Internet radio is in danger. Most Webcasters say they will be driven out of business if a proposed royalty rate increase becomes effective July 15.
In March, the U.S. Copyright Royalty Board ruled in favor of rates proposed by SoundExchange, which collects digital royalties for the recording industry. The rates are targeted at big companies such as Clear Channel, AOL and Microsoft, but are calculated per-listener and per-song rather than according to revenue and make no exception for smaller commercial or non-commercial Internet radio outlets. The popular music site Pandora, for instance, has said it would owe billions in royalties under the new system and therefore could no longer operate.
Deborah Proctor, general manager of the Triangle’s listener-supported classical station WCPE, 89.7 FM, has advocated for non-commercial and small commercial broadcasters. She supports two bills introduced in Congress earlier this month that she says would save Internet radio by vacating the Copyright Royalty Board’s decision and setting up a new framework for royalties.
I remember you were active in trying to save Internet radio five years ago, the last time the U.S. Copyright Office imposed exorbitant royalty rates.
We were working with a number of public radio groups, and because it also affects small, independent mom and pop Webcasters, who in some cases were literally working out of their basements, I got to know a lot of those folks, too.
The fall of 2002 and the beginning of 2003, in the late session of Congress, Sen. [Jesse] Helms helped everybody with a bill that got passed. The Small Webcasters Settlement Act laid the foundation for a set of negotiations that worked for four years.
Why is this happening again?
That agreement unfortunately has expired, and we’ve not been able to renegotiate anything close to those same terms.
The problem was caused when the 1998 Digital Millennial Copyright Act bunched in Internet public radio with commercial broadcasting on the Internet. The unfortunate thing is, no one consulted with public radio when the DMCA was in subcommittee back in 1998. Broadcasting in general saw this after the fact. It just kind of appeared, and once something like that is done, it’s very difficult to undo.
Would the bills in Congress fix that problem?
Yes. One of the provisions of the Internet Radio Equality Act is to put Internet public radio in the correct section of copyright law, where public radio broadcasting is right now. It’s written to include every public radio station and every educational institution, so that should they later on decide to begin Webcasting, they will be coved by this. That’s why this is really an important bill.
While terrestrial radio pays royalties to songwriters, Internet and satellite radio pay royalties both to songwriters and to performers. Was that also a result of the DMCA?
Let’s face it, playing something on the radio sells records. People have gone to prison because they have paid radio stations to play their albums and singles. So originally, when Congress set the Copyright Act in 1976, they said, there already is a quid pro quo, when a radio station plays somebody’s recording, they’ve got value received because they’ve got publicity received. Internet radio should have been treated just the same way as broadcast radio. What difference does it make which way the music is heard? Many independent artists will tell you that Internet radio is the only way their music is heard.
If Congress does not pass these bills by June 15, how will the new royalty rates affect WCPE?
When we were independent [before joining National Public Radio], our royalties were around $1,500 a year for everything. We’re looking at increases of 20 to 30 times that amount. Our annual budget is about $2 million. Because now we’re a member of NPR, NPR covers our royalties out of our dues, so I don’t know the specific amount. Public radio is estimating that in general their royalties will increase somewhere from 300 to 1,200 percent.
Right now, Internet public radio is essentially in its infancy. But these royalty rates may make it a financial impossibility, and that’s just not fair to Americans.