Competing royalty bills to come up in next Congress, reports Billboard

Monday, November 26, 2012 - 10:50pm

Word has officially come that the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet will hold its hearing on Internet royalties on Wednesday (as we covered here). The hearing begins at 11:30am ET in the Rayburn Building. The witness list hasn't yet been published (we assume it will be, here).

Billboard.biz reports the Internet Radio Fairness Act (covered in RAIN here) will be re-introduced in Congress next year. It was introduced to this Congress by Reps. Jason Chaffetz (R-UT) and Jared Polis (D-CO) in the House and Sen. Ron Wyden (D-OR) in the Senate. The news source also finds it likely the competing bill, Rep. Jerrold Nadler's (D-NY) Interim FIRST Act (more in RAIN here) will be introduced.

The IRFA will attempt to bring the Internet radio royalty process in line with those for other forms of digital radio (satellite, cable) by requiring the use of the 801(b) standard (more here). Internet radio rates are uniquely determined by trying to replicate a market rate via a standard known as "willing buyer willing seller."

Nadler's Interim FIRST Act would apply "willing buyer willing seller" to satellite and cable radio royalty settings. Additionally, it would require broadcasters to pay a royalty for streaming their online content that would, in effect, "make up for broadcasters not paying a fee when they play artists' songs over the air."

Billboard.biz's coverage is here.

IRFA sponsor Wyden says public policy shouldn't favor one business over another

Wednesday, November 14, 2012 - 11:50am

Oregon Senator Ron Wyden (D), who introduced the Internet Radio Fairness Act in the U.S. Senate in September, says the debate over Internet radio royalties is a battle between entrenched interests and a healthy future for music. His bill, he insists, is about ensuring a fair market that will help webcasting grow, leading to "more income for artists, and more music choices for consumers." Pitted against that future are "a few big record companies... (who) are using uncompetitive practices to crowd out the competition," Wyden told attendees of the Future of Music Summit yesterday in Washington, D.C.

He made a case that artists and independent labels should be siding with the webcasting industry in support of the new legislation, as they stand to benefit from a more robust Internet radio market his bill hopes to enable.

"The history of American music is one of artistic creativity, technological advancement, and particularly those innovators - the dreamers - who are willing to disrupt the status quo. And in my view, we've got to make sure that's what the future is all about," he said.

Wyden's Internet Radio Fairness Act (IRFA) seeks to reform the process by which Internet radio royalties are determined by requiring judges use the same legal standard they use when setting satellite and cable radio rates, known as 801(b). Currently, Internet radio is unique in that (as mandated by 1998's Digital Millennium Copyright Act), judges determine a rate based on what they feel a "willing buyer" and "willing seller" would agree to in a hypothetical market. While satellite and cable radio pay about 8% of their revenue for royalties, Internet radio rates have equaled 50-70% (or more) of revenue for webcasters. 

"It is the job of policymakers to ensure that the law and public policy doesn't favor one business model over another, and particularly that it doesn't favor incumbents over insurgents," said Wyden. "We've got to make sure that the past doesn't get a leg up on the future, and I think a lot of you remember that in these kinds of debates, it seems like the future doesn't have a lobbyist."

Read Wyden's speech in Digital Music News here

IRFA Senate sponsor Wyden, Pandora founder Westergren will speak at Tuesday's Future of Music Summit

Thursday, November 8, 2012 - 1:10pm

Oregon Senator Ron Wyden (D), who introduced the Internet Radio Fairness Act (S.3609) in the Senate in September will keynote the Future of Music Summit this Tuesday (November 13) in Washington, D.C.

The Future of Music Coalition has also just announced the event will begin with Pandora founder Tim Westergren (replacing CEO Joe Kennedy) in a one-on-one with music journalist Greg Kot.

The sold-out Summit event will be webcast live by Backbone Networks (and available on TuneIn), and listeners will be able to submit questions for speakers via Twitter and Facebook. Backbone, in fact, has also set up a "preview station" using its OnAirStudio and OnAirDisplay software. The preview station is now available and features highlights from past FoMC Summits.

See the full event agenda here.  

The FoMC is a D.C.-based national nonprofit organization to represent musicians' interests. Read more about Tuesday's Summit event here.

Supporters say Internet Radio Fairness Act would drive innovation and increase revenue for performers

Friday, September 21, 2012 - 11:25am

Two radio industry groups have issued statements of support for the just-introduced Internet Radio Fairness Act (here).

Both thanked Reps. Chaffetz and Polis and Sens. Wyden and Moran for the introduction of the bill, and decried the unfairness that Internet radio alone is subjected to rates determined not by the 801(b) standard of the Copyright Act, but by the imagined marketplace of the "willing buyer willing seller" standard.

"In 1998, Congress passed the Digital Millennium Copyright Act (DMCA), instructing the Copyright Royalty Board (CRB) to set (an Internet royalty) rate 'that a willing buyer and a willing seller would agree to,'" explained Kurt Hanson, founder and CEO of webcaster AccuRadio (and publisher of this newsletter), speaking on behalf of the Small Webcaster Alliance (which includes services like Digitally Imported, 977 Music, and Radio Paradise). "The difficult-to-interpret language of that standard has been a nightmare for our industry ever since, leading to CRB decisions that have forced Internet radio companies to pay unreasonably high royalty rates and hindering innovation and growth."

The National Association of Broadcasters joined in support of the bills. "NAB... strongly supports legislative efforts to establish fair webcast streaming rates. NAB will work with the bill's sponsors and all interested parties to create broadcast radio streaming rates that promote new distribution platforms and new revenue streams that foster the future growth of music."

We expect to soon have reaction from other supporters, as well as opposition statements from music industry representatives like the RIAA, SoundExchange, and performers organizations, as well as Congressional opponents to these bills.

IRFA would remove controversial "willing buyer willing seller" standard in webcast royalty determinations

Friday, September 21, 2012 - 11:25am

As expected (see RAIN here), Congressmen Jason Chaffetz (R-UT) (left) and Jared Polis (D-CO) this morning introduced to the House of Representatives a bill they hope will create a more level playing field for Internet radio concerning sound recording royalties. An accompanying bill has been introduced to the Senate by Sen. Ron Wyden (D-OR) (right). 

The Internet Radio Fairness Act would change the legal standard by which judges determine the statutory rate for streaming radio. The royalty rates for most other, related uses of copyright sound recordings use the standards set in section 801(b) of the Copyright Act. The 1998 Digital Millennium Copyright Act made an exception for Internet radio, requiring rates to be set to what the judges felt a hypothetical "willing buyer and willing seller" would agree. The bills would bring Internet radio in line with media like cable- and satellite radio, requiring rates to be set along 801(b) guidelines.

Proponents of the bills argue that the current standards discrepancy creates a competitive environment in which broadcast-, cable-, and satellite radio can flourish, while Internet radio operators are faced with royalty obligations equal to or greater than their annual gross revenue. It's interesting to note that the royalties that record labels (who've already come out in opposition to this bill) pay to publishers and songwriters to record their music are also based on 801(b).

Consider that satellite radio operator SiriusXM pays around 8% of its revenues for the right to use copyright sound recordings in its broadcasts, based on a determination using the 801(b) standard. Pandora, on the other hand, says nearly 70% of its total revenue (based on its Q1 FY 2013) will go to royalty payments (and that's per a deal Pandora struck that actually decreased its obligation (again, here, under "Pureplay Webcasters") from the CRB decision -- a decision based on "willing buyer/willing seller").

The bill does not, as some critics point out, address the fact that AM/FM broadcasters do not pay royalties on the sound recordings they play on the air (which in sense, makes the competitive burden to Internet radio that much heavier). New York Congressman Jerrold Nadler (D) plans to introduce a bill in opposition to the Chaffetz/Wyden bill, the Interim FIRST Act (see RAIN here). That bill would raise the royalties broadcasters pay to stream online to a level that would, in effect, equal what they'd pay for an over-the-air royalty. It would also impose the "willing buyer willing seller" standard to royalty rate settings for media currently using 801(b). 

Currently, under the "willing buyer/willing seller" standard, when CRB judges determine the royalty rate at which webcasters pay copyright owners and performers for the use of sound recordings, they do not (and in fact, are instructed to not) consider the "real world" ramifications of their determination, only the perceived economic value of the right.

"In setting royalties, (801(b)) assesses not only the economic value of the sound recording, but also the public interest in the wide dissemination of the copyrighted material and the impact of the royalty on the service using the music," explains attorney David Oxenford (here).

The 801(b) standard is a set of four criteria the U.S. Copyright Office has historically used to determine a royalty rate. They are:

  • Maximize the availability of creative works to the public;
  • Insure a fair return for copyright owners and a fair income for copyright users;
  • Reflect relative roles of capital investment, cost, and risk, and;
  • Minimize disruptive impact on the industries involved.

Read 801(b) of the Copyright Act here.

More, including commentary, coming soon in RAIN.

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