Attention Internet Radio Fans

May 1, 2002 Page 2

From: (your name)
To: Senator or Representative

Regarding the first two points above: The RIAA initially asked webcasters for a royalty of 15% of gross revenues.

Webcasters initially countered by offering approximately 3% of gross revenues, in the range of the royalty
they pay to composers. They could not come to terms, so the two sides went to arbitration in front of the CARP. The CARP's recommendation to the Copyright Office, however, is not a percentage of gross revenues at all,
but rather a price per song per listener -- at a price that, even if webcasters could eventually achieve the same advertising success that broadcasters have achieved, would work out to a royalty rate of 20% of
gross revenues! (That's a third more than the RIAA asked for!) Worse yet, in the current advertising environment, the CARP's proposed rate equates to a royalty rate closer to 200% to 300% of gross revenues!

Worse yet again, the royalties are retroactive to October 1998. For a popular independent webcaster that has had, say, an average audience of 1,000 listeners (fewer than a single small-market broadcast radio station)
for the past three years, the bill for retroactive royalties would be $525,600, or a retroactive royalty rate of 500% to 1000% of their gross revenues to date. Without the option of a "percentage of gross revenues"
royalty rate, this retroactive obligation alone will bankrupt or force the shutdown of the vast majority of webcasters.

It's hard to imagine that this is what Congress had in mind when it passed the DMCA.

How did the CARP arbitrators come up with such a high proposed royalty rate? Because they were instructed to set the rate based on the principle of what a "willing buyer" and "willing seller" would agree to...and there
was only one such arrangement, between the RIAA and Yahoo! The financial situation of Yahoo! was unique, as they had just paid over $5 billion to acquire an Internet radio division (Broadcast.com). Furthermore, it was a
deal put together at the height of the "dotcom" boom. The agreement made by Yahoo! with the RIAA does not reflect current market conditions and it should not serve as a representative rate baseline for an entire industry
today.

As mentioned above, the Copyright Office has also proposed complex reporting requirements from webcasters, almost exactly as requested by the RIAA (18 pieces of information for every song that's played and 7 pieces
of information on every listener that listens). Imposing this requirement would require significant additional expense that would force many smaller webcasters off the air and add an unnecessary financial burden to the
larger ones, with no apparent benefit to any one.

In conclusion, if the Librarian sets a royalty rate along the lines of the CARP recommendation (and sets the reporting requirements as proposed), Internet radio as an industry will be effectively dead by the end of May.

I respectfully urge you to communicate to the Librarian of Congress that you and your fellow legislators, in passing the DMCA, did NOT intend for the royalty rate to be set so high (and reporting requirements so complex)
that it would bankrupt the fledgling Internet radio industry.

Many of your constituents and I will greatly appreciate your attention to this concern.

Sincerely,
(your name and signature)