The war of words been Webcasters and the recording industry over a proposed
fee structure for royalty payments has escalated with the Recording Industry
Association of America (RIAA) claiming it is the target of an "intense
misinformation and propaganda campaign."
With the May 21 deadline fast approaching for the Library of Congress
Office to decide on an arbitration ruling on
royalty fees, the RIAA has gone on the offensive, claiming a misinformation
campaign "ginned up by sophisticated lobbyists in D.C." has not told the
full story.
The Arbitration Royalty Panel (CARP) recommendation, which has
been roundly criticized by nervous Webcasters, has set royalty fees at 14/100 of a
cent per performance, retroactive to October 1998.
Even as Webcasters big and small continue to argue that the fee structure
effectively bankrupt all but a handful of Internet radio stations, the RIAA
insisted the CARP rates would allow Webcasters to thrive.
"Contrary to what has been reported in the news media and circulated on the
Internet, the RIAA and its member companies want ALL Webcasters, large and
small, to succeed," the Association said in a statement posted on its Web site.
In what appears to be a slap at the 'Save Internet Radio' drive by
nervous Webcasters and the growing media interest in the Office
decision, the RIAA said: "The goal is to scare non-commercial Webcasters --
including college radio stations and so-called hobbyists -- and their
members of Congress into thinking that the CARP rates are going to drive
non-commercial Webcasters out of business."
"Contrary to press reports, the CARP rates will not put Webcasters out of
business. Many of the non-commercial Webcasters will actually only be
required to pay the minimum (and minimal) annual fee of $500," the
association argued.
Noting that its royalty calculations differ dramatically from the claims of
the Webcasting community, the RIAA said most of the fee projections reported
in the news media make the erroneous assumption that every listener who ever
logs into a given non-commercial Webcast remains logged into the site 24
hours per day, 7 days per week, 365 days per year.
"This assumes that no one ever logs off and listeners only visit that
particular site. While no one can say for sure what the actual listener's
time is, the notion that they stayed logged on 24 hours a day, 7 days a
week, is preposterous and the subject of gross exaggerations," the
association argued, adding it was open to treating hobbyists differently.
However, the voices behind the 'Save Internet Radio' campaign have
challenged the RIAA's statement, lashing back at the Association's attempt
to "obfuscate the facts."
Responding to calculations from the RIAA that shows some commercial stations
would only pay a small amount of royalties under the current CARP ruling,
supporters of the Webcasting community say those rates were computed for
"noncommercial" stations.
Paul Maloney, one of the loudest voices in the anti-CARP lobby, said the use
of the "hobbyist" argument is a red herring.
"It's true that noncommercial services will pay a lower rate (0.02 cents per
performance, plus 9 percent for ephemeral charges). But most of the
anti-CARP arguments we've seen plead that the determination will crush the
Webcasting business, not "hobbyists." Certainly there are many Webcasters
who aren't running ads at this time -- but that doesn't mean they don't
intend to, or don't hope to develop their service into a profitable
business. The "hobbyist" argument is a red herring. The Webcasters who've
become visible in crying out against CARP, as far as we know, are
businesspeople," Malone said in his Radio
and Internet Newsletter.
"A little math shows that a noncommercial Webcasters would have to have an
average audience of less than 18 people to qualify for the $500 minimum.
Remember, "performances" on which the royalty rate is based is songs
multiplied by listeners. If a Webcaster averages 15 songs per hour, they'll
play about 131,400 songs per year. Multiply that by an average audience size
of 18 to determine the total "performances" for the year -- in this case
2,365,200."
Multiply the "performances" total by the $0.0002 royalty rate (notice we
converted to dollars here), to yield a song royalty rate of $473.04. Add in
the 9% additional ephemeral fee ($42.57) and oops...we're more than $15 over
the $500 minimum fee," Maloney added.
Amidst the verbal jousting between the two sides, another big-name 'Net
radio station has gone silent, partially in reaction to the CARP
recommendation. The latest casualty is RadioCentral, a San Francisco-based B2B
Webcaster which shut off most of its streams and pink-slipped its entire
staff.
RadioCentral, which raised more than $14 million in funding to build and
deploy Webcasts for companies like About.com, EarthLink and Terra Lycos,
said blamed its demise on the slowdown in online ad spending and the
potential ramifications of the looming royalty rates.
Other streaming media plays that have shut down or tinkered with its
business model in recent months include MediAmazing, Cablemusic.com and
LiteRock 101.9.
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