Webcasters sound off on Net radio fees

SaveInternetRadio.com will begin broadcasting at noon on Tuesday, featuring music from independent label Garageband Records and interviews with lawmakers and artists backing the industry. The program aims to raise awareness and money for the cause of Webcasters, who say they face extinction unless Webcasting royalty rates approved this summer are set aside.

"These broadcasters are goldfish swimming in an ocean with sharks," said Kevin Shively, chairman of the International Webcasting Association Legislative Committee and business and Web development manager at classical music Net station Beethoven.com. "We want to continue to raise awareness of this issue. We're counting on Congress to act to save Net radio from going out of business."

The protest comes as the House of Representatives canceled a vote that would have postponed the royalty rate from taking effect until April. The delay would have allowed an appeals court to review arguments by Webcasters and the record labels, both of which have challenged the proposed rate.

Webcasters are seeking lasting relief from a rate set this summer by the Librarian of Congress of 0.07 cent per song, per listener. Hundreds of small Webcasters have already stopped streaming music under the threat of the fees, which critics say will result in consolidation of Net radio under a handful of large, well-funded companies.

One suggestion to protect small Webcasters, floated in July by Rep. Jay Inslee, D-Wash., would exempt businesses with revenue of less than $6 million a year from the new fees.

Shivley said Inslee is expected to appear on the SaveInternetRadio broadcast to discuss the Webcasting issue.

Challenges ahead
Despite some high-profile backers in Congress, the Webcasters face a tough fight. The recording industry has also challenged the Librarian of Congress rate, saying it is too low.

A Recording Industry Association of America (RIAA) representative did not immediately respond to an e-mail request for comment.

Not all record labels see the Webcasting issue in the same light. Independent labels that lack the marketing muscle to make the playlists on offline radio have turned to Net radio as way to get more exposure for their artists.

Garageband Records CEO Ali Partovi said his company believes the promotional value of Net radio offers a compelling business argument for offering royalty-free licenses to Webcasters. He said Garageband on Tuesday will begin offering royalty-free access to the company's stable of undiscovered talent with the SaveInternetRadio campaign but plans to extend the arrangement to all Webcasters indefinitely.

"We're not saying one side is right or wrong," he said. "But we do believe that there is a model for royalty-free licenses that works."

Partovi contrasted the situation in Net radio with terrestrial radio, where labels pay millions of dollars to stations to win exposure for artists.

"In both cases, someone is kind of getting screwed," he said. "We're offering a middle path."

Garageband represents some 50,000 unsigned artists, offering a clearinghouse for Webcasters to play little-known and undiscovered musicians. Partovi said eight of its artists have signed major label deals, including overnight heavy metal success Drowning Pool, which signed a deal with Wind Up Records last year. The band's debut "Sinner" album has since gone double platinum.

The royalty controversy stems from landmark digital copyright legislation passed in 1998, in which Congress said Webcasters would be required to pay labels and artists a fee to play their music online. This created a new type of royalty, as ordinary radio stations have long paid songwriters a small royalty but have never paid labels or artists themselves.

But Congress neglected to say exactly how much the online companies should pay per song. For years, record labels and the biggest companies attempted to negotiate an appropriate rate, but they could not find a compromise between wildly different proposals.

A few companies, with Yahoo as one of the only recognizable names, made their own separate financial peace with the labels. Most companies waited, taking advantage of a legal provision that allowed them to balk at paying royalties until the U.S. Copyright Office set an official rate.

That panel recommended a rate of 0.14 cent per song, per listener, but it was set aside by the Librarian of Congress, who set the 0.07 cent rate now in dispute. Both sides appealed the new rate in August in the United States Circuit Court of Appeals for the District of Columbia.