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Later this summer, Internet and satellite radio broadcasters will have to pay dramatically higher royalty rates. Web radio alone reaches more than 55 million listeners a week in the U.S. and the new rates have sparked enough protests that Congress has gotten involved.
Two bills have introduced, bills that we should acknowledge are supported institutionally by National Public Radio, and those bills would roll back the rates.
Reporting on this story, NPR's Felix Contreras.
FELIX CONTRERAS: In March, the Copyright Royalty Board, or CRB, a three-judge panel appointed by the Library of Congress, raised the rates from a fixed percentage of Webcasters' and satellite broadcasters' income to a rate based on the number of listeners and the number of songs played during a given time period. The new rates, which are retroactive to 2006, begin at eight one-hundredths of a cent per performance per listener. It sounds like a small amount but it adds up. Many commercial Webcasters have complained the new rates set by the CRB would actually exceed any revenue brought in from ads and subscriptions.
Representative JAY INSLEE (Democrat, Washington): This may surprise people, but government agencies sometimes make mistakes.
CONTRERAS: Congressman Jay Inslee, a Democrat from Washington State, is co-author of the Internet Radio Equality Act. The bill, which now has 63 co-sponsors, would restore the old formula of charging Webcasters a fixed percentage of income, so would a bill introduced in the Senate. Congressman Inslee says the legislation makes sense for a developing industry.
Rep. INSLEE: We want to have our music, we want to make sure the musicians are compensated but we want to make sure that we have a business model that allows Internet radio to blossom. It's new. It's nascent. It's growing. We don't want to strangle that new consumer service businesses in the crib.
CONTRERAS: While Yahoo!, AOL and Clear Channel Communications might be able to absorb the new royalty rates, small Webcasters say they would be hard-pressed to keep their stations on the air. National Public Radio filed a request with the Copyright Royalty Board to reconsider the rates on behalf of its member stations that stream music programming online. That request and others were denied.
The new rates were championed by SoundExchange, the non-profit set up by the recording industry to collect and distribute royalties for satellite radio broadcasts and music streamed online. Sound Exchange executive director John Simson says now that legislators have stepped in, they need to recognize that larger Webcasters can and should pay more.
Mr. JOHN SIMSON (Executive Director, SoundExchange): We want to make sure that if Congress decides they want to take some action, perhaps, to help a particular group of Webcasters whether it's non-commercials or small Webcasters that they not essentially give a windfall to the 20 largest companies that pay about 95 percent of the royalties online.
CONTRERAS: With the two bills making their way through Congress, a Washington, D.C.-based technology think tank held a briefing on Capitol Hill.
Mr. ROB ATKINSON (President, Information Technology and Innovation Foundation): Clearly, I would argue the optimal solution is...
CONTRERAS: The Information Technology and Innovation Foundation released a study that suggested a system of tiered royalty rates would work best. Rob Atkinson, the foundation's president, says the threat of losing their favorite Internet station is a big deal for the tens of millions of people who listen to Web radio across the country and around the world.
Mr. ATKINSON: A lot of these issues are inside the Beltway issues if you will. This one isn't. This is an outside the Beltway issue. This is one where there's been a lot of people now are aware of it. A lot of listeners on Web radio and other kinds of Web radio are aware of it. And they are saying something about it.
CONTRERAS: Congress did rollback royalty rates in 2002, the last time a rate increase was proposed. The new rates are scheduled to take effect on July 15th, so the current bills must make their way through the legislative process before then.
Felix Contreras, NPR News, Washington.
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