- Jonathan Potter, executive director, Digital Media Association
RealNetworks
"The power of the Internet is in building a mass audience that anyone with a message can reach. These alternative and unique voices are the lifeblood of the Internet. The Copyright Arbitration Royalty Panel ruling singles out these alternative voices by ruling that webcasters must pay twice as much as terrestrial broadcasters for the right to stream over the Internet. Moreover, the proposed royalty rates in both scenarios are too high and fail to strike the proper balance between rights holders, broadcasters, and consumers."
-- RealNetworks senior vice president & general counsel, Kelly Jo MacArthur
Live365.com
"What this means is that although the arbitrators have attempted to reach a reasonable balance between the interests of the copyright holders and the webcasters regarding the fair market value of transmission of the music, they may have overlooked those companies that are not yet profitable or the traditional start-up business.
"The previous CARP for Digital Performance Rights used as a key benchmark the Songwriters/Publishers royalties (BMI, ASCAP, SESAC - referred to herein as PRO's) and determined a rate based upon a percentage of revenue. For a start-up or a pre-profitable business, this allows growth and a sharing of revenues as opposed to a straight licensing fee, thus encouraging new companies to enter the market. The rate as established creates barriers to new companies entering the market."
-- John O. Jeffrey, EVP Corp. strategy & general counsel, Live365, Inc.
Loudeye
"While the proposed rates relieve some of the uncertainty around the Webcasting industry, the decision appears to fall short in reaching an appropriate middle ground that would provide steadier footing for the wide range of Webcasters the decision impacts."
-- Joel McConaughy, Loudeye CTO
iM Networks
"If adopted, the CARP recommendations play right into the hands of the
corporate giants. Instead of encouraging the spirit of the Internet's level playing field, these fees will squelch innovation by preventing
independent Internet broadcasters from growing to a point of profitability.
"Broadcasters need to reach a critical mass audience before they are able to profitably sell advertising or other services on their station. With these fees, the out of pocket expenses required to grow to that critical mass become prohibitive. As a result, only major networks and corporate giants who already have an aggregated audience will be able to sustain these rates. Had similar rates been imposed in the early days of radio, we would not have the $20 billion dollar marketplace that we have today.
"These rates hamper the Internet broadcasting marketplace, and this kind of near sighted approach is just going to drive people back into the loving arms of illegal alternatives, similar to what happened in the P2P market."
-- David Frerichs, Founder, President and Chief Technology Officer of iM Networks
National Association of Broadcasters (NAB)
"The ruling from the Copyright Arbitration Royalty Panel may have the effect of unintended consequences, in that many radio broadcasters may reevaluate their streaming strategies. If the powerful record company interests’ goal was to strangle a fledgling new service to radio listeners, it may have succeeded beyond its own expectations."
--Edward O. Fritts, president and CEO of the NAB
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