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Comparing the Royalty Rates

On Wednesday, the Copyright Arbitration Royalty Panel (CARP) of the U.S. Copyright Office announced the performance royalty rates for webcasting of 0.07 cents per performance for radio stations that stream their signals and 0.14 cents for all other Internet transmissions.

The report delivered yesterday was one that was years in the making, and is retroactive, valid for the period of October 28, 1998 to December 31, 2002. Much of the document discusses royalty payments, collections and verification, meaning that webcasters will have to keep strict records on what songs are being streamed.

According to the U.S. Copyrigeht Office, the CARP report will be reviewed by the office, which will recommend to the Librarian of Congress whether to accept, reject or modify the rates and terms set forth in the report. The Librarian must accept or reject the report no later than May 21, 2002.

Royalty Fees in Detail

The decision splits up the fees for terrestrial radio stations and Internet-only webcasting. For simultaneous retransmission of AM or FM radio signal, a webcaster or commercial broadcaster must pay a performance royalty of 0.07 cents per performance. For other transmissions, or side channels, a webcaster must pay 0.14 cents per performance

Non-commercial broadcasters must pay 0.02 cents per performance for streaming their radio signals, plus 0.05 cents per performance for other transmissions of up to two side channels that is consistent with the public broadcasting mission of the station. Any other side channels are 0.14 cents per performance.

Ephemeral license fees for all of the above are 9% of performance fees due. In this case, ephemeral means music that is stored in hard drives or buffers that aid in the delivery and process of the streams. What the CARP calls a "Business Establishment Service" is exempt from performance fees, but must pay a 10% ephemeral license fee of the gross proceeds.

Comparing the Royalty Rates:

The panel also came up with a way to estimate performances, too. Companies can estimate their total number of performances as: multiplying their total aggregate tuning hours by 15 performances per hour (or 1 per hour for news, talk or sports sites and 12 per hour for regular music radio programming).

A minimum fee of $500 per year for each licensee was also established. Collecting for the royalties will be SoundExchange, a division of the RIAA, which will act as receiving agent for statements and royalty payments.

Reaction from the Industry

Reaction, thus far, has been mixed, although many people on industry message boards and mailing lists are saying the rates are too high.

Jonathan Potter, executive director of the Digital Media Association, an organization that lobbies for Internet webcasters, said the DiMA was pleased the royalty rates were closer to the what the webcast industry proposed, rather than 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," said Potter, in a statement.

"The Copyright Arbitration Panel's recommendations are a first step in a process designed to bring stability to the webcast radio industry," said Potter. "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."

Hilary Rosen, CEO of the RIAA, said in a statement: "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."

To see the documents go to: http://www.loc.gov/copyright/carp/webcasting_rates.html

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