RATES COULD KILL WEBCASTING SERVICES, INDUSTRY GROUPS WARN

Parties were divided on rates. On panel, RIAA attorney Steven Marks called rates “substantially below” what group had hoped for and said RIAA wasn’t happy about that. However, Seth Greenstein, attorney with Digital Media Assn. (DiMA), said DiMA’s official position was that while it appreciated fact that arbitrators found that rates should be much lower than recording industry wanted, it was “unhappy” that rates set were substantially higher than Webcasters had sought. Unofficially, he said, fees will force every Webcaster to look carefully at its business model to see whether it’s still viable, particularly small services preparing to launch. One Webcaster worried that, while his revenue could reach $800,000 this year, his license fee under CARP decision could equal that amount, Greenstein said. Issue is amount and per-performance structure of payment, he said, not whether creators should be paid. CARP decision will block new competitors from entering market, he said.

Many radio broadcasters will re-evaluate their streaming strategies in wake of decision, NAB Pres. Edward Fritts said: “If the powerful record company interests’ goal was to strangle a fledgling new service to radio listeners, it may have succeeded beyond its own expectations.” More than 5,000 radio stations Webcast their programming, according to some estimates. U.S. is only country where fees for public performances outstrip fees to music publishers, NAB attorney Ben Ivins said in panel discussion. CARP rate is some 3-1/2 times what broadcasters pay music publishers for over-air rights, he said, and there’s just no money in Webcasting to cover that.

One of key issues is amount of information that streamers would be required to collect. Copyright Office issued Notice of Proposed Rulemaking aimed at crafting notice and recordkeeping requirements to help royalty-collecting groups such as SoundExchange -- and copyright owners -- keep track of what songs were played online and how many times they were played, Copyright Office Gen. Counsel David Carson said. “Our goal” is to have rules in place at same time as Webcasting rates become effective, he said.

If CARP’s rate decision doesn’t “do a lot of our members in,” proposed new recordkeeping requirements will, Ivins said. Gregg Lindahl, vp of Cox Radio Interactive, which streams more than 80 radio stations, said later that information collection was “extraordinarily burdensome” and “certainly casts the spotlight on privacy questions.” Among information that streamers are required to collect and forward to copyright holders, he said, is unique user identifier, country and other data about each recipient of Webcast.

“The question is why they want this information and what they will do with it,” Lindahl said. “It is just unclear what the purpose is of having this information.” He said streamers were required to collect and pass on more than 20 fields of data about each audio stream.

New copyright fees alone are big burden for streamers, Lindahl said: “Right now, streaming is nothing more than a public service. We really get nothing for it, and it is a significant additional expense. The new fees alone raise questions about the business future of streaming.” Another official agreed that virtually all streamers were losing money now, and new fees meant “the prospects for any profits anytime in the future are highly unlikely.”

Adding new reporting requirements to new fees means continuing to stream “begins to not look like a good business decision,” Lindahl said. Given current capabilities, providing new information will require “a significant back- office operation,” he said: “This is extraordinarily burdensome and ridiculous.” Another broadcast industry source called reporting requirements “ludicrous,” saying even recipients of Webcasts would have to actively provide information rather than being passive listeners.

One broadcast official called overall decision “almost a prescription for killing this nascent [streaming] industry in the cradle.” He said that may have been goal, since RIAA “has shown no interest whatsoever in the Internet. It scares the daylights out of them.” He said govt. might have been “willing accomplice” in goal.

Asked whether RIAA would seek Copyright Office review of rates, Marks told us Assn. hadn’t yet seen decision itself, which is being edited to address confidentiality issues. Greenstein, wearing his “non-DiMA hat,” said there were any number of grounds on which either side might appeal. “If I were a betting man,” Greenstein said, he would say appeals were likely, particularly on issues such as CARP’s failure to place percentage price cap on fees. CARP decision almost certainly will be appealed, Lindahl said, but he said he was “not optimistic, based on the amount of relief we've been given so far.”

Parties have 2 weeks from Wed. to petition Copyright Office to modify or set aside CARP decision, Carson said, and additional 2 weeks to reply to any petitions filed. If no appeals are filed, office’s final decision is due out by May 21; however, decision rejecting CARP report, in whole or in part, would be due around June 30. Any party still not happy with rates could take its case to U.S. Appeals Court, D.C.