Source

LOS ANGELES, July 12 (Reuters) - A federal appeals court has denied a petition by U.S. Internet radio stations seeking to delay a royalty rate hike due July 15 they say could kill the fledgling industry.

While the July 11 ruling by the U.S. District Court of Appeals for the District of Columbia Circuit was a setback, the SaveNetRadio coalition of Webcasters vowed it would continue fighting the hikes in Congress.

Late last month, thousands of U.S. Internet radio stations, organized by SaveNetRadio, held a "Day of Silence" to protest the hikes in performance royalties paid to musicians and record companies.

Under a Copyright Royalty Board ruling in March, Webcasters will pay a performance royalty of $0.0008 for each listener of each song in 2006, rising to $0.0019 in 2010. The first payment, backdated to Jan. 1, 2006, is due on July 15.



The new ruling means the six biggest Internet radio stations -- Pandora, Yahoo (YHOO.O: Quote, Profile, Research), Live365, RealNetworks Inc. (RNWK.O: Quote, Profile, Research), Time Warner Inc's (TWX.N: Quote, Profile, Research) AOL and Viacom Inc's (VIA.N: Quote, Profile, Research) MTV Online -- will pay 47 percent of their anticipated 2006 combined revenue of $37.5 million in performance royalties, said SaveNetRadio.

"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 Jake Ward, a spokesperson for the SaveNetRadio coalition of Webcasters, net radio listeners and artists.

SoundExchange -- a non-profit group representing more than 20,000 artists, 2,500 independent record labels and four major record companies -- collects the royalties from Internet and satellite radio, as well as digital cable.

Ward said the ruling by the U.S. District Court of Appeals in Washington puts the ball squarely in the hands of Congress, which has already received more than half million messages urging members to pass legislation to cut the royalty rate to 7.5 percent of a company's annual revenue, bringing Internet radio in line with the rate by satellite radio.



© Reuters 2007

Why is it that all these companies that are raking in billions of dollars a year are all classified as non-profit? Should I have not incoroporated my company and simply figured a way to cheat on my income and called myself not for profit?
e.g. soundexchange, riaa, mpaa, etc

Yeah, really!

In that case . . .

no more money for ASCAP from me
no more money for BMI from me
no more money for SESAC from me

and DEFINITELY

NO MORE MONEY FOR SOUNDEXCHANGE FROM ME.

I am keeping all the money to myself and putting it back into the station.

And that is FINAL!

Why is it that all these companies that are raking in billions of dollars a year are all classified as non-profit?

Pay yourself (or other company officers) an amount equal to what would have been profits and your business becomes non-profit.

Of course, there are forms to fill out...

There's more to this story because SoundExchange decided to NOT start charging the higher rates on Monday.

"There's more to this story because SoundExchange decided to NOT start charging the higher rates on Monday."

Funny. I have been keeping tabs on this saga from the very beginning and I never heared anything about SoundExchange making that decision.

" There's more to this story because SoundExchange decided to NOT start charging the higher rates on Monday. "

I'm getting conflicting reports on this.

http://www.wired.com/entertainment/music/news/2007/07/webcasters_face_music

While some claim that SoundExchange
said they weren't going to start charging ..

" A SoundExchange representative cautioned that the proposal did not constitute a formal deal, and added that neither SoundExchange nor Simson had ever promised not to enforce the current royalty scheme. "

from the above linked article.

Then there's this

" In addition to the minimum caps proposal, Webcasters were given assurances that negotiations would continue to work out breathing room for small and non-commercial broadcasters. "

from the same article.

In some ways, it sounds like SoundExchange is now
going to 'negotiate' a deal small webcasters
'can't refuse' .

They'll negotiate all right, as long as they have
the threat of dropping the bomb if the
small webcaster doesn't 'comply' .

Typical industry crap.
Negotiate at gunpoint.

Thanks for the info and links Dreddsnik! (Saves me from having to post it!)

-----------

"Typical industry crap.
Negotiate at gunpoint."

Amen brother.

BusinessWeek says: "The reprieve came July 12 when some 20 representatives of music labels, traditional radio networks, and Webcasters met on Capitol Hill, with industry royalty collector SoundExchange agreeing to hold off on the new fees while negotiations continue."

PCWorld says the same thing.

" " A SoundExchange representative cautioned that the proposal did not constitute a formal deal, and added that neither SoundExchange nor Simson had ever promised not to enforce the current royalty scheme. "

"
Date: July 14, 2007 @ 12:26 AM
BusinessWeek says: "The reprieve came July 12 when some 20 representatives of music labels, traditional radio networks, and Webcasters met on Capitol Hill, with industry royalty collector SoundExchange agreeing to hold off on the new fees while negotiations continue "

So,
Which is it really, I wonder ???

Even if Business week is correct ...
There is NO formal agreement from
soundExchange ... only there 'promise',
their 'word' .

In other words ..
' We promise not to collect as long as you do what we tell you ' ..

See what I mean ?

They can negotiate easily as long as they
hold the threat of outrageous fees over
the head of those they 'negotiate' with.

So many big mags tout the KINDNESS
of soundexchange, 'agreeing' to hold off.

Nope.

It's just another kind of lead pipe, to bust against virtual kneecaps.

What strikes me as odd is that this entire process of creating the CRB, going through the negotiating process with them, and spending however much time it took for them to come up with their fee structure...

...was a total waste of time and money.

Now SoundExchange gets to negotiate its rates with each separate webcaster, which is exactly what the CRB was created to prevent.

The US Copyright Office fails its mission. Again.

Is Internet Radio The Sacrificial Lamb In Digital Music War?The first major financial clash between old media and new occurs on Sunday, when an industry-fashioned fee schedule goes into effect for internet radio.


The clash was set up in March, when the Copyright Royalty Board (CRB), part of the Library of Congress, almost tripled royalty rates -- and also made them retroactive. It also added an annual $500 fee per station or channel. The new fee proposal was submitted by SoundExchange, an industry group.


The clash was assured on Wednesday, when the D.C. Circuit Court of Appeals chose not to act on an appeal of the new rate structure (it denied an emergency stay).


There are two measures before Congress, S1353 and HR 2060, which would roll back the fees. Neither measure has seen legislative action. However, the Washington Post reports that members of Congress organized a meeting of SoundExchange and internet broadcasters yesterday. At that meeting, SoundExchange "offered an annual fee cap of $50,000."



Let's put the $50,000 into perspective.

The world's three major copyright holders' groups "collectively charge terrestrial broadcast radio stations $972 per year per station for the rights to broadcast exactly the same music to an equivalent or larger audience." And the NY Times reported in 2004 that MTV "does not pay (royalties) for video clips from independent producers."


This concession also begs the question: how does SoundExchange have the right to negotiate fees approved by the CRB? Is the Copyright Royalty Board merely a rubber stamp for record labels?


The CRB is a new entity -- enabled by the Copyright Royalty and Distribution Reform Act of 2004 (P.L. 108-419) and finetuned by the Copyright Royalty Judges Program Technical Corrections Act (P.L. 109-303).


Enabling legislation for the CRB was sponsored by Rep. Lamar Smith (R-TX) with two co-sponsors: Rep Howard Berman (D-CA) and Rep John Conyers, Jr. (D-MI). Smith's 2004 re-election bid was underwritten by Clear Channel Communications, Sony Corp of America, Time Warner and Viacom Inc. He also introduced controversial Digital Millennium Copyright Act legislation in April 2006.



As Wired reported in the spring, this is a major bottomline hit for most internet radio:



In the old, percentage-based fee system, webcasters paid SoundExchange -- the Recording Industry Association of America-associated organization that pushed the Copyright Royalty Board to adopt the new rates -- between 6 percent and 12 percent of their revenue, depending on audience reach...

If Pandora has to pay the annual $500 minimum for each channel, Hanson said, its sound-recording royalty bill for 2006 alone would be capped at about $2 billion (based on the service's 300 million registered users, each of whom gets to create up to 100 unique channels).



The tactic -- use legislation or lawsuits or regulatory power or political connections to thwart competition -- is an age-old one. Think VCR versus Hollywood. The television industry objected to the VCR because it meant mere mortals could record TV shows and watch them over and over again -- or at some other time than the regularly scheduled broadcast -- or (horrors!) fast-forward through commercials. Sony took the case to the US Supreme Court, which ruled in 1984 (5-4) that such recordings were "fair use."



The RIAA is doing something similar today with its controversial suits against teenagers accused of downloading music illegally.



In many ways, the actions of the record labels are like the proverbial Dutch boy with his finger in the dike. It's a stop-gap measure. Eventually, the labels will be forced to make peace with the age of digital music. Until then, expect more legal and regulatory maneuvers.




But don't count on hearing about them from the "radio" that is your computer, if the station also plays music.




Internet Radio Equality Act of 2007 - S1353

Internet Radio Equality Act - HR2060
The Sound of Silence
Copyright Fee Proposal Dooms Online Radio; Act Now If You Care
Sony v. Universal City Studios
Broadcast Law Blog