Webcasters -- who for the last few years haven't had to make mandatory royalty payments to composers' collections agencies -- may soon be in for a change.
On Wednesday, the Digital Media Association (DiMA), a webcaster industry group, and the Recording Industry Association of America RIAA), unveiled contrasting plans for setting royalty rates for music streamed online.
Whichever final plan is approved by U.S. regulators will be retroactive to October 1998, when the Digital Millennium Copyright Act (DMCA), first took effect.
Under DiMA's plan, webcasters are proposing that online radio stations pay $0.0015 per listener hour to cover performance rights fees on music they play. The arrangement is similar to that of terrestrial radio stations, which pay $0.0022 per listener hour to the traditional composers' collection agencies: ASCAP and BMI.
Jonathon Potter, DiMA's executive director, said the plan was created with the idea of compensating artists without dealing too lethal a blow to the bottom line of Web radio operations.
Still, the plan differed sharply from the one proposed by the RIAA, which wants webcasters to pay $0.004 cents for each song they play. The rates, the group said, were based on fees it had negotiated in agreements with 25 individual webcasters.
The agreement with the composers is independent of fees paid to copyright holders. Web broadcasters have to obtain separate licensing agreements with record labels to broadcast recorded music.
Although the number DiMA proposed may look miniscule, it can add up, said Ken Steinthal, counsel to the DiMA members involved in making the proposal. Last year terrestrial radio broadcasters paid in the neighborhood of $350 million to ASCAP and BMI, Steinthal said. He didn't say how much collection agencies could expect to make from Web radio, which has a much smaller audience.
Steinthal argued that the proposed fee per listening hour for webcasters should be lower than that of traditional broadcasters. The DiMA believes that online radio promotes music sales because it exposes listeners to new artists they might not hear elsewhere.
"The nature of our music use has been entirely beneficial to the sound recording owners," Steinthal said.
The folks from DiMA also spent a lot of time during Wednesday's press briefing talking about how streaming radio -- as opposed to music-downloading applications like Napster -- doesn't pose a threat to music sales because users don't get to pick what songs they hear.
The proposals were submitted Wednesday to the U.S. Copyright Office, which plans to hold a hearing in late July to ferret out opposing views on the question of royalty fees. A royalty structure is needed to comply with DMCA, which required that webcasters pay an unspecified fee for streaming content.
Although mandatory payments haven't taken effect yet, economic concerns have already provoked at least one major radio broadcaster with a webcasting arm to reconsider its approach to online radio.
On Tuesday, Clear Channel Internet Group, the online arm of Clear Channel Communications (CCU), one of largest U.S. radio station operators, said it temporarily stopped audio streaming on all its radio station websites.
Clear Channel officials would not comment on the decision, but issued a press release describing the move as "a corporate decision." The company said it plans to put the streams back up "when it makes legal and financial sense."
Kevin Mayer, chairman and CEO of Clear Channel Internet Group, said the company is currently involved in negotiations over changes to its webcasting technology and plans to decide on whether to restore its streams.
