the future of Internet radio

[http://dummy.us.eu.org/robert (robert)]

I am writing you to express my strong fear that the U.S. Copyright Office
may be about to make a decision in the next few weeks that will bankrupt
and effectively destroy the Internet radio industry.

Let me begin by clarifying that this issue is not about Napster -- in
fact, quite the opposite. Internet radio is a perfectly legal new medium
that offers wonderful benefits for musicians and record companies as well
as for consumers. (Record company revenues from CD sales may well be at
risk in this "digital millennium," but that's due to the phenomena of MP3
file sharing and CD burning, not due to Internet radio.)

As required by the Digital Millennium Copyright Act (DMCA), however, the
Copyright Office is obligated to set a "sound recordings performance
royalty" rate for Internet radio. But the Copyright Arbitration Royalty
Panel (CARP) that was convened last summer has reached a conclusion that
is probably far more draconian than anything Congress intended.

For most Webcasters, the critical issues in front of the Librarian of
Congress are:

(#1) The CARP arbitrators set a royalty rate far higher than the rate for
composers' royalties (based almost exclusively on a single deal during
the height of the dotcom craze between Yahoo! and the RIAA).

(#2) The CARP arbitrators recommended a fixed price per song streamed per
listener, rejecting a alternative "percentage of gross revenues" royalty
concept that both sides had previously been willing to accept, and

(#3) The Copyright Office has proposed recordkeeping and reporting
requirements, precisely as requested by the RIAA, that are wildly beyond
the abilities of most webcasters to fulfill.

Regarding the first two points above: The RIAA initially asked webcasters
for a royalty of 15% of gross revenues. Webcasters initially countered by
offering approximately 3% of gross revenues, in the range of the royalty
they pay to composers. They could not come to terms, so the two sides
went to arbitration in front of the CARP. The CARP's recommendation to
the Copyright Office, however, is not a percentage of gross revenues at
all, but rather a price per song per listener -- at a price that, even if
webcasters could eventually achieve the same advertising success that
broadcasters have achieved, would work out to a royalty rate of 20% of
gross revenues! (That's a third more than the RIAA asked for!) Worse yet,
in the current advertising environment, the CARP's proposed rate equates
to a royalty rate closer to 200% to 300% of gross revenues!

Worse yet again, the royalties are retroactive to October 1998. For a
popular independent webcaster that has had, say, an average audience of
1,000 listeners (fewer than a single small-market broadcast radio
station) for the past three years, the bill for retroactive royalties
would be $525,600, or a retroactive royalty rate of 500% to 1000% of
their gross revenues to date.

It's hard to imagine that this is what Congress had in mind when it
passed the DMCA.

In conclusion, if the Librarian sets a royalty rate along the lines of
the CARP recommendation (and sets the reporting requirements as
proposed), Internet radio as an industry will be effectively dead by the
end of May.

I respectfully urge you to communicate to the Librarian of Congress that
you and your fellow legislators, in passing the DMCA, did NOT intend for
the royalty rate to be set so high (and reporting requirements so
complex) that it would bankrupt the fledgling Internet radio industry.

Many of your constituents and I will greatly appreciate your attention to
this concern.