- The Washington Times - Saturday, September 21, 2002

More than 30 percent of U.S. Internet radio stations have stopped broadcasting in the past year, and some webcasters are moving operations overseas to avoid paying a royalty that takes effect next month for copyrighted music.
A new study indicates 1,770 webcasters have shut down in the past year, and U.S. webcasters make up less than half of Internet radio stations worldwide for the first time.
"It is directly related to the royalty dispute," said George Bundy, chairman and chief executive of BRS Media Inc., a San Francisco firm that compiled the report.
An estimated 3,940 U.S. webcasters are streaming music, down from 5,710 a year ago after years of growth.
On June 20, the Librarian of Congress ruled that webcasters must pay artists and record labels .07 cents per song, per listener. That's 70 cents per song for every 1,000 listeners, and far more than the 4 percent of annual revenue that webcasters hoped to pay.
Now some Internet radio stations are moving computer servers and planning to incorporate their stations outside the country, an unforeseen consequence of the decision by the Librarian of Congress, who oversees the copyright office and mediates royalty disputes.
"Shutting the station off just wasn't an option for me. I have a sizable audience and I want to keep it going," said Vince Garcia, 42, a production director who started www.VinceGarcia.com, a Los Angeles Internet radio station that plays 1970s rock, two years ago.
The royalty, paid to artists and record labels, would cost his station an estimated $10,000 a year, Mr. Garcia said. So he moved his servers to Europe. Song files are on the server and he operates the station with software from home.
Next month, webcasters will have to pay thousands of dollars each in royalties for copyrighted music they played from October 1998 through Aug. 31. They will have to begin paying for copyrighted music they are playing now.
Cherry Shephard started www.WorldGospelOutreachRadio.com in July. Mrs. Shephard runs the gospel station from her home in Butzbach, Germany, where she is stationed in the U.S. Army, but her servers were in Colorado. In August, she moved them to Sweden.
"It's not that we don't want artists to get their money. We just don't agree with the idea of paying all this money in royalties and, being a small company, we weren't in a position to pay it," Mrs. Shephard said.
The Recording Industry Association of America said webcasters will have to pay royalties on all music U.S. consumers listen to.
"This will not affect webcasters' responsibilities to pay for transmissions to listeners in the U.S.," said John Simson, executive director of SoundExchange, the group set up by the RIAA to collect and distribute royalties paid by webcasters.
Other webcasters are considering moving.
"The royalty rate would bankrupt most webcasters. I am actively considering moving. In the next two weeks, if I don't see any movement in negotiations or in terms of legislative relief, I will have to move," said Mark Glynn, 39, who started Internet station www.RadioNewOrleans.com in 1997.
Small Internet radio broadcasters would not have to pay the royalty this year if Congress approves a bill introduced in July, but the measure may not earn approval before the end of the 107th Congress. The Recording Industry Association of America opposes the legislation, which would exempt webcasters with annual revenue of less than $6 million from paying royalties this year.
Their best hope for a lower rate may be a settlement with the RIAA. Webcasters and the record label have been in negotiations since May.
"Up to now, a reasonable middle ground has not been met," said Kevin Shively, director of interactive media for Connecticut webcaster www.Beethoven.com.
Whether webcasters go out of business or out of the country, artists and record labels will lose a potentially massive source of revenue, said Mike Roe, who began Florida-based www.RadioIO.com in March 2000.
Mr. Shively is skeptical about moving operations outside the United States, in part because other countries are working on royalty rates to impose on webcasters and the number of safe havens will run out one day.
"We've invested too much to make this a viable industry to move. It needs to be a viable industry in the U.S.," he said.
But if the royalty isn't lower, some have to decide between leaving and silencing their stations, Mr. Roe said.
"I don't want to go out of business," he said. "I have to look at the options."

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