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Webcasters threaten to sue RIAA

A group representing small Webcasters says royalty agreements negotiated last year could put thousands of Net radio stations out of business.

A group representing small Webcasters is threatening to sue the Recording Industry Association of America on antitrust grounds, fearful that hundreds or thousands of stations will be pushed offline.

The Webcaster Alliance, a group representing about 300 Net radio stations, says royalty agreements negotiated last year at the behest of Congress and the Library of Congress threaten to put a number of small stations out of business.

The group's members have not paid royalties to copyright owners under any of several possible payment schemes, one of which was passed last year by Congress in an attempt to protect the economic viability of small Net radio stations. The group contends that the big record labels and medium-sized Webcasters tailored even that agreement to shut out small operators.

That agreement "appeared to establish an anticompetitive program designed to exclude small radio stations," said Perry Narancic, an attorney representing the alliance. "Now we have people existing in a great sense of uncertainty, because neither of the regimes make economic sense for them."

The resurgence of the small Webcasters' claims underscores the continuing economic uncertainty in a medium struggling to retain its grassroots origins.

Unlike the case for broadcast radio, Congress early on imposed rules requiring Net radio stations to pay royalties for music played online. However, the fees were delayed for years to let labels and Webcasters negotiate appropriate rates, so thousands of tiny stations operating on shoestring budgets sprang up.

Last summer, the Librarian of Congress finally set royalty rates, asking Webcasters to pay 0.07 of a cent per song played. Small, independent Webcasters immediately protested, saying that that would put them out of business.

In response, Congress passed the "Small Webcasters Settlement Act" late last year, which created a new plan under which Webcasters could instead pay a percentage of their revenue as royalties. Negotiations between one group of small Webcasters and the Recording Industry Association of America (RIAA) set that rate at between 8 percent and 12 percent of stations' revenue.

The Webcaster Alliance cried foul, claiming that it had been left out of negotiations and that those rates would still put the majority of small and hobbyist stations out of business. In the ensuing months, the alliance repeatedly tried to open new negotiations with the RIAA, to no avail.

The alliance is proposing the reinstatement of a $500 minimum annual fee for small stations, which was featured in earlier proposals. Currently, all of its members are out of compliance with the royalty requirements.

The group says it doesn't expect a response from the RIAA but is willing to go to court. The RIAA is illegally "attempting to manipulate the small commercial Webcasting market in order to unlawfully maintain its core monopoly," the group contended in its letter to the music trade association sent Tuesday.

The RIAA has said there is no need for additional rounds of negotiations.

"Copyright owners and performers have diligently negotiated multiple royalty arrangements in order to ensure a vibrant Webcasting business," said RIAA spokesman Jonathan Lamy. "It is unfortunate that there are still entities that want to exploit for commercial gain the creative efforts of others without having to pay fair rates for their use."