- The Washington Times - Saturday, June 22, 2002

San Francisco Internet radio station SomaFM said yesterday it has closed, the first casualty of a new royalty the stations must pay to play copyrighted music.
SomaFM's decision came a day after Librarian of Congress James H. Billington said Internet radio stations, or webcasters, must pay musicians and record labels 70 cents per song for each 1,000 listeners.
Also yesterday, U.S. Rep. Rick Boucher, Virginia Democrat, said he may introduce bills to lower the royalty webcasters must pay and reform the arbitration process that culminated in Mr. Billington's decision. But it is unlikely a bill lowering the royalty would make its way through Congress in time to help small webcasters threatened by the new fees, even if the legislation faced no opposition, Mr. Boucher said.
"The potential damage to the industry is enormous. The rate is too high, and they simply will not be able to operate," he said.
Webcasters must make their first payment to musicians and record labels on Oct. 20. That payment will cover the use of all copyrighted music played from 1998, when the Digital Millennium Copyright Act was passed, through Sept. 1, 2002.
SomaFM founder Rusty Hodge wrote on his Web site that the company had to close because it can't afford the royalty, which would cost an estimated $15,000 a month.
Webcasters are likely to appeal Mr. Billington's decision and press for a lower rate in federal appeals court.
"It is safe to say that every avenue will be explored and this decision will be fought by the small webcasters. It's a matter of survival," said Kevin Shively, director of business development at Beethoven.com, a Connecticut webcaster and one of the highest-ranked independent Web stations with more than 100,000 unique listeners a month.
Webcasters could avoid a lengthy court fight if they can persuade the Recording Industry Association of America to negotiate new rates for the legions of small webcasters who say they are threatened with extinction unless the new royalty is changed.
"The recording industry wants the royalty for its musicians, but if you kill the cow, there's nothing to milk," said Gregor Markowitz, co-founder of Hober Thinking Radio, a webcaster in Takoma Park.
If the RIAA is willing to negotiate lower rates for some webcasters, an appeal may be unnecessary, said John Jeffrey, executive vice president and general counsel of Foster City, Calif.-based Webcaster Live365 Inc.
"It's in the recording industry's interest to keep the small webcasters around. It's in their interest to get the artists out there," Mr. Jeffrey said.
But John Simson, executive director of SoundExchange, the group set up by the RIAA to collect and distribute the royalty paid by webcasters, said it is too soon to know whether the recording industry will negotiate lower rates for smaller stations.
"I think we're willing to explore it, but it's going to be hard to get something done immediately," he said.
Like the webcasters, the RIAA also could appeal Mr. Billington's decision. The recording industry and unions for performers lobbied for higher rates to compensate musicians and record labels.
"We are concerned that the rate set by the librarian is too low to result in fair compensation to artists that will help them to survive financially and to continue creating," said Thomas F. Lee, president of the American Federation of Musicians.

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