<REFLEXÕES DE UM CARACOL>

Internet radio stations to protest royalty hikes
They will replace music with silence today to fight royalty rate hikes.

By Jim Puzzanghera, Times Staff Writer

WASHINGTON — Across the Internet, the music will die today. It's a protest staged by online radio stations to preview what they say will happen when substantially higher royalty rates kick in next month, silencing for good stations that can't afford them.

Thousands of webcasters will replace their music streams today with periods of silence and occasional messages about the dispute, urging people to press Congress to reverse the royalty rate and fee increase set by a federal board. But despite growing support, Congress is unlikely to act before July 15, when the new rates take effect.That leaves Internet radio operators hoping that a federal court will grant an emergency stay, or that negotiations with SoundExchange, the organization that collects and distributes Internet music royalties, will lead to lower rates and fees."It's not a moneymaking venture; it's a labor of love," said Ted Leibowitz, 39, a software engineer who runs BAGeL Radio from his San Francisco apartment. He pays about $1,000 a year to broadcast "indie rock" 24 hours a day, sending out about 40,000 music streams a month through Live365.com, an Internet radio service based in Foster City, Calif. The new royalty rates threaten to shut down Live365, and Leibowitz estimates that he would have to pay more than $100,000 a year in royalties and fees to keep his station going. "Even if I was a wealthy man," he said, "that would be a very expensive hobby."So BAGeL Radio is joining Yahoo Music, MTV Online, Rhapsody and other sites in the National Day of Silence led by SaveNetRadio, a coalition of large and small webcasters and artists opposing the royalty hike. Many of those sites will point their listeners to an hourlong forum on the issue being aired continuously today by KCRW-FM (89.9) in Santa Monica, which may have to cut back its Internet music streaming if the rates take effect.The webcasters are protesting a decision in March by the Copyright Royalty Board, an obscure group of federal judges. The current rate of 0.08 of a cent per listener each time a song is played will more than double by 2010. The board also set a $500-a-year administrative fee for each channel a webcaster broadcasts, and removed an alternative rate structure for small sites that capped royalties at 10% to 12% of their revenue.Many webcasters will have to pay a large lump sum July 15 because the new rates and fees are retroactive to the start of 2006, when the old rates expired.The ruling sparked outrage on the Internet, where about 72 million listeners a month tune in Internet music stations as an alternative to broadcast and satellite radio. Despite the royalty ruling, SoundExchange can strike separate deals with websites. John Simson, the organization's executive director, said negotiations were continuing and dismissed fears of an Internet radio apocalypse July 15."We're going to be very busy the next two weeks," he said.The $500-a-channel fee is as controversial as the per-song royalty hike. Live365, for example, has about 10,000 channels, many of which are run by hobbyists, who pay as little as $10 a month for the company to handle their technology needs and royalties.Chief Executive N. Mark Lam estimates that Live365 will owe $7 million on July 15. The company made about $7,000 profit on $8.7 million in revenue last year — its first annual profit since launching in 1999. He predicted the new rates would kill the company.Yahoo Music and Pandora have a similar problem because they create personalized music channels for thousands of listeners, all subject to the $500 fee. Ian Rogers, general manager of Yahoo Music, estimated the company would have to pay about $750 million in that fee alone.Legislation has been introduced in the House and the Senate to roll back the royalty rate and fee increases. Although the House bill has 119 co-sponsors, there's almost no chance that it can get through Congress before July 15.Rep. Jay Inslee (D-Wash.), the lead sponsor of the House bill, said he would continue to push for passage after the deadline. "We're just not going to let this nascent industry die and we're not going to let people's websites go blank," he said.
jim.puzzanghera@latimes.com

http://www.calendarlive.com/tv/cl-fi-radio26jun26,0,6148450.story?coll=cl-tv-features

While Congress continues to back-burner the debate over whether it's fair for streaming radio services to be charged as much as ten times their revenue in performance royalties, the US Copyright Royalty Board last week met for a roundtable discussion about whether yet another class of royalties that are already part of copyright law, should apply to Internet radio as well.
The class being discussed is the "mechanical royalty" - a fee collected for the right to make a reproduction of a recording, or what the law calls a phonorecord. The basic meaning of the royalty is quite sensible: When you have a record, and you want to make records off of that master for reproduction and possible sale, you owe a mechanical royalty fee for each reproduction. Historically, that fee has been set at a flat rate of $0.09 cents per copy.
A 2001 agreement between the RIAA, royalties agencies, and music publishers established that streaming services where the music isn't specifically selected by the listener by song, do not count as phonorecords as described by US law, and thus no mechanical royalties apply. This is why you can't pick your own tunes from any of these services. That agreement is not under dispute. What the CRB has brought to the table, according to an insider's report on the blog of broadcast law attorney David Oxenford, is the issue of whether a webcaster such as Last.fm or Pandora actually makes a phonorecord for itself in the process of streaming a copy of that to the listener.
The debate partially stems from the findings of a US District Court in New York last April, which ruled in favor of AOL, Yahoo, and RealNetworks.
Their contention was that they did not have to pay performance royalties to ASCAP and other performance rights organizations (PROs) for music which their customers download directly from them, as opposed to services which are streamed to them. In its defense, ASCAP cited laws which appeared to state otherwise, though the Court found flaws in those laws that created what it decided were unintentional overlaps, the effect of which might have been that PROs could have been paid twice for essentially the same rights.
Ironically, it was an amicus brief filed by the RIAA itself which swayed the court's opinion. The RIAA has frequently this section of US Code: "A 'digital phonorecord delivery' is each individual delivery of a phonorecord by digital transmission of a sound recording which results in a specifically identifiable reproduction by or for any transmission recipient of a phonorecord of that sound recording."
US Code goes on to cite an exception: "A digital phonorecord delivery does not result from a real-time, non-interactive subscription transmission of a sound recording where no reproduction of the sound recording or the musical work embodied therein is made." That part pretty much made the judge's decision quite easy, deciding, "Although...the streaming of a musical work does constitute a public performance, we conclude that the downloading of a digital music file, in and of itself, does not."
That deduction was reached by virtue of having decided that the delivery of digital music cannot be considered both a public performance and a mechanical reproduction. From the law's standpoint, it should only be one or the other. The fact that a streaming performance is liable for performance copyright helped seal the deal that a reproduction was not.
The RIAA has urged the CRB to come up with a hard and fast rule as to what constitutes a digital phonorecord with respect to streaming services, and this is the purpose of the roundtable having convened. But an examination of this and other rulings got members of the Board to start thinking this way: Maybe the act of delivering music can't be treated as performance and reproduction simultaneously, but what about what happens in the act of preparing that performance? Doesn't a streaming service provider have to make a mechanical reproduction then? And does that reproduction fit US Code's current description?
Already, the distributors of ringtones based on existing popular music recordings pay mechanical royalties to a group called the Harry Fox Agency (HFA), and those fees are most certainly passed on to their customers. So there is precedent for the concept of digital mechanical reproduction. And certainly the topic must be broached in some way, shape, or form, before it can be decided that mechanical copyright does or does not apply.
But it makes the debate over royalties for digital works all the more difficult for a Congress that may only have a month left to decide this issue, and which the district court mildly pointed out may not really understand the topic anyway.