Court Rules Against Broadcasters

While a U.S. Copyright Office arbitration panel began hearings this week to decide on the rates for webcasters, a Philadelphia court upheld a ruling on Thursday saying that terrestrial radio stations must pay extra fees when streaming their stations over the Internet.

The Digital Media Association (DiMA), an industry group that acts on behalf of webcasters, said that this ruling levels the playing field between Internet radio companies and terrestrial stations. Now, both groups must pay the same fees that are in the process of being decided during the U.S. Copyright's arbitration hearing. (See related story.)

The radio stations are claiming that they already pay a performance fee to labels and say they shouldn't have to pay again to stream. But critics say that they should face the same legislation as Internet radio companies.

Naturally the broadcasters weren't happy. NAB President and CEO Edward Fritts said in a statement: "Broadcasters, record companies and consumers have long enjoyed a symbiotic relationship whereby airplay on radio stations benefits all parties, along with generating enormous revenues for the record labels. We’re disappointed that this unique relationship will be disrupted by the court ruling. Broadcasters currently pay in excess of $300 million annually in music licensing fees to compensate songwriters and music publishers. Any additional fee to compensate record companies would be unfair and unreasonable, and for that reason, we are reviewing our options."

Oddly enough, the record labels and webcasters were on the same side. Hilary Rosen, the CEO of the RIAA said in a statement: "We are pleased that the court upheld the rights of artists and record companies. We now look forward to working with the broadcasters for a smooth transition into this marketplace."

Many analysts believe that the ruling may force terrestrial radio stations to further pull back from streaming. Already many large radio groups stopped putting their radio stations online after a dispute with ad agencies regarding the payment to voice artists. And one of the largest radio groups, Infinity, owned by Viacom, has essentially refused to stream any of its stations.

New Webcasting Legislation

Meanwhile, Representatives Chris Cannon (R-UT) and Rick Boucher (D-VA), introduced a new bill on Friday that hopes to make it easier for companies to stream online. The Music Online Competition Act (MOCA) has the backing of DiMA.

According to DiMA, MOCA (http://www.digmedia.org/whatsnew/moca.pdf) is not meant to amend the DMCA, just to update provisions in the U.S. Copyright Act by clearing up issues for a digital world. For one, it affects incidental copying such as storage on hard drives, which the labels are looking to charge for. It also helps online retailers by eliminating fees for streaming song samples.

Still, it's unlikely that the labels will take kindly to more legislation. In a statement by Rosen of the RIAA, she said that the bill won't help deliver music to fans. "It is essentially a solution — a very bad solution — in search of a problem," she said. "The bill substitutes government regulation for the marketplace. This is not only wrong, it is also inconsistent with the strongly held views of experts and the private sector that government regulation of the Internet would be a disastrous mistake."

DiMA meanwhile applauded the legislation. "The Music Online Competition Act will ensure that consumers have Internet access to legal high-quality music, that creators get paid rapidly, and that competition — rather than lawsuits — will drive this marketplace forward," said Jonathan Potter, executive director of DiMA. "I am optimistic regarding the potential for hearings on the Music Online Competition Act and related issues this fall in the House Judiciary Committee."