Sunday, July 15 was destined to be the “day the music dies,” but as the sun rose Monday morning, Live365.com, Pandora, MVY Radio and other webcasters were still streaming. On Thursday, the nascent Internet broadcasting industry emerged alive from a closed-door meeting convened by Massachusetts Representative Ed Markey, yet still facing an uncertain future.
At the meeting, Sound Exchange the industry group responsible for collecting royalty payments, verbally promised to refrain from enforcing revised rates ordered by the U.S. Government’s Copyright Royalty Board last April.
Additionally, Sound Exchange offered to cap fees for smaller webcasters at $50,000 per year – the original judgment mandated a $500 per channel fee. Many web stations allow their listeners to create hundreds, often thousands, of personalized music streams. They faced multi-billion dollar royalty payments. Large providers like AOL, Yahoo! and Rhapsody were expected to start paying immediately; the fees are retroactive to January 1, 2006.
A motion to delay implementation of the new rates was denied by an appeals court Thursday. This left webcasters looking to mounting Congressional pressure to address the inequities of the fee structure, which most webcasters claimed would force them out of business. The July 15 deadline had been extended from May 15, and on Thursday a bill to move it out another 60 days was offered in the House.
Legislative responses to the rate increases had been filed soon after the CRB decision. The Internet Radio Equality Act, introduced April 26, has attracted 134 co-sponsors, including Carol Shea-Porter. The New Hampshire representative was an early supporter of the legislation, saying in a statement that the hike “would have a devastating effect on millions of listeners.”
A similar law was also under consideration in the Senate, but on Tuesday, Judiciary Committee Chairman Patrick Leahy expressed hope that cooler heads would prevail.
“He’s been encouraging all the parties to calmly work towards private settlements on the rates, and there has been progress,” said Leahy spokesman David Carle. “The parties are still talking, and we’ve heard from webcasters that there’s optimism about the final deal on royalties being reached.”
Jay Inslee, the Washington representative who submitted the House bill, agreed. An Inslee spokesperson told Congressional Quarterly Wednesday that “for Jay, the number one thing is reaching an agreeable solution to both sides, where artists feel like they’re being compensated fairly and webcasters can have a sustainable economic model.”
Even though the world of Internet radio breathed a sigh of relief Friday, all was not sanguine. Sound Exchange’s promise was too vague, said AccuRadio’s Kurt Hanson, and wasn’t even offered in writing. Referring to Internet advocacy group SaveNetRadio.org’s “countdown clock” to the rate hike, Hanson cautioned, “during this period of negotiations, I would probably set it at ‘2 days and holding.’”
A press release issued by Sound Exchange announcing their decision also raised concerns. The fee cap, said the statement, was conditional upon stations working “to stop users from engaging in “streamripping” – turning Internet radio performances into a digital music library.”
The recording industry has long fought illegal file trading. But streamripping, the practice of recording songs from an Internet station, is similar in practice to a VCR. “All you’re doing is time-shifting,” wrote Salon blogger Farhad Manjo – something that’s perfectly legal. But he worried that web stations fighting for their lives would agree to industry demands for technical steps, such as lowering bit rates and interrupting songs mid-track, to make duplication more difficult.
“You have to wonder if the recording industry — now that it’s got webcasters locked in negotiations for their future — will have any trouble imposing such reduced-quality streams,” wrote Manjo.