New Day of Infamy Coming? May 21, 2002

But the threat of an impending government ruling on what royalty fees the webcasters pay would be approved could reset the calendar back to 1995 before anyone invented streaming audio or MP3s. Many webcasters would be rendered silent.

The U.S. Copyright Office established a Copyright Arbitration Royalty Panel (CARP) to decide what fees Webcasters should pay - and will owe retroactively to 1998 - to record companies. And now the CARP's recommendations, which include paying a fraction of a cent every time a song plays, are up for a vote next month. The decision will be forwarded as a recommendation to the Library of Congress.

Webcasters, including the broadcast radio stations that stream their signals over the Internet, are crying foul over the proposed fees they would be required to pay a substantial amount of money to the copyright tribunal that handles the distribution of the royalty fees. Many radio stations would simply cease their Internet casts while those who webscast only would see more than half of their revenue disappear, so low that they could simply go out of business altogether.

The Day The Music Died

The dispute between big record companies and big broadcasters caused most commercial stations to pull their webcasting from service for several months last year before a temporary compromise was worked out. Should the arbitration panel's recommendation be adopted, it would be a disaster for the ability of even large commercial stations to simulcast on the web.

The royalties, similar to current ASCAP and BMI payments but to a theoretically worldwide audience, have been estimated by Arbitron Webcast VP/GM Bill Rose to be likely to cost a New York City music station something like $15 million a year -- a quarter of such a station's annual billing from advertising.

But at least a big corporate radio station has billings; what the copyright decision could unquestionably mean is the death of music for Internet-only radio stations, which tend to be the province of music-lovers, nerds, activists, egomaniacs, and other small-time operators with a vision and the drive to make it happen.

The beauty and the curse of the web is that anyone with the right software can tune in, if only they can find you; even the most popular Internet-only stations still have audiences comparable only to small-market on-air stations, but in theory they can reach the world -- and that's what has the record industry scared.

Recall that National Public Radio and the National Association of Broadcasters pressured Congress a couple of years ago into gutting the FCC's Low Power FM proposal, so that it left the large urban cities most in need of breaking the corporate monopoly on media as the areas least likely to be eligible for such stations. In the wake of that gutting, pirate radio -- despite fierce, renewed FCC crackdowns -- is making yet another comeback. (Funny thing about those public airwaves; the public keeps wanting to use them.)

Now, the NAB is getting a taste of its own medicine: corporate greed that is preventing it from reaching desired listeners. Don't feel too badly for them, though -- they've still got free leases, with no accountability or need for public service, on mega-valuable broadcast properties that in theory use airwaves belonging to you and me.

The real losers are musicians outside the mainstream, folks whose creations might be played on the Internet but not on stale commercial radio. And, of course, also left high and dry are those same media democrats who, unable to crack the airwaves, turned to the Internet to express themselves through radio, the most immediate of mediums, and who are now finding that potentially "illegal," too.

Time was when rock and roll broke the BBC's monopoly on Britain through offshore pirate broadcasters like Radio Caroline, and a generation of AM rockers grooved on Mexican clear channel stations that ignored American tastes in music and wattage. Can a generation of foreign Internet pirates be next?

Royalty Fees May Silence Web Radio

"The CARP rates as they are proposed right now would make it impossible for Beethoven.com to continue operation or to even formulate any viable business model for Internet radio," said the classical music site's director, Kevin Shively. "They want to charge us per listener, per track played - every time one listener hears one track they want 14/100th of a cent."

Internet radio proponents say the people who would suffer the most from the new rules would be online music audiences.

John Jeffrey, lead lawyer for Live365, the largest Internet radio provider, explained: "If you want to listen to anything other than Top 40 music [on the radio] there's nothing to listen to, but you can find any type of music on the Web."

The music sites have benefited from the vast number of people who can access the Internet, making less popular genres flourish online, he said.

"The percentage of classical music listeners in a small market would be very low. There just aren't enough people in their broadcast range to make it viable," Jeffrey said. "But when you can make your music available to the world, you have a much bigger net to amass a bigger audience."

Yet, despite quickly growing audiences, the stations are still struggling. Most are not turning a profit yet and 1,100 have already gone out of business in the past year, Shively said. "Anything that would be overly aggressive in terms of royalty would just push the rest of us over the edge."

But the Recording Industry Association of America (RIAA) said in a recent statement that it "wants all Webcasters, large and small, to succeed" and "the CARP rates will not put Webcasters out of business."

The statement also asserts that the consequences of the proposed royalties are being blown out of proportion.

"The CARP rates have become the subject of an intense misinformation and propaganda campaign (so-called 'grassroots' but really ginned up by sophisticated lobbyists in D.C.)," the RIAA stated.

Kurt Hanson, publisher of Rain: Radio and Internet Newsletter , disagreed with the description. "We're a bunch of small, independent Webcasters who wouldn't have a clue how to be sophisticated lobbyists," Hanson said. "The RIAA is trying to position themselves as the little guy - an approach that smacks of desperation."

But the CARP report assures music fans of its sincerity. "The subject matter underlying this proceeding - access to music - spans from ancient antiquity to state-of-the-art-technology. ... The Panel is cognizant that the decision it renders ... could significantly affect citizen access to music for years to come."

Hanson created SaveInternetRadio.com to educate people about the impending legislation.

"The clock is ticking," he said. "The copyright office has to accept, modify or set aside the CARP recommendation by May 21."

Hanson said this ruling is an important one for the music industry as a whole. "If the CARP rule is accepted, it looks like it favors the RIAA, but I think they would win the battle but lose the war," he said. "If 50,000 stations go off the air, the RIAA is going to look like the enemy to music fans."

The RIAA's statement puts a positive spin on the situation, saying that Webcasting represents an "important and growing source of revenue for record labels, as well as for artists and performers."

But Webcasters like Shively are nervously awaiting the May decision. "Our entire industry is hanging in the balance," he said.