It’s been a while since we reported on the status of webcasting
and the ongoing debate about payments of performance royalties, so it’s
time for a rundown:
Background
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Last February 2002, the US Copyright Office released its recommendations
on webcasting rates and reporting requirements. Following the release,
both webcasters and copyright holders (i.e. labels) mounted campaigns
to express their opposing views on the recommendations, urging their
supporters to register their opinions with the Copyright Office and
their elected representatives.
The FMC filed a number of papers with the Copyright Office during this
period, urging the agency to develop a multi-tiered rate and licensing
structure that distinguished between the various webcasting business
models and encouraged the growth of this emerging media. We also proposed
payments based on percentage of revenue instead of a per-listener payment.
This not only reflected payment models currently under use in the terrestrial
world, but was also scalable according to the abilities of webcasting
stations to generate revenue.
Read our summary proposal filed with the Copyright Office here
Then last June, the Librarian of Congress released his decision on the
webcasting rates based on the findings of the Copyright Arbitration
Royalty Panel (CARP). Briefly, the Librarian rejected the CARP’s
findings and cut the performance royalty rate in half; from .14 cents
to .07 cents per “performance”.
Overall, reaction to this decision was negative. The RIAA denounced
the rate reduction, saying that is “simply does not reflect the
fair market value of music as promised by the law”. Small webcasters,
on the other hand, argued that the installation of this per-performance
rate, which was retroactive to October 1998, would set rates so high
that they would hasten the destruction of the emerging webcasting world
and force many small webcasters out of business. Indeed, hundreds of
small/college webcasters took down their streams following the June
2002 decision, unsure about their ability to pay the performance royalties.
Then in November 2002, based on the request of small webcasters for
relief, Congress passed the “Small Webcaster Settlement Act”
(SWSA). Among other things, the Act allowed copyright owners [labels
represented in negotiations by SoundExchange] to offer webcasters a
percentage-of-revenues royalty rate, essentially allowing the parties
to mutually agree to override the “per-performance” rate
handed down by the Copyright Office in June 2002. It also suspended
all royalty payments due from noncommercial webcasters until June 30,
2003, giving both sides time to work out a new voluntary royalty structure,
and added a new definition of "noncommercial" that permitted
webcasters who were for-profit entities to file for nonprofit status,
as long as they had a "commercially reasonable expectation that
such exemption shall be granted."
Since the passage of the SWSA, groups of webcasters and copyright owners
[labels and SoundExchange] have been negotiating privately to come to
reasonable terms of payment for the use of music. But, instead of setting
a rate that applies across the board to all webcasters, rates have been
set on various tiers that take into consideration the size of the webcasters’
audience, their revenues, and their status as a commercial or nonprofit
entity – a lot like what the FMC was proposing last spring.
Michael Papish, CEO of Media Unbound and a policy analyst for college
station WHRB and the Intercollegiate Broadcast System, has been an active
participant in these negotiations and has distilled the various agreements,
which are now posted on the FMC website here
Kurt Hanson’s Radio and Internet Newsletter also has a chart showing
the various rates here
as well as some great analysis of the webcasting negotiations.
In June, the recording industry reached a milestone settlement when
it finished its negotiations with college and noncommercial broadcasters.
Under the terms of the agreement, college stations will pay a flat rate
of $250 in 2003, which will increase to $250 or $500 in 2004 depending
on the college’s enrollment. Other noncommercial broadcasters
pay about this much as well.
The agreement with college and noncommercial webcasters should allow
those webcasters to start streaming again. There are, however, a number
of points in these negotiations that will make it difficult for some
small webcasters to grow significantly without paying a much greater
rate. In addition, the reporting requirement that was adopted by the
Copyright Office has been waived for college and non-commercial webcasters
in 2003 and 2004. While the FMC understands that the original reporting
requirements were overly burdensome for small stations, we are hopeful
that the small webcasters and record labels will continue to work together
– as outlined in their agreement — to establish a simple but
sufficient set of reporting requirements that will ensure that all musicians
are compensated directly for songs played.
Here are a couple of articles about the college settlement:
College Radio Will Stream On
A deal between the recording industry and noncommercial webcasters will
keep more college stations online, but DJs are still limited in terms
of how they can arrange their playlists.
By Katie Dean
Wired.com,
June 5, 2003
College, Noncommercial Webcasters to Pay Discounted Royalty Rates
The recording industry has granted college radio stations and other
noncommercial broadcasters deep discounts on the fees they pay for transmitting
music over the Internet, wrapping up a series of hard-fought deals with
webcasters.
By Jon Healey
Los
Angeles Times, June 4, 2003
Non-Comm Streamers Reach Royalty Deal with SoundExchange
By Paul Maloney
Radio
and Internet Newsletter, June 2, 2003
In the next newsletter we’ll update you on the status of Low Power
Radio and the results of the “interference testing” that
was conducted by the FCC to determine whether LPFM stations could be
licensed in more populated areas.