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Webcasters Go Silent in Royalty-Rate Protest

Hundreds of Web broadcasters went silent on Wednesday in an organized protest against proposed U.S. royalty rates they say would undermine the industry and stifle innovation on the Internet.

The Web radio stations started their protest at dawn to oppose rates recommended in February by a Copyright Royalty Arbitration Panel working for the U.S. Copyright Office.

Under the Digital Millennium Copyright Act, the Librarian of Congress is required to set sound recording performance royalty rates for Web radio stations by May 21.

The arbitration panel recommended Webcasters pay recording companies a rate of 14/100ths of a cent per listener per song. While that appears to be a small fee, Webcasters say it would drive many in the struggling industry out of business.

Kurt Hanson, publisher of Radio and Internet Newsletter, and one of the organizers of the protest, said the proposed fees would amount to about $9,000 a month for any mid-sized Webcaster, about double typical revenues.

Some representatives of the music industry, which had lobbied for the royalty structure, said that while the Webcasters “Day of Silence” was misguided, it was an appropriate reminder that music must carry a price in the market.

“Everyone should understand what the world would sound like without the music that is often taken for granted. If those who make the music we all love are not fairly compensated for their work, that will be the result – silence,” said John Simson, executive director of SoundExchange in an open letter signed by over 50 music executives and artists including Eagles front-man Don Henley.

SoundExchange collects license fees on behalf of the recording industry.

While many Webcasters planned an entire day of silence, others replaced music streams with periods of silence interspersed with public service announcements on the subject.

The Recording Industry Association of America, which represents all the major labels like AOL Time Warner Inc.’s Warner Music and Vivendi Universal’s Universal Music, lobbied Congress for the royalty payments and had sought even higher rates.

Simson, of RIAA affiliate SoundExchange, said he is pleased with the proposed rates, which put the industry a step closer to implementing the right of licensing, collecting and distributing performance royalties for Webcasts.

He said he did not believe the rates would cripple the industry and were fairly valued.

“Somehow these companies have found a way to pay fair market rates for everything else necessary for their business from bandwidth and computers to rent and furniture. Why should the most important element of their business – the music – be any different?,” he said. “The time has come for Webcasters to stop protesting and work cooperatively with artists and record labels to ensure success for all and provide fans with the great music they expect and deserve.”

Meanwhile, Webcasters said if they are put out of business, the recording industry will have to deal with more pirate services that will flourish in their absence.

Some traditional broadcasters, which stream simulcasts on the Web, also planned to support the effort on Wednesday, Hanson said.

Traditional radio stations pay no performance royalties for music played on air because it has proven promotional value.

These operators would only be required to pay half of the fee – or 7/100ths of a cent – for music they stream on the Web simultaneously with their radio broadcasts, according to the proposal.

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