RAIN: Radio And Internet Newsletter
Kurt Hanson, publisher, Paul Maloney, editor
Librarian of Congress Set Webcast Royalty Rates Based on Yahoo! DealThat was Designed to Reduce Competition and Hurt Small Webcasters
Chicago - Jun 24, 2002 - The voluntary royalty deal between Yahoo!
and the RIAA that the Librarian of Congress announced as his template
for the entire industry last week was a deal crafted by Yahoo! to shut
out small webcasters and decrease competition, Broadcast.com founder
and Dallas Mavericks owner Mark Cuban revealed to "RAIN: Radio And
Internet Newsletter" in an article published today.
Although he had left the company by the time the deal was signed, Cuban
explained that the deal he originally helped put together conceded a
high royalty price to avoid a "percentage-of-revenue" royalty rate. By
doing this, Cuban explains, he hoped that low-revenue webcasters would
be unable to compete against the well-funded Yahoo!
Cuban also explains that he wanted a "per-stream" deal because he
intended to use "multicasting" technology to serve multiple listeners
with a single stream, thus paying royalties to the RIAA on only the
The thinking behind the deal structure, Cuban explains below, was that
smaller webcasters, who would be unable to afford to webcast on their
own under such terms (because of the fixed rates), would be compelled
to use the services of well-funded aggregators like the Yahoo!
Cuban sold his network of streaming broadcasters, Broadcast.com, to
Yahoo! in August 1999, for a reported $5.7 billion.
Both the CARP and Billington Used the Yyahoo! Deal as Their Template
for the Entire Industry
On Thursday (6/20), Librarian of Congress James Billington set royalty
rates for webcasters, retroactively to October 1998 and continuing
through year-end, based primarily on the terms of that Yahoo!/RIAA
deal. The royalty rate of $0.0007 (7/100th of a cent) per song per
listener is currently greater than 100% of industry advertising
revenues and thus will bankrupt most of the smaller webcasters and
drive broadcasters' streams off the Internet, many observers
Most webcasters had expected a royalty rate expressed as a percentage
of their revenues, as this is the case for the royalty that
broadcasters and webcasters pay composers and as is the precedent in
almost all other countries.
The final deal between Yahoo! and the RIAA was the sole "marketplace
deal" upon which the webcast royalty rate was based, both in the CARP
(Copyright Arbitration Royalty Panel) recommendation last February and
the Librarian of Congress's final decision on Thursday.
The CBI board has reviewed the webcasting rate decision made by the
Librarian of Congress. While we are not pleased with the determination,
we realize that the Librarian was working within the constraints of the
Unfortunately, the rates set today (6/20/02) announced what could be
the beginning of the end for many Educational and student programs at
Colleges and Universities around the country.
We are saddened that the process has prevented the Librarian and the
Copyright Office from setting rates and recordkeeping requirements that
appropriately reflects our members ability to comply and pay those
In the coming days, we will be communicating with our members
concerning the options available to them and then move forward with an
We are hopeful that the members of Congress have been mindful of the
process and can see that the outcome is detrimental to students across
the country, the general public and will result in a loss of revenue
for the copyright holders. A quick legislative solution is needed to
help save the student programs.
CBI (Collegiate Broadcasters, Inc.) is a non profit organization whose
membership is comprised of college broadcasters from around the country
with a web page at www.collegebroadcasters.org.
BRS Media Wants Legislation That Will Lower
San Francisco - Jun 24, 2002 - BRS Media released details of a
letter urging law makers in Washington to consider legislation that
will lower Webcasters' Fees and overturn the Librarian of Congress'
decision on Internet radio royalty rates.
In the letter to Congress, BRS Media's chairman and CEO George T. Bundy
stated, "The Librarian's decision on Internet radio royalty rates has
already had a direct impact on a once thriving Internet sector known as
Web Radio." Bundy went on to write, "We are encouraged that the
Librarian of Congress reduced the rates for internet-only webcasters to
the same level as that of AM/FM radio Internet broadcasters. But we
remain terribly concerned that this rate will lead to the elimination
of hundreds of small, independent, internet-only radio stations." Bundy
added, "In fact, we have already witnessed just that with great,
internet-only stations like San Francisco based SomaFM (www.soma.fm)
having to discontinue their webcast." he then added, "This decision on
Internet radio royalty rates will effectively create a virtual
monopoly, and will have the stamp of approval from the Librarian of
Congress, by offering only a limited number of highly powerful
companies the chance to survive."
Webcasting numbers recently released by BRS Media, a firm that has been
tracking Radio on the Internet since 1995, indicated that the number of
online radio stations worldwide is now down to 4557. As opposed to
early Spring 2001 when there were over 5700 radio stations webcasting
online. With those numbers in mind Bundy continued the letter, stating,
"Unfortunately, the industry’s growth continues to be stunted;
and we are now seeing that the number of radio stations going offline
has begun to exceed the number of new stations coming online."
Bundy recommended that congressional leaders consider legislation to
modify the defective "willing-buyer/willing-seller" standard
established by Congress, and thereby, used by the Librarian of Congress
to determine these rates. Suggesting instead that the traditional fair
market formula be the standard. "We believe a formula such as the
traditional fair market formula would facilitate growth in the Internet
Radio Industry rather than stifle it.” said Bundy, adding," And
utilizing a formula such as this would also ensure that artists,
writers, and record labels are fairly compensated."