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Groups Appeal Online Royalties Proposal

Radio stations, Webcasters and record labels are appealing an arbitration panel’s proposed royalties for online radio services, arguing over rates that some say would kill most free Web broadcasts. At issue are fees that online radio services would have to pay to artists and record companies for each song played. The fee is $1.40 per thousand listeners for Internet-only stations, and 70 cents per thousand listeners for over-the-air stations that simultaneously broadcast online.

Webcasters said the fees would consume most if not all of their dwindling advertising income. David Landis, founder of the Los Angeles-based station Ultimate80s, said his royalties would be $3,000 to $4,000 a month, which would increase his expenses by about 50%. But the record companies’ trade group, the Recording Industry Assn. of America, says the proposed rates are too low. The rates should be closer to the deals negotiated between the RIAA and more than two dozen companies, RIAA attorney Steve Marks said, even though many of those companies are no longer Webcasting or even in business.

The Librarian of Congress is due to rule on the appeals and set the rates by May 20.

Under federal law, anyone can launch a non-interactive radio station over the Net if they pay royalties to the copyright holders. Those royalties go to music publishers, which collect a small percentage of the Webcasters’ revenue, and to labels and artists, who split 50-50 the royalties set by the Library of Congress’ Copyright Office.

The arbitration panel’s job was to calculate what the rates would be if negotiated by a willing buyer and a willing seller. But attorneys for the Webcasters and the RIAA say the panel botched the calculation by looking at the wrong evidence.

In particular, both sides contend that the panel put far too much weight on a deal the RIAA negotiated with Yahoo Inc., which mainly retransmits over-the-air broadcasts. Ken Steinthal, an attorney representing the Digital Media Assn., said the rates should reflect what the music publishers collect, which is about 85% less than the proposed royalty. But Marks said the publishers’ fees aren’t relevant because the two markets are so different.

The Webcasters also want the option of paying the labels and artists a percentage of the revenue generated by their online broadcasts. The RIAA initially proposed collecting 15% of the Webcasters’ revenue, but both the RIAA and the arbitrators cooled on the idea because it’s hard to define what revenue should be covered.

Landis, who is helping to organize a protest by small independent Webcasters, wants to pay 2% of revenue or $1,000 a year, whichever is greater.

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