Calling the imposition of tremendously increased royalty fees on music webcasters "arbitrary and capricious," a group of organizations and companies with streaming radio interests, including the Digital Music Association, AccuRadio, and National Public Radio, filed a petition for an emergency stay before the US Court of Appeals in D.C., of the order imposing new performance royalty fees on online streaming music providers.
In their petition, the allies used formulas whose details were only provided to the Court under seal, the solutions to which overwhelm even BetaNews' own projections of the fees the SoundExchange performance rights organization could stand to attain.
They contend that so called "minimum fees" may be construed in such a way that they apply to almost everyone in the streaming business, though by way of a breakdown where the fees stop seeming "minimum" very quickly.
"Because the [Copyright Royalty Board] failed to provide any clear definition of the terms 'station' or 'channel,"' the petition reads, "SoundExchange has taken the position that each of the hundreds of thousands (or even millions) of these program streams and playlists constitutes a separate 'station' or 'channel."'
In other words, the petitioners interpret SoundExchange's argument to mean that, if we define a streaming station as a single running program of pre-selected music, then every such program constitutes a station in and of itself, even if that station plays to only one person.
Thus the $500 minimum royalty fee per channel could be construed as a "fee per playlist," which could entitle SoundExchange to royalties even far beyond what we previously considered to be unprecedented.
"Under that position," the petition continues, "'minimum' annual webcaster fees would oxymoronically reach hundreds of millions of dollars per licensee." While SoundExchange was only entitled to a total of $18 million for 2006 under the statutory license, "the 'minimum' fees for 2006 for just three licensees (RealNetworks, Pandora, and Yahoo) would be over $1.15 billion! They would dwarf the licensees' radio-related revenue by substantially more than a billion dollars."
Without the minimum fee breakdown, BetaNews estimates Yahoo's LaunchCast would owe $18.3 million in back royalties for 2006. We don't yet have enough data to make estimates for RealNetworks or Pandora. But with Pandora's business principle being the automatic creation of personalized playlists, the petitioner's claim opens up the possibility that Pandora could owe as much as $500 per year per listener.
NPR's interest in this issue goes to the heart of its business as well. Many NPR stations are streamed online, for which it does owe some royalties under current law, but a rather nominal fee due to exemptions pertaining to its status as a public broadcaster, as well as the fact that NPR stations don't present playlists of popular music.
But under the new streaming copyright system, the fact that an NPR station could play popular music means that it could owe royalties on a pre-emptive basis. Thus, stations that used to pay virtual pocket change in royalties could suddenly find themselves owing millions per year.
A stay of the court order imposing royalties could give Congress extra time to debate and vote on legislation that would codify a royalty system for Webcasters that overrides the CRB's decision - a system which, if Congress delays, would go into effect on July 15.
"D-Day for Internet radio, is fast approaching, and we are hopeful that today's motion for an emergency stay will afford the Internet radio industry crucial time to rehear this case," reads a statement released yesterday by SaveNetRadio.org spokesperson Jake Ward. "We have every confidence that Congress will continue to give the Internet Radio Equality Act the attention it deserves with the urgency it requires, as evidenced by the over 100 cosponsors who have signed on H.R. 2060 since its April 26th introduction."
By Scott M. Fulton, III, BetaNews
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