[PAA-Discuss] Appeals Court Rejects Webcaster Royalty Delay

[slindahl at rounder-graphics.com]

Appeals Court Rejects Webcaster Royalty Delay
ARTICLE DATE:  07.12.07
By  Chloe Albanesius
http://www.pcmag.com/article2/0,1895,2158196,00.asp

Opponents of an Internet radio royalty rate hike were issued a setback
Wednesday night when a U.S. appeals court denied their request for an
emergency stay.

The U.S. Court of Appeals for the D.C. Circuit rejected a request to delay
the July 15 implementation of new Web broadcast fees. The Copyright
Royalty Board (CRB), which regulates those fees, revamped royalty
payments in March so that the current price per stream to one user of
$0.0008 will increase to $0.0019 per stream by 2010. The minimum fee
would be $500 per year. The fees were initially supposed to go into
effect on May 15, but the CRB extended that deadline to July 15.

Webcasters balked at the increase, and said the increase would drive their
businesses into the ground, particularly since the rules were supposed to
be retroactive for 2006.

"We are disappointed that the court failed to acknowledge the irreparable
and quite frankly, devastating effect these royalties will have on the
Internet radio industry," said Jake Ward, a spokesman for SaveNetRadio, a
coalition of Internet broadcasters.

"An invoice of more than $1 billion must be paid in four days, which is
unfathomable for an industry that grossed less than $200 million last
year," Ward said.

Jonathan Potter, executive director of the Digital Media Association
(DiMA), echoed those sentiments. "DiMA members and all webcasters … are
now forced to make very difficult decisions about what music, if any, they
are able to offer," he said in a statement. "The result will certainly be
fewer outlets for independent music, less diversity on the Internet
airwaves, and far fewer listening choices for consumers."

SoundExchange, the organization that collects royalties for copyright
owners in the music business, last week extended a compromise offer that
proposed capping such advance payments at $2,500 per service, though the
offer would expire in 2008.

DiMA's Potter replied that the offer was "simply a stay of execution for
Internet radio."

Internet broadcasters never notified the CRB that "the per-channel minimum
might have a disproportionate impact on certain Internet radio stations,"
according to Michael Huppe, general counsel for SoundExchange.

In a filing with the Appeals Court, Peter Keisler, the U.S. assistant
attorney general, said "DiMA's claim to irreparable harm appears
contrived."
— next: Battle Continues in Court, On the Hill

Battle Continues in Court, On the Hill

Despite the decision, David Oxenford, a lawyer who represents some of the
webcasters, wrote in a blog post that "the appeal will continue." The
July 15 deadline "does not mean that negotiations necessarily end, or
that lawsuits will follow the next day if a webcaster does not pay on
time, but the potential liability for obligations will be looming over
each webcaster."

"We will vigorously proceed with our appeal," said N. Mark Lam, CEO of
Live365. Lam is in Washington, D.C. this week to "make myself available
for face-to-face negotiations with SoundExchange" and to drum up support
for the pending bills, he wrote in an online posting. Internet
broadcasters have taken their fight to Capitol Hill, where two bills are
currently working their way through Congress.

Reps. Jay Inslee, D-Wash., and Donald Manzullo, R-Ill., in April
introduced a bill, H.R. 2060, which would exchange the flat Internet
radio royalty payments for a tiered system based on revenue. The measure
would strike down the CRB's March ruling and set the royalty rate at 7.5
percent of revenue through 2010.

Sen. Ron Wyden, D-Ore., followed suit in May with the introduction of a
companion Senate bill, S. 1353.

The Senate bill has since been referred to the Senate Judiciary Committee,
while the House measure was sent to the House Energy and Commerce
Committee.

    * Analysis: A Reprieve for Internet Radio?
    * Bills Would Rework e-Gambling, Internet Radio
    * Pandora Founder Wants You to Save Internet Radio

Inslee said during a Tuesday floor statement that the CRB's decision was
"wildly disproportionate." He pointed to a radio station in his district,
Big R Radio, whose royalties would "exceed by 150 percent the revenues
that this business is getting in" when the rules go into effect.

He urged both parties to "reach an economically viable and fair solution."

The Radio and Internet Newsletter's (RAIN) on June 26 sponsored an
Internet radio "day of silence", which saw stations like Live365 and
Pandora go dark. Supporters were urged to inundate their senators and
representatives with requests to strike down the CRB rate hike.

Pandora founder Tim Westergren wrote in a blog post last month that the
response to the day of silence was "extraordinary" but urged supporters
to "stay vigilant. We've raised awareness but we need to keep the
pressure on."

Westergren said in an April Appscout interview that Internet radio is a
"pretty young industry, [so] we don't have very deep roots in Washington.
The best recourse for us is looking to rally listeners and try to get a
new bill passed, and try to change that language so that we're treated
like other radio."