Broadcasters have been accustomed to paying royalties for playing
copyrighted music over the air to Performance Rights Organizations
(PRO) such as ASCAP, BMI and SESAC; but, until recently, broadcasting
the same program material over the Internet was basically free. On Dec.
4, 2002, President Bush signed into law the Small Webcaster Settlement
Act (SWSA), which requires that owners and performers of copyrighted
material receive royalties for material broadcast over the Internet.
Creating a method that fairly addresses the issue of copyright owner
compensation versus the amount paid by webcasters is a complex
to see the breakdown of fees for the various type of streaming
When traditional over-the-air broadcasters simply
“stream” program audio over the Internet, perhaps as a
value-added service to listeners or to extend reach beyond its
terrestrial footprint, it is subject to all of the exclusions,
limitations and fees defined within this law as a stand-alone
webcasting service. The eventual establishment of fees for the
transmission of copyrighted digital material was not a surprise to
broadcasters; what was a surprise is that they would need to pay on a
per-performance (song) basis rather than a simple percentage of
gross revenues, such as that used by the PROs, increasing the cost to
secure rights to stream audio over the Internet approximately three
times that of over-the-air.
The push to maintain copyrights for materials broadcast over the
Internet began in 1995 when congress passed the Digital Performance
Right in Sound Recordings Act (DPRA), which permitted owners of
copyrighted material to be compensated for broadcasting performances
over the Internet, primarily dealing with subscription-based services.
In 1998, the Digital Millennium Copyright Act (DMCA) broadened the
scope of the DPRA to include the non-subscription services typical of
webcasting services currently broadcasting over the Internet.
The DMCA provided for two types of licensing structures, voluntary
and statutory, which must be issued to entities engaged in broadcasting
copyrighted digital material.
Voluntary licenses are generally issued directly by the owners of
the copyrighted material based on an agreement between the owners of
the material and the entity desiring to make the material available
over a digital transmission medium, such as the Internet.
A statutory license is required for a broadcaster to stream a
program audio over the Internet. Unlike the voluntary license, where
agreements are made directly between the performer and webcaster,
statutory licenses are based on a fixed-cost model that defines a
payment structure based on the number of performances (songs) broadcast
and a royalty distribution scheme that includes payments to the
copyright owner, the performing artist, the American Federation of
Musicians (AFM) and the American Federation of Television and Radio
Taking into account the nature of digital transmissions, the DMCA
also establishes a an ephemeral license that addresses digital
copies of copyrighted material which reside on the memory used to
“buffer” or temporarily hold digital program material prior
to audio conversion. Broadcasters wishing to stream program audio need
to pay a fee for both licenses.
Because an industry-wide agreement could not be reached in the case
of statutory licenses, the U.S. Copyright Office and the Library of
Congress ordered that a Copyright Arbitration Royalty Panel (CARP) be
established. The CARP proceedings began late in 1998. After a long
period of proposals and negotiations between both sides, CARP released
a report in early February 2002 recommending rates and terms for
The fees for webcasting are based on the type of entity.
Non-commercial broadcasters pay a much lower rate than commercial
entities for retransmission of program audio or up to two channels of
copyrighted non-program material, providing it is consistent with the
public broadcast mission; if non-commercial broadcasters desire to
program three or more channels of audio, they will pay the same rate as
commercial broadcasters/webcasters. Digital broadcasts within business
establishments are exempt from the performance fee.
All entities are still required to pay ephemeral license fees based
on 9 percent of the calculated performance fee. See Table 1 for
Since the licensing fees are determined on a “per
performance” basis, it will be necessary to capture and report a
significant amount of data for each performance. The software for many
digital audio storage/playback systems will need to be upgraded in
order to store the additional information and provide a proper report.
Perhaps the most difficult aspect of this will be the time required to
enter the information for each track on a station's playlist.
The fees for statutory licenses are retroactive back to October 28,
1998, however the SWSA provides a mechanism that permits the designated
receiving agent for the fees, the SoundExchange, to negotiate the past
fees prior to December 15, 2002 with individual commercial webcasters
and extended the obligation period for non-commercial broadcasters to
June 20, 2003.
McNamara is president of Applied Wireless Inc., New Market,