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The Future of Internet Radio is at Risk

by Cancer

On Wednesday, February 20, the Copyright Arbitration Royalty Panel (hereafter referred to as CARP) proposed new rates and royalties to be paid by "Webcasters". The royalty rates are for the performance of copy written material. The rates, as proposed are an outrage, and will cause the demise of many, if not all, Internet Radio stations.

Webcasting is a new form of broadcasting using the Internet as a transmitter rather than a tower as in radio, or satellite dishes as in television. Aside from the delivery mechanism, Webcasting is identical in every way. Yet the new fees and rates being proposed by CARP along with the RIAA are forcing Webcasters to pay much more to broadcast, and to deliver more detailed logs for their transmissions than traditional terrestrial broadcasters. This legislation will in effect suppress the very foundations this country is built upon - the freedom to pioneer new technologies and develop entrepreneurial ideas to their maximum potential.

Thanks to Webcasting technology, for the first time in decades the power to broadcast has again been placed in the hands of those who cannot afford to purchase a 50,000 watt transmitter and spend millions of dollars to compete with the major radio stations. Broadcasting has reached a new era akin to the days when radio began, when anyone could start their own radio station with a few parts and some electricity. Those days fueled an entire industry that has now become a multi billion dollar machine.

Through Webcasting there is a whole new machine on the verge of being created, yet the new rules and fee structures are quickly squashing any hope of anyone being able to afford to pioneer this technology.

The proposed fee structure is 14/100th of a cent per song played, per listener tuned in to the station. To make it simple, let's assume our station has 1 listener tuned in for 24 hours a day all year long. Let us also assume we play 15 songs per hour.

14/100th X 15 songs = 2.1 cents X 24 hours = 50.4 cents X 365 days = $183.96 per year

So that's roughly $180 per year for one listener. Now let's look at one of the top independent stations on the Internet right now, Digitally Imported (DI), which is also mostly commercial free. DI has at any given time of day at least 2000 listeners. Over a year at the above rate this means they are paying 2000 X $183.96 = $367,920.00 in fees alone.

This is JUST to the RIAA. Keep in mind there are also fee's due to ASCAP, BMI, and SESAC.

Does terrestrial radio pay that much in licensing fees for broadcasting their music to a much larger audience? No they don't. DI as one of the more successful Internet Radio Stations has only scratched the surface with their 2000 listeners. Thats a drop in the bucket compared to the audience that average terrestrial radio stations have. At these rates , a more successful Los Angeles terrestrial station will an average 500,000 listeners would be liable to the RIAA for $91,980,000. But terrestrial radio does not have to pay these rates. Nothing close to these rates.

CARP has also proposed a 9% fee for making "Ephemeral Reproductions" (a digital copy on your hard drive. Basically an mp3). DI and with their 2000 listeners would be liable for an additional $33,000 in fees.

Do traditional radio stations have to pay for Ephemeral Reproductions? No. But they DO place their music onto a hard drive for station automation. Why aren't they charged?

The CARP proposed rules also require that the Webcaster keep extremely detailed logs of their transmissions - much more detailed than the logs required of terrestrial radio stations. It is assumed that the only reason the RIAA and the record labels wants to enforce such detailed logging is to enhance their own ability to market their own product.

While some logging is understandable, Webcasters are being asked for much more than is possible to deliver:

1) UPC codes of the music we play.

What if the disc was given to us as a promotional copy from the record label? The UPC codes are destroyed on those copies so they can't be sold. What if we play music from vinyl recordings?

2) The exact time a listener tunes in, tunes out, and the listener's time zone.

Traditional radio has never been technically able to report this information and never will. It seems as if the industry has done just fine with rough estimation for the last 40 years. Again, it appears the RIAA and the major labels just want to use this information for marketing purposes.

3) The unique user ID, associated with each listener.

For what purpose? The only way to accurately get this information is to turn a station into a subscription-based service where the listener has to have a login and password. Coincidentally the major record labels are all starting up their own such subscription-based services.

4) ISRC Coding embedded into the disc itself.

This is Preposterous. This automatically rules out playing any music from cassette or vinyl. It is also next to impossible to retrieve the ISRC coding from a disc without highly advanced CD players or other systems. Again the major record labels seem to have all of the ISRC codes from the discs they manufacture. Perhaps yet another ploy to monopolize the Webcasting industry with their own stations.

As a Webcaster I am not opposed to regulation and legislation. I understand the need for artists to get paid. However I feel this new legislation is helping the Big 5 record labels (Sony Music, Warner Music, EMI Recorded Music, Universal Music and BMG Entertainment), along with the RIAA, to monopolize an emerging industry. If this were allowed to happen when radio was first introduced to the World it would not have emerged as the industry it is today.

I also feel the money re-couped from these outrageous fees would not benefit the artists at all, rather it would benefit the RIAA and the record labels. If one reads the fine print the RIAA can use re-couped funds for operations without limit, and if they cannot distribute a royalty within 3 years they keep the money. Nothing in the legislation says they have to locate and pay an artist or prove that they even embarked in a search process.

Do you remember the multi million dollar RIAA/ settlement a while back? The Big 5 record labels kept all of that money and distributed none of it to the artists.

It is difficult for me as a Webcaster to agree to pay such fees and keep such detailed logs when I have no reciprocal methods of accountability from the RIAA. I have no proof the artist is getting paid. If this new legislation is indeed designed to protect the artist I want to see exactly where the fees I am paying are going.

I urge you to speak out against this legislation on behalf of the Webcasting community. This is a crucial time for those of us attempting to create a new business based on new technologies. I hope you can see as clearly as I do that this legislation is creating a monopoly in an industry already considered monopolized by the Big 5 Record labels. As an American you should see these proposed rules go against the very entrepreneurial values that made this country what it is today.

The CARP report will be reviewed by the Copyright Office, which will recommend to the Librarian of Congress whether to accept, reject or modify the rates and terms set forth in the report. The Librarian must accept or reject the report no later than May 21, 2002. However, it is likely that the recommendation will be made much sooner.

You can help Vampire Radio and the other 50,000+ Internet radio stations by making your feelings known. You can submit Your Comments on the CARP Royalty Proceedings Directly to Congress and the US Copyright Office at

Or, you can write The Copyright Office at:

U.S. Copyright Office/Library of Congress
101 Independence Avenue SE
Washington, DC 20559-6000

And finally, please, contact your member of Congress and raise this issue to top priority. The losers will be you and the 80 million consumers who are currently listening to Internet radio. Many, if not all Internet Radio Stations will fold. The big losers will once again be the artists. There will be less exposure to their music and they will not see one red cent of the revenue confiscated by the RIAA.

I would like to thank Toby Sheets of for the extensive research he did involving the recommendations set forth by CARP. And, who has launched an initiative designed to ensure that the voice of every person, organization, and company concerned with the recent decision on CARP royalty rates be heard.

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