We are all in danger of losing Internet radio!
This will happen on May 21st without your help. Please see the
following letter which contains information and links regarding
this serious matter.
If you do NOT want to lose Internet radio, please feel free to
copy this letter and mail it to your Congressmen with your signature.
(your name and address)
May 1, 2002
the number of loyal Internet radio listeners in the U.S. is in
the millions and growing at over 100% per year, according to
studies available at
www.Measurecast.com. Internet radio is
a medium that does NOT deserve to be bankrupted and shut down in
just a few weeks.
Dear Senator or Representative:
I am writing you to express my strong fear that the U.S.
Copyright Office may be about to make a decision on May 21st
that will bankrupt and effectively destroy the Internet radio
Let me begin by clarifying that this issue is not about Napster
– in fact, quite the opposite. Internet radio is a perfectly
legal new medium that offers wonderful benefits for musicians
and record companies as well
as for consumers. (Record company revenues from CD sales may
well be at risk in this "digital millennium," but, if so, that
would be due to the phenomena of MP3 file sharing and CD
burning, not due to Internet radio.)
Internet radio is a young but fast-growing medium. Tens of
millions of Americans have sampled it, according to a study
When Congress passed the Digital Millennium Copyright Act (DMCA)
in 1998, it seems to have been led to believe that because
Internet radio is "digital," record company revenues were at
risk because consumers could
make "perfect" copies of the music they hear. In 2002, it's
clear that was a misrepresentation of the facts: First, people
do not make copies of the music played on Internet radio.
Second, even if they could, Internet radio
is almost always delivered in a reduced-quality format, much
lower than that of CDs or even FM radio. Thus, any copies made
would be "perfect" copies -- but of a low-quality original!
(It's a misrepresentation of what
As required by the DMCA, however, the Copyright Office is
nonetheless obligated to set a "sound recordings performance
royalty" rate for Internet radio. But the Copyright Arbitration
Royalty Panel (CARP) that
was convened last summer has reached a conclusion that is
probably far more draconian than anything Congress intended.
For most Webcasters, the critical issues in front of the
Librarian of Congress are:
(#1) The CARP arbitrators set a royalty rate that's far, far
the royalty rate paid by broadcasters and webcasters to
almost exclusively on a single deal during the height of the
between Yahoo! and the RIAA).
(#2) The CARP arbitrators recommended a fixed price per song
listener, rejecting a alternative "percentage of gross revenues"
concept that both sides had previously been willing to accept,
(#3) The Copyright Office has proposed recordkeeping and
requirements, precisely as requested by the RIAA, that are
the abilities of most webcasters to fulfill.
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
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.
(your name and signature)