Copyright Board Upholds Decision; Internet Royalty Rates Proceed

By Scott M. Fulton, III, BetaNews

April 16, 2007, 6:24 PM

Stating that Internet streaming broadcasters' objections had neither put forth new evidence nor presented any clear sign that they had made some egregious error, the three-judge US Copyright Royalty Board this afternoon ruled it would not stay its own decision last month imposing a massive, per-performance rate increase on Internet streaming broadcasters, beginning in 2008.

"We find...that none of the moving parties [that requested a rehearing] have made a sufficient showing of new evidence or a clear error or manifest injustice that would warrant a rehearing," the judges wrote. "To the contrary...most of the parties' arguments in support of a rehearing or reconsideration merely restate arguments that were made or evidence that was presented during the proceeding." While those who objected to the rates, which included National Public Radio, argued that they were putting forth new evidence, the judges wrote that such evidence was either already in the record or "could have been discovered during the proceeding, with reasonable diligence."

However, in what could be a glimmer of hope for streaming music providers and radio stations with streaming channels, the CRB did rule that it would not impose the per-performance rate retroactive to 2006 and 2007. Instead, it would impose an increase on the "aggregate tuning hour" (ATH) method that had been employed before, but which earlier legislation had enabled streamers to forego.

While the new ATH rates will represent a rise over 2005, they may not be as intolerable as the per-performance rates. BetaNews projects, based on ATH ratings for November 2006, AOL Radio - the nation's largest streaming provider - could owe retroactive royalties of about $946,000. Likewise, Launchcast may owe $700,000, Clear Channel $365,000, and Live365.com $264,000. Had the originally planned rate gone into effect, AOL Radio might have owed $23.6 million for 2006.

A somewhat higher ATH rate will be in effect for 2007, the judges decided, though the amount that the SoundExchange performance royalty organization would collect on behalf of performing artists would still be lower than previously anticipated. But for 2008, the $0.0014 per performance rate would take effect. While that may seem impossibly small on the surface, consider the cost when multiplied by as many as 30 trillion individual song performances per year.

In a statement issued just after the ruling, SoundExchange Executive Director John Simson wrote, "Our artists and labels look forward to working with the Internet Radio industry - large and small, commercial and non-commercial - so that together we can ensure it succeeds as a place where great music is available to music lovers of all genres."

But as Trevor Moyer comments on the blog Save Our Internet Radio, "So according to the CRB, their decision, which will effectively wipe out almost all of U.S.-based Internet radio - thousands of small webcasters, college radio streaming, NPR on the net, and services like Pandora to name a few categories - is NOT a manifest injustice. Wow."

From here, the affected parties have 30 days to appeal this decision to the US Court of Appeals for the District of Columbia. This will likely happen. Meanwhile, streaming providers have until May 15 to pay their 2006 dues, which for some may be crippling though not fatal. And opponents of the new scheme may yet find their long-sought audience with Congress. If so, legislation may be able to change the course set by copyright judges before the Court of Appeals hears the case - which industry lawyers believe might not happen for another year, at best.