A quick update on the webcasting royalty rate situation... the webcasters represented by DiMA have asked the judges on the U.S. Copyright Royalty to reconsider their decision to implement royalty rates so high, and constructed in such a way, that webcasters large and small would have to shutter (or severely modify) their existing webcasting stations.
As suspected earlier today, DiMA is asking the judges to reconsider because the $500 minimum annual fee per station is too high, and because the judges were biased towards SoundExchange's proposal and expert.
Here's DiMA's full statement, released three hours ago:
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DiMA
Requests Judges Reconsider Major Flaws in Internet Radio Royalty Decision
March 19, 2007 – The Digital Media Association (DiMA) today asked theCopyright Royalty Board to reconsider three issues in its March 2 determinationof Internet radio royalty rates, on the basis that the Board’s initialconclusions would lead to clearly inequitable or erroneous results that werenot intended by the Board.
Jonathan Potter, DiMA’sexecutive director, offered the following statement:
“We do not believe that the Copyright Royalty Board intended to shut downthe vast majority of legitimate online radio services immediately when itissued its decision, yet that is the sober reality facing many services.
We hope that the Judges will rehear these three issues as they will havea particularly negative and immediate impact on our industry.”
1. Clarifythe $500 “Per Station” / “Per Channel” Minimum Royalty
Some DiMA members’ Internet radio services offer users more than 100,000
specialized programming options. These include “artist-based”
programming that reflect a playlist the service believes will be enjoyed byfans of a certain artist; “consumer-influenced” programming thatreflect listeners’ musical tastes; or aggregations of hobbyists orsemi-professional DJs who create stations on a broader service, such asLive365, that in turn provides a single, aggregated report of use to SoundExchange.
To the extent the Judges' minimum fee per service is uncapped and extends toall these programming options, the minimum fee (which the Judges intended to bea modest fee to cover SoundExchange administrative costs) will greatly exceedthe total royalties that many services would otherwise owe. For example,
Live 365’s minimum fee will be more than three times higher than its 2007
royalty obligation (under the new rates). Some specialized programmingservices will have minimum fees that exceed $50 million.
DiMA presumes that the Judges did not intend the minimum fee to have suchdraconian impact, and we are hopeful that Judges will reconsider the fee toimpose a per-service cap, as has previously been agreed to by SoundExchange andDiMA.
2. Includean Aggregate Tuning Hour (ATH) Royalty Calculation Alternative
Previous royalty agreements have enabled services to pay royalties“per-performance” (i.e., by counting each performance of each songto each listener) or “per tuning hour” (i.e., by measuring thetotal hours that consumers were listening to the service). Mostwebcasters, and all broadcaster simulcasters, chose to measure aggregate tuninghours and pay royalties on that basis.
The Judges’ recent determination is effective retroactively, to January1, 2006, and does not explicitly permit payments “by tuning hour.” However, most Internetradio services have not been maintaining precise performance data, and forthose who can reconfigure their system to do so that effort will requireseveral months. Accordingly, DiMA requests that the Board confirm areasonably calculated “tuning hour” royalty alternativepermanently, or at least for the retroactive period and for several months inthe future, e.g., until January 2008.
3.
Reconsider the Validity ofRIAA/SoundExchange Expert Proposal
In its Internet radio decision the Judges based their royalty ratedetermination entirely on the expert testimony presented by SoundExchange witnessMichael Pelcovits, who suggested that the right way to price non-interactiveDMCA-compliant radio royalties is to calculate downward from the royalties paidby interactive non-DMCA compliant on-demand music services. In aconcurrent case, regarding royalties to be paid by XM and Sirius, anotherSoundExchange witness proposed an entirely different methodology forcalculating non-interactive DMCA-compliant radio royalties. If the secondexpert’s theory had been applied in the Internet radio proceeding, theconclusions would have led to far lower royalties being set for Internet radio.
This gamesmanship by SoundExchange suggests that the Judges' reliance onthe SoundExchange’s expert to set Internet radioroyalties was erroneous, and should be reconsidered at this rehearing stage.
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(image from loc.gov)
