Net Radio Royalties Set. CARP Recommedations Halved.

By Richard Menta 6/21/02

The Library of Congress has made a decision on royalty rates for Online radio streams, setting a fee that all US based Net radio stations will have to pay to the record industry for the privilege of playing their music. The good new is that the Librarian of Congress halved the recommendations of the Copyright Arbitration Royalty Panel's (CARP).

The bad news is that those figures may still be too much.

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The Librarian of Congress, James H. Billington, rejected the CARP recommendations last month. Saying the CARP rate "was arbitrary and not supported by the record of evidence," he postponed the pricing structure 30 days, arriving at an alternative.

The alternative calls for a royalty of 0.07 cents per listener per song , half of the CARP rates calling for .14 cents per listener per song.

While significantly reduced, 70 cents per thousand listeners per song adds up very quickly when loyal listeners, in say a work environment, stay hooked for several hours a day 5 days a week.

Any radio station craves for such an audience. Unfortunately, most Net radio stations have not developed a profitable business model yet. With rates charged on a per listen basis versus those based on revenues, the fees easily can exceed the money that is brought in.

Terrestrial radio stations are exempt from such per-play rates for over-the-air broadcasts - that is unless they also stream them over th Net. Most have already pulled their streams to avoid this added fee.

To make matters even worse for Webcasters, these rates are retroactive to 1998, the year the Digital Millennium Copyright Act (DMCA) was passed. Some, including tiny budgeted college radio stations, are now on the hook for hundreds of thousands of dollars. And that is with a modest Net audience.

The record industry is unhappy with the decision too. They were hoping for egregious fees so they can put all the competition out of business and take their place with their own radio services.

The President of Recording Industry Association of America Cary Sherman said the rate "simply does not reflect the fair market value of the music as promised by the law." Fair market in Sherman's opinion is a rate that allows the RIAA to orchestrate a record industry monopoly on Net radio.

With Clear Channel literally monopolizing and homogenizing Top 40 radio, listeners are flocking to the alternatives offered by Net radio. The record industry would like to take control of that audience and the music we listen to.

But if listeners are running from the pabulum Clear Channel is feeding them, how long will they stand for a like product from the record labels?

The answer is that true Net radio will probably expatriate to other countries where the reach of the DMCA is negated. If webcasting is indeed destined to be a viable industry, it may not be in this country.

My prediction? Look for Net streaming companies to set up shop in Canada, Mexico, and other countries for the sole purpose of redistributing US Net station streams under foreign laws.

Then look for another several years of lawsuits as the music industry says that doesn't count because the origin of the stream is still from US Webcasters, even if the music files and technology are stored overseas.

Bottom line, there are a lot of American technology folks on the unemployment line right now who are going to stay there as the labor market crosses the border.


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