Royalty requirement may kill Web sites broadcasting music

By | July 16, 2002 at 12:00 AM

If music Webcasting – the streaming of music over the Internet instead of through radio receivers – makes it through the present decade, it will be no thanks to the federal bureaucracy.

A much-dreaded ruling out of Washington, D.C., last month could mean the end of small Webcasters and the crippling of large ones.

Webcasting has been under the shadow of this impending ruling since October 1998, when the Digital Millennium Copyright Act declared that Webcasters should pay performance royalties. Now the damage is clear: The government has set the rate.

Performance royalties are payments to the owners of copyrighted recorded performances, usually the record labels. The payments differ from writer royalties, which go to the people who compose the music and write the lyrics.

Broadcast radio hasn’t had to pay performance royalties since the 1930s, when a ruling exempted it on the premise that broadcast constituted promotion of the recorded product. But in 1998, Webcasting was judged to be a different animal, and the Copyright Arbitration Royalty Panel was formed to determine the royalty rate.

Webcasters thought they had weathered the worst of it in March, when an early CARP suggestion of 0.14 cent per recording per listener was rejected by the Librarian of Congress, the final arbiter.

The key phrase is “per listener.” Multiply a dozen songs an hour by even 50,000 or 60,000 listeners and multiply the result by 0.14 cent. Pretty soon, thousands of dollars a day are flying out the window as performance royalties. At that rate, one observer noted, performance royalties for most Webcasters would equal roughly 200 percent of their budgets.

Webcasters’ relief was short-lived. On June 20, the Librarian of Congress set the Internet performance royalty rate at 0.07 cent per performance per listener. This means performance royalties will now equal “only” about 100 percent of a small Webcaster’s budget.

The decision is retroactive. Stations will owe royalties for all Webcast music performances from Oct. 28, 1998, through August 31, 2002. They’ll be due Sept. 1.

How is all of this important to music, to music-lovers and music-makers? Consider the case of Valley pianist Julianne Markavitch.

Markavitch is an independent artist who records and produces her own compact discs. As with other independents, her main concern, post-production, is how to market her product.

An Internet station called has been the answer. streams and promotes Markavitch’s recordings when standard broadcast stations are not even remotely interested. Should Webcasting be crippled by performance royalties, Markavitch and other independents would suffer.

An editorial statement at says royalties should be based on revenue, not the number of listeners, and that the royalty rate creates “a barrier to entry to the industry that is impermeable to all but the biggest and deepest-pocketed corporations.”

If performance royalties go to the major record labels and the rates are untenable, who but the labels themselves will be able to stream their music over the Internet?

Kevin Shively, director of interactive media at and a member of the board of directors for the International Webcasting Association, believes a misunderstanding is at the root of the feds’ insistence that Webcasters pay such royalty rates.

“Copyright holders have very successfully convinced Congress that digital transmissions represent a perfect copy, which can preclude the necessity of purchasing recordings,” Shively says.

“For anyone who knows about Internet radio, this is obviously a complete fallacy. At this stage, Internet radio doesn’t approach a perfect copy. In terms of sound quality, because of the restrictive bandwidth, Internet sound is inferior to FM.”

Besides, Shively adds, Internet streaming is live and cannot easily be downloaded for later play. It’s easier to tape music from FM radio. The feds seem to have confused Internet radio with Napster, the file-sharing service that offered free downloadable digital files of copyrighted performances.

Internet radio is a force for presenting and promoting a far greater range of music than could ever be showcased on broadcast radio alone. It would be a shame to allow its destruction because of governmental confusion.

The good news is that the Librarian of Congress’ decision can be appealed. Many Webcasters and artists are preparing those appeals.

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