Bill Would Overturn Increase In Internet Radio Royalties

Internet radio broadcasters could get a break from a bill introduced this week that would lower the rates they pay for playing music.

U.S. Reps. Don Manzullo, R-Ill., and Jay Inslee, D-Wash., introduced a bill to overturn a Copyright Royalty Board (CRB) decision that would require Internet broadcasters to pay three times as much as their over-the-airwaves counterparts for the right to play music.

The Internet Radio Equality Act, introduced Thursday, could ultimately impact up to 70 million Americans who, according to Nielson Media Research, listen to online music stations each month. The bill would mandate royalty parity for Internet, satellite, and cable radio, as well as jukeboxes and traditional radio.

The CRB increased royalty rates (PDF) for Webcast music, setting a retroactive rate of $0.0008 per song for 2006. The rate in 2005 was $0.0007 per song. Under the ruling, announced March 2, the amount is set to rise to $0.0019 per song by 2010. That -- plus a $500-per-station fee and the elimination of fee schedules that based fees on a percentage of revenue -- could amount to a 300% increase for large operations and up to 1,200% for smaller operations, according to digital media representatives.

"In last few days, we have received hundreds of e-mails from constituents of ours who are online music listeners," a spokesman for Manzullo said in an interview. "I think we're going to see a massive grassroots interest in this. Hopefully things can come together quickly on this and we can get it changed."

The CRB's rules are scheduled to take effect May 15, and Internet broadcasters will be hit not only with an increase in current rates but a bill for the retroactive fees.

Jack Ward of SaveNetRadio, the group lobbying against the Recording Industry Association of America and the CRB ruling, said in an interview Friday that the increases are "astronomical." He said the bill for the difference in the old rates and the retroactive hike is one "no small Webcaster can pay."

The RIAA referred questions about the bill to SoundExchange, which represents record labels and artists. That orginization said the proposed legislation would "gut the fair market rates."

"If passed, the bill would also result in a windfall of more than $50 million to mega-corporate webcasters like Clear Channel and Microsoft at the expense of recording artists across the country," the group said in a prepared statement. "Because the bill is retroactive, artists would have to write checks to cover refunds to corporations whose CEOs and top executives are paid millions of dollars per year."

John Simson, executive director of SoundExchange, said: "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. 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."

Reps. Manzullo and Inslee echoed the concerns of Internet music providers and supporters who have said the increases will bankrupt some companies and force others to stop streaming on-air programs over the Internet.

"This titanic rate increase is simply untenable for many Internet radio broadcasters," Inslee, a member of the House Energy and Commerce Subcommittee on Telecommunications and the Internet, said in a prepared statement. "You can't put an economic chokehold on this emerging force of democracy. There has to be a business model that allows creative Webcasters to thrive and the existing rule removes all the oxygen from this space."