A bill introduced in the House today (April 26) would change the recent webcaster royalty rates set for sound recordings by the Copyright Royalty Board.

The stated purpose of the Internet Radio Equality Act, introduced by Reps. Jay Inslee, D-Wash., and Don Manzullo, R-Ill., is "to nullify the March 2, 2007, determination of the Copyright Royalty Judges with respect to Webcasting, to modify the basis for such a determination and for other purposes."

In March, after a two-year proceeding that included a trial, the Copyright Royalty Board (CRB) set the 2006-2010 compulsory-license royalty rates that Webcasters and simulcasters must pay to perform recordings on non-interactive Web sites (section 114 of the Copyright Act).

In their 115-page opinion, the judges set commercial Webcaster and simulcaster rates ranging from .08 cents per stream in 2006 increasing to .19 cents per stream in 2010, with a minimum payment of $500 per channel or station per year. Non-commercial Webcaster and simulcaster rates were a flat fee of $500 per channel or station unless their streams exceed a certain number of average tuning hours, then they would have to pay commercial rates beyond that point.

Many small and noncommercial Webcasters were gravely concerned that they would be put out of business at these rates. Some of them are expected to appeal the decision.

The bill would set a minimum of no more than $500 for each provider of services, rather than the CRB's per channel or station minimum. It would also give the Webcasters the option to select whether they want to pay .33 cents per hour of sound recordings transmitted to a single listener, or 7.5% of the revenues that are directly related to its digital transmissions of sound recordings and are received by the Webcaster during that year.

When the CRB determines rates in the future, the bill requires reports from three sources.

The bill would require the Assistant Secretary of Commerce for Communications and Information to submit a report to the judges on the competitiveness of the Internet radio marketplace and the effect of the proposed rate determinations on Internet radio providers. This report would be submitted after the assistant secretary consults with representatives of copyright owners, nonprofit educational institutions and Internet radio providers.

It would require the FCC to prepare and submit a report on the effects of proposed rate determinations on such things as localism, diversity and competition in rural areas; diversity of programming; and competitive barriers to entry in the Internet radio market.

Finally, the bill would require a report from the Corporation of Public Broadcasting on the effect of royalty determinations on their licensed stations.

"This bill may be Internet radio’s last best hope," says Jonathan Potter, executive director of the Digital Media Assn. "The Internet Radio Equality Act sets a new standard for setting royalty rates that will level the playing field for Internet radio, avoid unfair bankruptcies that eliminate royalties currently being paid to recording artists and record companies, and removes the unfair advantage enjoyed by our competitors in the satellite radio community."

"The idea that this bill would help small webcasters or artists is ludicrous since less than 2% of all royalty payments in 2006 came from small webcasters," said John Simson, executive director of SoundExchange. "The true beneficiaries are the mega-multiplex services like AOL, Yahoo!, Microsoft and Clear Channel, which will benefit from rates substantially lower than those set by the Librarian of Congress in 2002."

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