- The Washington Times - Friday, May 10, 2002

A group of Internet radio broadcasters told key senators yesterday they will be forced to shut down their businesses unless a royalty they must pay to artists and music labels is changed.
"This is no bluff," said Kevin Shively, director of interactive media at Hartford, Conn., Web radio station Beethoven.com.
Internet radio stations have developed a following among listeners who log on to hear music by independent artists not typically played on mainstream radio. But webcasters say they still don't make money because they have little or no advertising and can't afford to pay royalties.
The royalties are mandated by the 1998 Digital Millennium Copyright Act but haven't been collected from webcasters since the law passed four years ago. That's because no formula was established to determine what amount they should pay.
In February, a panel appointed by the U.S. Copyright Office said webcasters must pay 0.0014 cents per song, per listener. Nonprofit Internet stations and traditional radio stations that stream signals to Web sites must pay half that rate.
The Copyright Office must make its recommendation to the librarian of Congress by May 21. It can accept the decision by the Copyright Arbitration Royalty Panel, modify it, come up with new terms, or call for a new panel. If changes are made, the new deadline for a decision will be June 20.
Webcasters fanned out across Capitol Hill yesterday to tell lawmakers that unless the royalty is changed, the nascent Web radio industry will be killed off. Nineteen webcasters, including TwangCast.com in Orange, Va., said they will have to close operations unless the copyright proposal is altered.
"I don't see any alternative but to convene a new [Copyright Arbitration Royalty Panel]," Mr. Shively said before a meeting with Sen. Edward M. Kennedy, Massachusetts Democrat.
But in a letter sent last night to Librarian of Congress James H. Billington, Rep. Howard Coble, North Carolina Republican, and 16 other congressmen urged Mr. Billington not to be swayed by comments made outside the Copyright Arbitration Royalty Panel (CARP) hearings.
"We strongly believe that process should be respected, and the Library of Congress' review of the CARP recommendation should be based solely on the extensive record before it and not on anecdotal or other information ," he wrote.
The royalty rate would cost Beethoven.com an estimated $34,397 this year, or about 40 percent of its current operating expenses, Mr. Shively said.
It would cost Web radio station Ultimate80s about $9,500, or 15 percent of the Los Angeles station's operating revenue, founder David Landis said.
"We are absolutely for artists being compensated. We just will never be able to afford these rates," Mr. Landis said.
John Simson, executive director of SoundExchange, a group set up by the Recording Industry Association of America to collect and distribute royalties that would be collected from Internet stations, said webcasters that consistently lose money are likely to go out of business whether or not the royalty rate is imposed.
"We aren't going to put them out of business with the royalty rate. They're going to go out of business anyway," Mr. Simson said.
Mr. Shively, Mr. Landis and other Internet radio station owners and operators gathered in a basement room at the Rayburn House Office Building yesterday morning to plot their strategy. The coalition of Internet entrepreneurs were unlikely lobbyists.
"Up until now, the most political thing I ever did was vote, so this is all new to me," said Mike Roe, the founder of Radioio, in Jacksonville, Fla.
A Senate Judiciary Committee hearing is scheduled for Wednesday to investigate the arbitration panel process used to determine the royalty rate. Webcasters held meetings with 10 members of that committee yesterday three Republicans and seven Democrats, including Sen. Patrick J. Leahy, Vermont Democrat and chairman of the Judiciary Committee.
At least one lawmaker came to webcasters' defense and blasted the current proposal to charge Web radio stations for playing copyrighted music.
"These rates are completely unjustified," Rep. Rick Boucher, Virginia Democrat, told a group of about 20 owners of Internet radio stations. "This formula doesn't work. Small webcasters will be strangled in their infancy."


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