COPYRIGHT CORNER

WEBCASTING AND COPYRIGHT

February 2003

Recent news reports about the controversy concerning the dispute between Record Companies and radio stations concerning copyright royalties for streaming copyrighted music have highlighted concerns that small radio stations would be absolutely unable to continue webcasting, and, indeed, a number of small Internet webcasters have ceased operations due to the high royalty rates. Webcasting is defined the ability to use the Web to deliver live or delayed versions of sound or video broadcasts. Sometimes the same technology is referred to as “streaming.” For a webcast, like a broadcast, it is the transmitting organization as opposed to the listener, that determines the content of the program or the playlist. Although video may also be streamed, the controversy has revolved around so-called “Internet radio” and copyrighted sound recordings.

With the advent of the Internet, some radio broadcasters began to simultaneously webcast their radio broadcasts over the Internet. Others offered original direct Internet broadcasts. Radio stations that provided simultaneous webcasting paid royalties to copyright holders for the performance of their copyrighted music. However, the royalties they pay to ASCAP (the American Society of Composers, Authors and Publishers), BMI (Broadcast Music, Inc.) and SEASAC (Society of European Stage Authors and Composers) compensate the composers or holders in the musical composition and not the owners of the copyright in the sound recording (i.e., the record). Most radio and television broadcasters pay royalties through an annual blanket royalty fee.

The reason that recording companies were not compensated for playing their records over the air is that historically, there were no performance rights for sound recordings. In 1995 the Copyright Act was amended with the Digital Performance Right in Sound Recordings Act and again in 1998 with the Digital Millennium Copyright Act to provide performance rights for sound recordings performed by digital means. The second amendment covered webcasting. Radio broadcasters opposed the 1998 amendment, but Congress supported the recording industry by enacting this compulsory license provision. If a radio station webcasting over the Internet does not qualify for the compulsory license, then the only option it has is to negotiate individually with each record company whose recordings are being streamed.

There are several detailed requirements that a webcaster must meet in order to qualify for the compulsory license. (1) The webcast may not be a subscription service; in other words, users must not be able to select and play songs on demand. (2) Within a three hour period, the webcaster cannot play more than three tracks from an album, and no more than two consecutively, nor more than four tracks by a given artist, and no more than three consecutively. (3) If the webcast is archived, the archive must be at least five hours long, and may not be made available for more than two weeks. (4) If the webcast repeats itself (plays in a loop) then the loop must be at least three hours long. (5) Prior playlists of songs may not be published. (6) The webcaster must identify the song title, album title and the featured artist during the performance of the song. (7) Finally, the webcaster must not encourage users to copy or record the music being played and must disable copying by users in possession of technology capable of copying the recording.

From 1999 forward, the debate has been over the royalty rates that webcasters must now pay to recording companies in addition to the royalties to composers. In February 2002, the U.S. Copyright Office (Copyright Arbitration Royalty Panel, or CARP) released its proposal for how webcasters should be charged by the music industry. Neither side liked the proposal. The proposal was rejected by the Copyright Office in May 2002, and in June 2002, the Librarian of Congress issued a compromise ruling, which mandated that webcasters must pay 1/14th of a cent ($0.0007) per song, per listener, retroactive to October 1998. The rate was scheduled to go into effect August 1, 2002, but was delayed until October. The Recording Industry Association of America contended that the Librarian of Congress set the rate too low; and that the result would be that artists and record labels would subsidize the webcasting business. Small Internet broadcasters say the .07 cents per song would drive them out of business. More than 200 Internet-based radio stations had shut down before August 1 because of the impending fees. In fact, KPIG of Watsonville, California, the first commercial station to stream its signal over the Internet in 1995, stopped its webcasting for several months but has now returned to the Internet, but as a subscription fee radio station instead.

Many college radio stations have indicated that they will be unable to participate in webcasting due to the fees. In addition to the .07 cents per song fee, the announced fees include a minimum of $500 per year, retroactive to 1998. To stay at the $500 annual minimum, the station could average no more than 21 simultaneous listeners. Further, most college stations are noncommercial, they cannot run advertising to offset the additional costs.

A number of bills were introduced to offer some solution to the problem, and finally in mid-November 2002, H.R 5469, the Small Webcaster Settlement Act, was passed. It suspends all royalties until June 2003 and gives the parties time to work out reasonable royalties for noncommercial webcasters. It also permits small broadcasters to pay either a percentage of either their revenue or expenses in lieu of the per song rate. The bill was actively supported by virtually all players on both sides of the debate ranging from the record industry, artist representatives, both large and small webcasters, college radio stations and religious broadcasters. It basically allows the parties to mutually agree to override the CARP decision. The bill also protects artists by mandating that a share of the royalties be paid directly to them in order to eliminate the possibility that record companies might use their unfair bargaining position to contract with artists in ways that squeeze them out of their share of the royalties.

SoundExchange, the organization of recording companies that was created to license, collect and distribute the public performance royalties from digital performance of sound recordings, represents 2700 record labels and over 400 companies of all sizes. It will negotiate with webcasters’ organizations, such as the National Association of Broadcasters and the International Webcasting Association for royalties more tailored to the needs of small, noncommercial webcasters while still compensating copyright holders. There are various web resources to assist radio stations to understand this complicated issue and to calculate their royalties.[1]

Internet webcasting has tremendous potential for more than radio broadcasts, and it is already being used for continuing education programs and the like. Both audio and video streaming over the Internet offer expanded opportunities for librarians to update their skills and to develop professionally. Additionally, libraries themselves may want to webcast various user training courses and programs. The Internet radio royalty issue should make librarians realize that the royalties for streaming copyrighted audio and video content cannot be ignored, and may, in fact, be substantial.