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CARP: What It Means to Radio

The Internet radio copyright front turned white hot in recent weeks when the Copyright Arbitration Royalty Panel returned its recommendations for royalty payments to music copyright holders for music streamed over the Internet.

The Internet radio copyright front turned white hot in recent weeks when the Copyright Arbitration Royalty Panel returned its recommendations for royalty payments to music copyright holders for music streamed over the Internet.

That was a body blow but only the latest in a long stream of punches terrestrial radio stations have taken in this area.

As it stands now, the CARP’s recommendation is that radio stations that retransmit their over-the-air signal on the Internet will owe 0.07 cents (7/100th of one cent) per song per listener for the music they play. This is retroactive to late 1998, when the Digital Music Copyright Act was signed into law.

Internet-only streamers will pay double that amount, 0.14 cents, per song, per listener.

Transient copies

In addition to these rates, both terrestrial and Internet-only radio stations will pay an additional 9 percent of the above fees for what is termed an “ephemeral” license, which covers the buffer copies made when files are transferred from one computer to another.

However, the U. S. Copyright Office last year asked Congress for a new law on this matter as well as other points in the DMCA. It stated then that buffer copies “have no independent economic significance” and therefore should not be subject to the royalty payments.

Rep. Chris Cannon introduced the Music Online Competition Act last summer. The MOCA proposes to correct the questions that buffer copies create, among other areas of contention in the digital age.

But rather than amending the DMCA, MOCA aims to clear up digital transmission issues in the U.S. Copyright Act. The bill is supported by the Digital Media Association and is opposed by the Recording Industry Association of America.

Like almost every other national issue in the United States, MOCA was put on a back burner by the events of Sept. 11. However, Cannon’s office promises hearings on the bill later this year.

End nowhere in sight

Despite a hue and cry from Webcasters that the CARP’s recommendations spell the end to Internet radio, the matter is far from settled.

“Though the CARP itself was required by statute to present its final determination to the Librarian of Congress within 180 days of commencement of the arbitration proceeding,” said veteran copyright attorney Bennett Lincoff, senior counsel at Darby & Darby, PC, “the Librarian, in turn, has an additional 90 days in which to review and either adopt or reject the decision of the CARP.”

This means that the Copyright Office must make a final ruling on or before May 21. Either side may then appeal the decision of the Librarian to the U.S. Court of Appeals for the District of Columbia Circuit, according to Lincoff.

“Many decisions of the predecessor agency to the CARP, the Copyright Royalty Tribunal, were appealed beyond the Copyright Office to the federal courts,” he said.


As the CARP’s decision was announced, many broadcasters wondered why the rates are based on a flat fee instead of a percentage of revenues, as the American Society of Composers, Authors and Publishers collect.

The argument in support of the percentage rate structure proposed that until Webcasters achieved profitability, the most reasonable system would ask only for a percentage of whatever the streamer earned.

But DiMA Executive Director Jonathan Potter, whose organization was one of the parties representing Internet broadcasters before the CARP, defended the flat fees as prudent over the long haul.

Potter’s argument is that a station’s Web site offers e-commerce and other revenue possibilities. Webcasters don’t want to have to share those monies, which could become considerable, with copyright owners whose music has nothing to do with that part of the business.

Thicker and deeper

As onerous as the royalty rates recommended by the CARP seem to be, the reporting requirements may be worse. In simple terms, these consist of two elements: what music was played by which Webcaster and when, and who listened to it.

Using current technology, such reporting can be complicated. Eighteen fields of data are required to answer the first requirement, including such things as the Universal Product Code on the album.

Seven fields of data are required for the second, the most difficult to obtain being a “unique user identifier.”

Assuming privacy issues can be surmounted and the individual user identified, the difficulty would be to match that information to the “song played” information. While no vendor appears to have equipment that performs that task at present, engineers for several companies told Radio World they could readily adapt their systems to gather and connect such information.

Not exempt

Terrestrial radio streamers suffered a key setback last August when a federal district court in Philadelphia refused to overturn the Copyright Office decision that the stations would be subject to pay royalty fees to recording companies for music they streamed over the Internet.

The radio stations, through the NAB, had insisted the exemption they enjoy from such fees for over-the-air broadcasts was extended to the Internet via the DMCA.

Keith Meehan, executive director of the Radio Music Licensing Committee, sees the matter as far from over.

“I think it’s going to be a very lengthy process to resolve that. My opinion is that this will end up with Congress amending the DMCA. I’m hopeful that that’s how this will be resolved, because I don’t see any other reasonable solution to it, given all of the conditions that are in the DMCA.”

Beyond CARP

Meehan said the fees and reporting requirements recently recommended by the CARP are only one part of the equation which terrestrial radio finds objectionable. There are other DMCA conditions for streaming of copyrighted music on the Internet that also trouble stations.

Three, in particular, that RMLC’s Meehan cites are:

— No pre-announcement of music to be played is permitted. (This does not prevent announcement of a song immediately before it is played.)

— The number of songs from a recording or by a particular artist that can be played in a several-hour time period is limited.

— A requirement to provide visually information such as the artist, label and song title.

“The DMCA basically precludes a radio station, in its normal activity, from streaming its signal onto the Internet because of the conditions that are attached to what they have to do,” said Meehan. “That’s not how radio operates.”

Asked what Congress would grant if he got his entire wish list, Meehan said it would eliminate all of those conditions that preclude a radio station from streaming its current signal onto the Net.

“And it would acknowledge that the exemption for terrestrial radio stations is there for Internet streaming of those radio stations. It would basically exempt the radio stations from paying fees for streaming their signal onto the Internet.”


Pure Internet radio broadcasters object to that solution, which would result in an exemption for terrestrial broadcasters streaming music online that the Net-only Webcasters would pay to play.

One advantage both terrestrial and pure Internet radio broadcasters enjoy from the DMCA is the compulsory nature of the licensing. Lincoff said that because the CARP, not the record labels, sets the rates, the labels will not be able to set fees so high that Internet radio would be squeezed off the Net.

“If you’re a non-subscription, non-interactive Webcaster and you comply with the other provisions in the statute, then you qualify for the statutory license,” said Lincoff. “If you qualify for the statutory license and pay the fee in a timely way and you meet the reporting requirements as to song usage and such, then you are licensed as a matter of law for the uses of the sound recording that you’re making.”

Is a radio station playing a request operating “interactively”? Congress considered this when constructing the DMCA and as long as an Internet streamer’s programming is not substantially composed of playing requested music within an hour of the request, it is not deemed “interactive.” (All-request radio is out, but some-request radio is OK.)

While not considered in the CARP proceedings, such all-request services exist., the Internet-only, listener-formatted service, is one that persists. As of late last year, the record labels, with some other partners, launched their own subscription services, such as MusicNet and FullAudio Corp.

The worldwide Web

If you, as an Internet broadcaster, can still rest easily amid all this uncertainty, Lincoff points to another fly in the ointment.

“The DMCA insulates qualifying Webcasters from infringement liability only to the extent that their transmissions occur entirely within the United States.

“Therefore, despite having complied with U.S. law, to the extent their transmissions are available worldwide, they remain exposed to an unknown quantum of infringement liability under foreign legal regimes. This result, flows from the principle that national copyright laws do not have extra-territorial effect,” Lincoff said.

He said no one should want it otherwise.

“In the absence of worldwide harmonization, it is not in the interest of copyright owners to support a rule that would allow the territory with the least protection to become the world’s arbiter of intellectual property law on the Internet. Such a result also would not be in the interest of Webcasters whose own IP rights would thereby be at risk,” Lincoff said.

But it also calls into question what rights fees a Webcaster will owe when the worldwide bill comes in. In early March, the European Union announced plans to impose a tax on products delivered online — including audio, video and music — to EU consumers from other nations.

A final note on the acronym CARP: The Copyright Arbitration Royalty Panel was originally to be named the Copyright Royalty Arbitration Panel. But the words were rearranged so that family-friendly publications such as Radio World could print the panel’s acronym.