MICHELE NORRIS, Host:

The deadline for Webcasters to pony up or shut down has come and gone, and the standoff continues over the royalties they will pay for streaming music online. Webcasters large and small say the proposed higher rates could put many out of business.

NPR's Felix Contreras reports there is now another roadblock to a settlement.

FELIX CONTRERAS: Okay. Let's recap. Back in March, a three-judge panel created to oversee royalties in the digital realm, announced new royalty rates for music streamed online.

Commercial Webcasters had been paying a percentage of their annual income. But the new rates would require them to determine how many listeners they had each time they played a particular song. Noncommercial Webcasters, many of whom were represented by National Public Radio in negotiations, said they couldn't afford the technology for this kind of monitoring. Smaller commercial Webcasters said the new rates would amount to more than their annual income. In large Webcasters with thousands of channels bulked at a $500 per channel minimum fee imposed as part of the new rates. So the Webcasters appealed to a federal court. Smaller Webcasters and noncommercial outlets have reported positive talks with Sound Exchange, the nonprofit setup by the record industry to collect royalties.

CONTRERAS: For larger Webcasters, Sound Exchange offered to cap the minimum per channel fee, but the Webcasters would have to encode their streams with software that prevents their listeners from recording them, which called stream ripping.

JONATHAN POTTER: The connection of the minimum fee to stream ripping is fantasmical. It doesn't exist.

CONTRERAS: Jonathan Potter is the executive director of the Digital Media Association, which represents the six largest Webcasters: AOL, Yahoo, Live 365, Pandora, Real Networks and MTV.

Potter blames the record industries, specifically its lobbying group, the Recording Industry Association of America. He says the industry is trying to push Webcasters to adopt the kinds of copy protection measures it's endorsed for CDs to prevent unauthorized peer-to-peer file sharing.

POTTER: The RIAA and Sound Exchange have decided, hey, we've got these guys. We got a gun to their heads. Perhaps, we can box them in and force them to give us something that they've been prepared to give us before, and that would be a technological mandate to block stream ripping. And we're just not going to do that.

CONTRERAS: The kinds of digital locks the record industry wants to put on Internet radio are either not feasible, expensive or not reliable according to Ken Fisher, editor of the technology Web site Arstechnica. And he says they're unnecessary.

KEN FISHER: It's almost a guess at the next threat. There's no real proof that stream ripping is actually a problem.

CONTRERAS: But Richard Ades, spokesperson for Sound Exchange, says it is. He cites the wide availability of stream ripping software and he says Webcasters have as much to lose from the practice as the record industry.

RICHARD ADES: If somebody's a fan of the '60s music, let's say, and a Webcaster's got - has a '60s channel, somebody goes in and rips the music for a week. They don't need the Webcaster anymore.

CONTRERAS: There's a lot at stake in this standoff, says Arstechnica's Ken Fisher. He's been following the negotiations and says the record industry is desperate after its attempts to stifle unauthorized peer-to-peer file sharing have failed.

FISHER: The future of media is streaming over networks like the Internet, so this is a very important decision in sending out a message saying, well, we're interested in this new medium, but only if it's played 100 percent on our terms. And that's something that, if I were the music industry, I would think twice about.

CONTRERAS: It may have time to do that. The Webcasters' appeal is still pending and there are two bills in Congress that would roll back the online royalties to their previous rates.

Felix Contreras, NPR News.

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