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Rates Set for Royalties on Internet
Thu Jun 20, 6:48 PM ET
By DAVID HO, Associated Press Writer

WASHINGTON (AP) - The government on Thursday decided that songs delivered online by Internet music broadcasters will be charged royalty fees at a rate that is half of what was originally proposed by an arbitration panel.


Librarian of Congress James H. Billington, who oversees the U.S. Copyright Office, found that the original proposal setting a higher rate "was arbitrary and not supported by the record of evidence," said spokeswoman Jill Brett.

Instead, webcasters will be charged at a rate that amounts to 70 cents per song for every 1,000 listeners, the Copyright Office announced on its Web site.

In May, Billington rejected the panel's rate proposal — up to $1.40 per song heard by 1,000 listeners. That was double the rate for broadcasts sent out simultaneously on radio and the Internet.

The recording industry, which had sought higher royalties to compensate artists and music labels for using their songs, criticized the lower rate.

The rate "simply does not reflect the fair market value of the music as promised by the law," said Cary Sherman, president of Recording Industry Association of America ( news - web sites).

Even though many webcasters had sought lower rates, some were still unhappy.

"We're going to lose more money," said John Jeffrey, vice president of Live365 Inc., the largest Internet radio network. "We think that this is a rate that still means the majority of independent webcasters will cease to operate."

Jeffrey said even the lowered rate will still cost the cash-strapped company about $100,000 each month.

Live365, a network composed of about 30,000 radio stations created by individual Internet users, wanted a rate based on a percentage of revenue, the same scheme used to pay songwriters and music composers.

Opponents to Thursday's ruling can appeal to the U.S. Court of Appeals for the District of Columbia Circuit within 30 days. The court could modify or set aside the decision if it finds the ruling was highly unreasonable.

Internet radio — either simulcasts of traditional over-the-air radio or Internet-only stations streamed through the Internet to computers — is becoming more popular as people get high-speed connections at home.

Webcasters said the rates initially proposed were too high and would cost larger Internet radio broadcasters hundreds of thousands of dollars annually, more than they get from advertising or listener contributions. Many webcasters said the fees, which would be retroactive to 1998, would force them to shut down.

The new fees would add to the royalties already paid by webcasters who, like over-the-air radio stations, already pay composers a rate typically based on a percentage of the broadcaster's revenue.

Traditional radio broadcasters have been exempt from paying the royalties for each song played — the standard that is now being applied to webcasters. Broadcasters successfully argued before lawmakers that they already were promoting the music.

After the recording industry failed to impose new royalties on traditional broadcasters, the industry turned to webcasters — and a 1998 law granted the industry its wish.

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