The issue stems from a recommendation made by the Copyright Arbitration Royalty Panel (CARP) that would require Webcasters to pay record companies 0.14 cents per listener per song and over-the-air broadcasters to pay 0.07 cents per song for streaming online.
Some larger media companies with interests on both sides of the issue, such as AOL Time Warner, have stayed on the sidelines of the controversy. Hundreds of small Webcasters, however, say the new fees would exceed their revenue, crushing them financially and potentially forcing them out of business.
The hearing comes nearly a week before the U.S. Copyright Office, which appoints members to CARP, is expected to vote on the rates. Independent Webcasters have been protesting the proposed licenses,Congress and support from listeners for a "Day of Silence," in which many small online radio stations shut off their music streams.
At the hearing before the Senate Judiciary Committee, the Recording Industry Association of America (RIAA) testified that it supports Webcasting and wants online stations to succeed. But it said artists and record companies should be fairly compensated for the performance of their music in this emerging media. The compensation, according to the RIAA, should be determined through a fair process and should be based on the market value of the sound recordings.
"If Webcasters don't succeed, artists and record companies stand to lose an important new revenue stream," Hilary Rosen, chief executive of the RIAA, said in her testimony. With the music industry hit hard by piracy, "new revenue streams are more important than ever in a world where new technologies are dramatically changing the way people get and listen to music."
The Webcasters, however, disagreed with Rosen's statements, saying they are not asking for a free ride. They said they want to pay royalties to recording artists and ensure all creators are fairly compensated for their work. But they said the proposed fees would be 200 percent of current revenues for most independent Webcasters, forcing many to shut down.
"It's disingenuous to say, 'We want you to succeed,' while at the same time asking for royalty rates that will ensure bankruptcy," said Kurt Hanson, a publisher for radio and Internet newsletter RAIN. "Most Webcasters have no problem in the digital world with a royalty being paid to artists or to the copyright owners and, as Ms. Rosen says, at a 'fair market rate.'"
The Webcasters said a reasonable royalty rate would be in the ballpark of the percentage composers receive, around 3 percent to 4 percent. Frank Schliemann, founder of Onion River Radio, said a percentage-of-revenue royalty formula is fair to all Webcasters in all markets. He said radio broadcasters have paid songwriter royalties on a percentage-of-revenue basis for decades.
"Rather than a flat rate based on the unknown, a percentage-of-revenue alternative will allow Onion River Radio and other Internet radio stations to grow and generate more profits for creators, publishers, performers and producers, as well as Webcasters," Schliemann said in his testimony. "I am troubled by the lengths to which the RIAA has gone in its effort to squeeze every penny possible out of Webcasters, with no regard to whether they are killing the goose in their greed for golden eggs."