Internet Radio to Fall Victim to Unfair Rate Hikes

I don't know how many of you listen to internet radio but it is getting ready to die. Although internet radio is considered public domain and garners no income from advertisments, the record industry has lobbied a new law that will increase their current royalty rates by as much as 1200%! Even artists are opposed to this rate hike because it means that all the small stations that play their music will go off the air. Below is the body of an article from a Legal News website... For more info you can visit http://www.savenetradio.org/

From FindLaw Legal News and Commentary:

This Tuesday, June 26, is a "day of silence" on which webcasters will protest the hike in Internet radio royalty rates, scheduled to become effective July 15, and to apply retroactively to January 1, 2006. Webcasters have also asked the U.S. Court of Appeals for the D.C. Circuit for an emergency stay of the rates ruling.

The webcasters have an excellent point: Instead of increasing rates enough to properly compensate rights holders and encourage creation, the new rates are so unreasonably high that they are threatening the survival of an entire industry. Unless the new regulations are successfully repealed, the new rates will result in true perpetual "radio silence" for thousands of online radio stations - a loss for rights holders, distributors and consumers alike.

Background: How the Current Rates Came To Be

In 1998, Internet radio was added into the copyright law, via inclusion in the Digital Millennium Copyright Act (DMCA). Currently, webcasters running music-based radio stations pay an annual fee, plus 12 percent of the stations' profits, to the music industry's royalty collection organization, SoundExchange. These rates are applied evenly throughout the industry: Media giants such as Yahoo! pay the same organization, pursuant to the same calculation, as the smaller independent webcasters serving a tiny niche audience.
The rates are not only manageable, but they have enabled phenomenal growth in a relatively new industry. An estimated 70 million people regularly consume Internet radio - and this number has been growing steadily. To serve this audience, there are literally tens of thousands of online radio stations available in the U.S. alone.

What changed, and why? The answer is that the Recording Industry Association of America (RIAA) naturally sought to be better compensated from the revenues of this booming industry. Webcasters and others with an interest in keeping the rates low strongly opposed the change. Nevertheless, the RIAA successfully lobbied for a rate hike.

On March 2 of this year, the Copyright Royalty Board (CRB) issued its ruling on the matter. (The CRB is a panel of three retired judges established in May 2005 and empowered by Congress to determine royalty rates for broadcast material.) The ruling said that public broadcasters must pay webcasting royalties in the same manner as commercial broadcasters do. The panel also declared that royalty rates will increase by approximately 30% in each of the next two years. In addition, each station must now pay an annual per station "administrative fee" of $500. Further, as noted above, the new rates, though effective on July 15 of this year, will be applied retroactively to January 1, 2006. All in all, this translates to what is, at a minimum, a whopping 300-1200% royalty rate increase.

As a result, not only must every public radio webcaster pay crippling royalty rates, each must also endure the burden of increased record-keeping and reporting requirements and carefully consider whether to participate in expensive copyright tribunals and CRB hearings to challenge the ratings policy.