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U.S. Webcasters Facing Harsh Royalty Rules

A panel of judges on the U.S.’s Copyright Royalty Board have upheld (PDF) a previous ruling which substantially increases the amount of royalties Internet broadcasters and Webcasters would have pay for the use of music in online radio and other streaming media. Under the new royalty structure many Internet broadcasters and terrestrial stations offering online feeds of their programming may be forced to shut down operations.

National Public Radio and several independent Webcasters had appealed the Copyright Royalty Boards’ decision to raise royalty rates last March, arguing the new rules amounted to an "abuse of discretion" and would see royalty rates for online broadcasters rise so significantly that most, if not all, online broadcasters would be put out of business. The Copyright Royalty Board rejected the appeal, noting that the parties did not present any new evidence or error in previous proceedings which would warrant overturning the previous ruling.

Appeals processes are typically limited to consideration of new evidence which was not introduced or available during initial procedures, or to address errors in process which could have materially impacted a cases’s outcome. In upholding its original decision, the Copyright Royalty Board did change how royalties for online broadcasters would be determined through 2008; instead of a per-song fee, broadcasters will be able to pay a royalty based on the average listening hours.

The new royalty rates are schedule to go into effect May 15, 2007, unless the U.S. Court of Appeals for the District of Columbia Circuit agrees to hear a further appeal.

Under the existing royalty arrangement, online broadcasters had to pay an annual fee, plus twelve percent of their profits to the SoundExchange, a music industry organization set up to collect royalties from broadcasters. The new terms (PDF) change payments to a flat-fee of $0.0011 for each song played on a per-listener basis, applies the new fees retroactively to the start of 2006, and introduces a schedule which more than doubles the per-song rate by 2010.

According to most Internet broadcasters, the new royalty structures are "irrationally high," totalling more than four times what satellite and broadcast radio pay, and effectively tripling royalty payments to be paid by many Internet broadcasters. Pandora has warned its users the new fees will shut down "every Internet radio site." A campaign for "save Internet radio" peition campaign has been launched in hopes of influencing members of Congress to forestall the new royalty regime.

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