Comments About the CARP Rate Announcements

Jun 1, 2002 12:00 PM

RAIN: Radio And Internet Newsletter

Kurt Hanson, publisher, Paul Maloney, editor

CARP bombshell:
Librarian of Congress Set Webcast Royalty Rates Based on Yahoo! DealThat was Designed to Reduce Competition and Hurt Small Webcasters

Chicago – Jun 24, 2002 – The voluntary royalty deal between Yahoo! and the RIAA that the Librarian of Congress announced as his template for the entire industry last week was a deal crafted by Yahoo! to shut out small webcasters and decrease competition, Broadcast.com founder and Dallas Mavericks owner Mark Cuban revealed to “RAIN: Radio And Internet Newsletter” in an article published today.

Although he had left the company by the time the deal was signed, Cuban explained that the deal he originally helped put together conceded a high royalty price to avoid a “percentage-of-revenue” royalty rate. By doing this, Cuban explains, he hoped that low-revenue webcasters would be unable to compete against the well-funded Yahoo!

Cuban also explains that he wanted a “per-stream” deal because he intended to use “multicasting” technology to serve multiple listeners with a single stream, thus paying royalties to the RIAA on only the initial streams.

The thinking behind the deal structure, Cuban explains below, was that smaller webcasters, who would be unable to afford to webcast on their own under such terms (because of the fixed rates), would be compelled to use the services of well-funded aggregators like the Yahoo! Broadcast service.

Cuban sold his network of streaming broadcasters, Broadcast.com, to Yahoo! in August 1999, for a reported $5.7 billion.

Both the CARP and Billington Used the Yyahoo! Deal as Their Template for the Entire Industry
On Thursday (6/20), Librarian of Congress James Billington set royalty rates for webcasters, retroactively to October 1998 and continuing through year-end, based primarily on the terms of that Yahoo!/RIAA deal. The royalty rate of $0.0007 (7/100th of a cent) per song per listener is currently greater than 100% of industry advertising revenues and thus will bankrupt most of the smaller webcasters and drive broadcasters’ streams off the Internet, many observers believe.

Most webcasters had expected a royalty rate expressed as a percentage of their revenues, as this is the case for the royalty that broadcasters and webcasters pay composers and as is the precedent in almost all other countries.

The final deal between Yahoo! and the RIAA was the sole “marketplace deal” upon which the webcast royalty rate was based, both in the CARP (Copyright Arbitration Royalty Panel) recommendation last February and the Librarian of Congress’s final decision on Thursday.

CBI Board

The CBI board has reviewed the webcasting rate decision made by the Librarian of Congress. While we are not pleased with the determination, we realize that the Librarian was working within the constraints of the law.

Unfortunately, the rates set today (6/20/02) announced what could be the beginning of the end for many Educational and student programs at Colleges and Universities around the country.

We are saddened that the process has prevented the Librarian and the Copyright Office from setting rates and recordkeeping requirements that appropriately reflects our members ability to comply and pay those fees.

In the coming days, we will be communicating with our members concerning the options available to them and then move forward with an agenda.

We are hopeful that the members of Congress have been mindful of the process and can see that the outcome is detrimental to students across the country, the general public and will result in a loss of revenue for the copyright holders. A quick legislative solution is needed to help save the student programs.

CBI (Collegiate Broadcasters, Inc.) is a non profit organization whose membership is comprised of college broadcasters from around the country with a web page at www.collegebroadcasters.org.

BRS Media Wants Legislation That Will Lower Webcasters’ Fees

San Francisco – Jun 24, 2002 – BRS Media released details of a letter urging law makers in Washington to consider legislation that will lower Webcasters’ Fees and overturn the Librarian of Congress’ decision on Internet radio royalty rates.

In the letter to Congress, BRS Media’s chairman and CEO George T. Bundy stated, “The Librarian’s decision on Internet radio royalty rates has already had a direct impact on a once thriving Internet sector known as Web Radio.” Bundy went on to write, “We are encouraged that the Librarian of Congress reduced the rates for internet-only webcasters to the same level as that of AM/FM radio Internet broadcasters. But we remain terribly concerned that this rate will lead to the elimination of hundreds of small, independent, internet-only radio stations.” Bundy added, “In fact, we have already witnessed just that with great, internet-only stations like San Francisco based SomaFM (www.soma.fm) having to discontinue their webcast.” he then added, “This decision on Internet radio royalty rates will effectively create a virtual monopoly, and will have the stamp of approval from the Librarian of Congress, by offering only a limited number of highly powerful companies the chance to survive.”

Webcasting numbers recently released by BRS Media, a firm that has been tracking Radio on the Internet since 1995, indicated that the number of online radio stations worldwide is now down to 4557. As opposed to early Spring 2001 when there were over 5700 radio stations webcasting online. With those numbers in mind Bundy continued the letter, stating, “Unfortunately, the industry�s growth continues to be stunted; and we are now seeing that the number of radio stations going offline has begun to exceed the number of new stations coming online.”

Bundy recommended that congressional leaders consider legislation to modify the defective “willing-buyer/willing-seller” standard established by Congress, and thereby, used by the Librarian of Congress to determine these rates. Suggesting instead that the traditional fair market formula be the standard. “We believe a formula such as the traditional fair market formula would facilitate growth in the Internet Radio Industry rather than stifle it.� said Bundy, adding,” And utilizing a formula such as this would also ensure that artists, writers, and record labels are fairly compensated.”