Top Webcasters Ask Congress To Reconsider Royalties (June 9, 2007)

In early March, the CRB raised the per-performance fee to be paid by webcasters retroactively to .08 cents per stream per listener in 2006, .11 cents in 2007, .14 cents in 2008, .18 cents in 2009 and .19 cents in 2010, with a minimum annual fee of $500 per streamed channel.

The new rates are set to become effective on July 15 barring any intervention from the Federal Government, with retroactive royalties for 2006 due immediately.

The letter states that the CRB decision "shocked the industry and neutral analysts" and claimed that "The CRB-imposed royalties will cause immediate bankruptcy of the majority of the Internet radio industry when it becomes effective July 15, and will actually reduce royalties to record companies and artists as services go dark and royalties are never paid."

The letter continues, "The $500 annual minimum fee would cost only three companies well over $1 billion annually," and the royalties retroactive to 2006 exceeding $2 billion.

The letter to Congress also compared 'Net-radio royalties to those paid by the competing media: "Cable radio pays royalties of 7.25% of revenue, satellite radio less than 5%, but Internet radio, which now pays approximately 30% of industry-wide revenues, will be forced to pay between 60% and 300% of revenue plus $1 billion in administrative fees."

The letter urges Congress to act to stop the retroactive rates from becoming effective before the second deadline date of July 15. It was originally May the 15th.

The House and the Senate are both considering bills that would set aside the CRB rate hike and set a transitional royalty rate of 7.5% of revenues for 2006-2010."

The heads of the four companies also are asking Congress to consider that many online radio stations face closure under the new rates. "While process is important, we submit that the end result, which threatens the viability of the smallest, most innovative, most artist- and consumer-friendly promotional radio industry, is most significant," the letter states. "We ask you for your help to restore balance and fairness so that this new industry can survive and continue to pay artists reasonable royalties."

Congressman's response to Copyright Royalty increase (June 9, 2007)

This is a response to my concern from my representative in Congress.

Thank you for taking the time to contact me about H.R. 2060, the Internet Radio Equality Act.

As you are aware this bill would nullify the decision of the Copyright Royalty Judges to substantially increase royalties paid by internet radio web-casters. The proposed 300-1200 percent rate increase would have devastating effects on both small and large internet radio web-casters. Therefore, I have decided to co-sponsor of H.R. 2060, the Internet Radio Equality Act, believing in equal opportunity for business and free media.

I have long been a critic of over-consolidation in mass-media that stifles or eliminates public access to diverse sources of information. Internet radio provides opportunities for people to voice their concerns, introduce their art, and communicate globally. The majority of the proposed rate increases would arise from the decision of the Copyright Royalty Judges to charge internet radio web-casters a fee for every individual listener. This would be the same as charging terrestrial radio stations a fee for every person listening to their broadcast rather than a flat fee for the single use of material.

Currently, traditional terrestrial radio, such as AM and FM, are only required to pay a publishing royalty, which is often to the recording company, but not a performance royalty, which goes directly to the artist. With the advent of new mediums not clearly covered under existing federal law, the royalty structure has tended to include performance royalties in addition to publishing royalties. For instance, satellite radio providers must pay both a percentage to the performer and the publisher. H.R 2060 would rescind the Copyright Royalty Board Decision and impose royalty fees in line with the rates paid by satellite radio providers.

H.R. 2060 has received a great deal of bipartisan support in the House of Representatives but has yet to receive a committee hearing. I remain hopeful that this legislation will be brought to the floor for a vote before the new royalty structure becomes effective on July 15. Thank you for contacting me regarding this important issue.

Sincerely,

SAM FARR

Member of Congress