Court Denies Internet Radio Rate Stay

By Richard Menta 7/12/07

Webcasters have reason to fret. Yesterday afternoon a federal appeals court denied webcasters an emergency stay of huge royalty hikes that will hit them in a few days. The Webcasters sought the stay from the U.S. Court of Appeals for the District of Columbia Circuit in an effort to seek relief from significantly increased royalty charges levied upon them by the US Copyright Board. Many small webcasters argue that they cannot sustain their business at the higher rates and will have no choice but to close up shop unless they are lowered. The new rates begin on Sunday, but according to court Webcasters didn't meet the high burden necessary to establish that a stay should be granted.

In a press release issued today SaveNetRadio spokesperson Jay Ward stated "We are disappointed that the Court failed to acknowledge the irreparable and quite frankly, devastating effect these new royalties will have on the Internet radio industry," said Ward. "An invoice of more than 1 billion dollars must be paid in four days, which is unfathomable for an industry that grossed less than $200 million last year. This is a setback, but it is certainly not the end of the road.

The "invoice" that Ward refers to comes from the fact that the new hikes are retroactive to Jan. 1, 2006 and a lump sum payment is due from each Webcaster. There is still the possibility that recently introduced legislation called the the Internet Radio Equality Act will vacate the rate hike and set the rate on par with those paid by the satellite radio services. Satellite radio pays 7.5% of revenues while the new rate schedule for Internet radio charges a flat fee for each time a song is played. The fee is the same for all webcasts, regardless of the size of Internet radio company or revenue it draws. The new fees are expected to drive out non-profit webcasters including college radio.

According to the Radio and Internet Newsletter "The House Commerce Committee is calling on representatives from the webcast and recording industries to meet today discuss a settlement that would provide Internet radio operators with a workable alternative to the proposed CRB [Copyright Board] rates. Whether the meeting will bear fruit in time for the small Webcaster waits to be seen.

"We are pleased by this decision, which vividly demonstrates that the Copyright Royalty Judges got it right when they set royalty rates and terms for the use of music on Internet radio," said SoundExchange Executive Director John Simson in a statement. "This is a major victory for recording artists and record labels whose hard work and creativity provides the music around which the Internet radio business is built. Notwithstanding this victory, we continue to reach out to the webcasting community to reach business solutions."

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