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Internet radio firms hear a sour note from appeals court

Federal panel rejects request to stay royalty rate increase for music webcasters

By Linda Rosencrance
July 12, 2007 12:00 PM ET

Computerworld - A federal appeals court yesterday denied a petition from music webcaster associations for an emergency stay of new royalty rates that Internet radio companies have to start paying on Sunday.

"[The] petitioners have not satisfied the stringent standards required for a stay pending court review," the U.S. Court of Appeals for the District of Columbia Circuit wrote in its brief and to-the-point opinion.

The stay, if granted, would have delayed the July 15 due date of the increased royalty payments that are owed by music webcasters to SoundExchange Inc., the nonprofit organization set up by the Recording Industry Association of America to collect so-called digital performance royalties for recording artists and record companies.

The new rates were set by the Copyright Royalty Board (CRB) of the Library of Congress in early March and went into effect May 1, retroactive to the start of last year. The rate increase would at least triple the amount of royalties Internet radio broadcasters must pay to copyright holders per song, and it has been challenged by webcasters, Internet radio listeners and more than 6,000 artists over the past several months.

The appeals court's decision dealt a blow to efforts to overturn the new rates, acknowledged Jake Ward, a spokesman for the SaveNetRadio coalition.

"We are disappointed, surprised, not discouraged -- but certainly we recognize it as a setback," Ward said. "We're putting a lot of pressure on Congress today and tomorrow. [But] if this comes and goes on July 15 without congressional action, webcasters will have a choice to make."

For many, Ward added, the available options are all bad because they simply don't have enough money to pay the new royalty rates.

"What they'll be forced to choose is whether they want to continue broadcasting in noncompliance with the royalty board's rates or declare bankruptcy," he said. "But if they shut down, they're still violating the royalty board's decision because the rates have been in place since May 1 and are retroactive to 2006."

In a statement issued today, Jonathan Potter, executive director of the Washington-based Digital Media Association, said his group -- which represents large music webcasters and is known as DiMA -- was also disappointed by the appeals court's ruling.

Webcasters "are now forced to make very difficult decisions about what music, if any, they are able to offer," Potter said. "The result will certainly be fewer outlets for independent music, less diversity on the Internet airwaves and far fewer listening choices for consumers."

He added that DiMA officials are "hopeful" that Congress will take action on the issue, and that webcasters and SoundExchange "will find a way to compromise and maintain the diversity and opportunity of Internet radio."



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