U.S. Copyright Office Says Webcasters Must Pay

The U.S. Copyright office, on Friday, ruled that radio broadcasters are not exempt for the royalties which webcasters are required to pay.

The ruling published on Monday stated, "Broadcasters who choose to transmit their radio signals over a digital communications network such as the Internet may do so under a compulsory license. The Office has determined that an FCC-licensed broadcaster is not exempt from a copyright owner's digital performance right for sound recordings under these circumstances."

There are two different copyrights applicable to any given song. One covers the written music, and another the particular performance of that song. The performance right is usually owned by the performing artist (for example the singer), or the record label that represents that artist. Currently U.S. over-the-air broadcasters are exempt from paying performance royalties while the Digital Millennium Copyright Act (DMCA) requires webcasters to pay a compulsory fee which includes the performance royalty.

The RIAA petitioned the copyright office to ensure that the broadcaster's exemption was not extended to digital transmissions via the Internet. While usually taking an opposing stance to the RIAA, the Digital Media Association (DiMA) supported this petition.

The DiMA represents new media companies, including webcasters who are subject to a compulsory license that includes performance royalties. It is their stance that exempting traditional broadcasters from that fee would put them at unfair advantage.

Jonathan Potter, executive director of DiMA commented on the recent ruling: "It is critically important ruling for webcasters, to put all parties on the same playing field. It would stunt the growth of this industry if broadcasters had a special exemption."

The National Association of Broadcasters (NAB) is displeased with this ruling. Edward O. Fritts, NAB president and CEO released a statement saying: "NAB believes this ruling is directly contrary to existing federal law and Congressional intent as expressed in the Copyright Act. That's why NAB has asked a federal district court in New York to settle the issue."

"Broadcasters currently pay hundreds of millions of dollars annually to the licensing societies representing the authors, composers and publishers, and have never been required to pay additional fees to the record companies and artists," Fritts continued.

The NAB filed a complaint against the RIAA's petition of the copyright office at a federal district court in New York. The case was argued on May 29, 2000. A decision is still pending. If the court rules in favor of the NAB, the copyright office's ruling could be overturned.

Interactive Webcasting

In related news, the copyright office denied a request from the Digital Media Association to initiate a rule making proceeding to decide whether a webcasting service becomes interactive when a consumer exerts some influence on the music, stating that the current law is sufficient.

Interactive digital services, such as a pay-for-play service or an entirely user chosen playlist, are not covered under the compulsory license required by the DCMA. Those services require individual agreements with the recording companies.

The DiMA petitioned the copyright office in an attempt to delineate a gray area in the law concerning the definition of an interactive service. It believed that services which are subject to consumer influence, such as personalization features, soliciting musical preference, or song ratings, should be covered under the webcasting compulsory license. Jonathan Potter of DiMA, indicated that the copyright office acted in their favor despite their decision not to hold further proceedings.

"The ruling affirmed that personalization of radio streams is acceptable under the compulsory license of the DMCA," stated Potter.

The copyright office begins arbitration to determine the rate of webcaster's compulsory fee in February. These proceedings will determine the back-rate fee for webcasting services dating back to October 28, 1998, through December 31, 2000 as well as setting the rate from January 1, 2001, through December 31, 2002.

Once the rate is determined, the copyright office will select an administrative service to orchestrate the collection and distribution of U.S. performance revenue for non-interactive digital services collection of fees. In November, the RIAA officially launched SoundExchange as its candidate for this service. Currently no other group has been formed or come forward as an alternative to SoundExchange. However the DiMA does not support the selection of SoundExchange, and Potter indicated that the DiMA expects competition to come forth before the official selection.

"SoundExchange is a captive of the RIAA with members of all five major labels on its board and it is intended to benefit the RIAA," stated Potter.