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Dead Air Online
Disputes Over Fees, Royalties Have Webcasters Pulling the Plug

Start streaming audio Listen to Rick Karr's report.

Aug. 30, 2001 -- The Internet was once heralded as a promising new avenue for radio stations to reach audiences all across the globe, well outside the broadcast ranges authorized by the FCC. Internet users could simply surf to an address on the World Wide Web, click a hyperlink and -- provided they had the right software -- listen to their favorite radio stations "stream" songs.

WFMU Webcasting site
Webcasting intro page for WFMU, an independent radio station in New Jersey with a large and loyal Web listening audience
Photo: WFMU

Some of those Internet sites were built by established radio stations looking to expand their listener base. And some were from "independent" stations and Web-only destinations that played an eclectic mix of music that appealed to a small but devoted listening audience. Together with sites like Napster that allowed Internet surfers to swap entire songs, the Web was turning up the volume on music heard over a new broadcasting medium.

But over the past five months, hundreds of U.S. radio stations have dropped their Internet simulcasts. NPR's Rick Karr reports that the reasons have a lot to do with the collapse of the Internet economy -- but also because of powerful forces that govern what is heard over the radio and who gets money for playing songs and advertisements.

Players in the Webcasting Dispute

• Read a summary of the controversial contract between the American Federation of Television and Radio Artists and radio advertisers.

• The National Association of Broadcasters, which represents most commercial radio stations, has posted a position paper on why broadcasters shouldn't have to pay additional royalties for digital transmissions of songs.

• The Recording Industry Association of America has a Webcasting FAQ that explains why broadcasters should pay extra royalties for Webcasting, and the rules Webcasters have to follow.

• The U.S. Coypright Office regularly updates its site information about its upcoming decision on royalties for digital transmission of records. The office also lists its rulings on issues specific to Webcasting.

The Digital Media Association is the Webcasters' trade group -- and the group has a page outlining its position concerning royalties for digital streaming.

According to a new contract between advertisers, ad agencies and the American Federation of Television and Radio Artists (AFTRA) -- a union that represents actors and announcers -- advertisers now owe commercial actors an additional fee if their advertisements are streamed over the Internet. (AFTRA also represents some employees at National Public Radio).

Many radio broadcasters balked, saying the new fees would cut into already sagging ad revenues -- and they pulled their signals off the Internet. But AFTRA National Assistant Executive Director Mathis Dunn says radio companies bet on Internet streaming to boost their listening audience, allowing them to charge more for advertising. When that didn't happen, stations simply pulled the plug.

Another factor is 1998's Digital Millennium Copyright Act (DMCA), which requires Webcasters to pay an additional fee for music over the Internet. Broadcasters sued the Recording Industry Association of America (RIAA) over the fee, and lost. Now the argument is over the amount of the fee -- the RIAA wants Webcasters to pay up to 15 percent of their revenues, but Webcasters argue for a rate that's about 30 times lower than that.

The new royalty rate will be set in January. Until then, some broadcasters remain enthusiastic about Webcasting -- even with tough DMCA restrictions that govern Internet playlists to protect record companies.