Knight Ridder/Tribune News Service
The following editorial appeared in the San Jose Mercury News on Thursday, April 18, 2002.
The Internet has opened up a new universe of radio, unbound by limits of signals and of spectrum.
From classical to rock, from East Coast to West, there are hundreds of Internet radio stations. They include streamed versions of broadcast stations and a quirky band of Internet-only Webcasters, largely of entrepreneurs and music collectors on shoestring budgets. They offer originality and variety not found on an FM dial dominated by corporate conglomerates.
But Internet radio is in jeopardy. At issue is the size of a new royalty that Webcasters will pay recording companies and performing artists for playing their tapes and CDs.
Giving performers a piece of the action isn’t a bad idea, if the cut is reasonable. But the proposed royalty is excessive, and the paperwork that Webcasters would have to keep is burdensome as well as potentially invasive of listeners’ privacy. The combination could wipe out many of Internet radio’s pioneers.
Performance fees are a new royalty Congress passed at the behest of the recording industry’s Internet-phobic lobby, the Recording Industry Association of America. Radio stations haven’t had to pay a performance royalty, on the theory that the tunes they play on the air serve to promote CD sales. Instead, they pay a royalty to the songwriter.
In 1995, however, Congress bought the RIAA’s argument that Internet radio stations should pay both, on the grounds that Web streaming produces perfect digital copies, creating opportunities for theft. That has not turned out to be true: Streaming degrades the quality of a recording. Piracy from streaming hasn’t been a problem.
An arbitration panel charged with setting the royalty is recommending 0.14 cent per listener per song for Internet-only Webcasters and half that for broadcast stations that also stream over the Internet. Those sums may not sound like much, but 0.14 cent is 10 times what the Webcasters had requested and 100 times, in some cases, what they pay songwriters.
Fractions of a cent add up fast to real money. They’d also be retroactive to 1998.
For Radio Paradise, a Web-only rock station, the $9,000 a month it would owe would be triple the revenue that it takes in, according owner Bill Goldsmith. He and others say the payments and costs of tracking information on listeners would force them off the Net. The ones who could stick it out, at a loss, would be the big commercial broadcasters.
Next month, the U.S. Copyright Office will respond to the arbitration panel’s recommendation. After that, either side can appeal to federal court.
If the Patent Office doesn’t slash the royalty, Congress should consider rescinding it.
Internet radio gives consumers reason to go out and install high-speed Internet cable or DSL in their homes. By rescuing Internet radio, Congress would encourage the growth of broadband and diversity of entertainment on Net a winning combination.
(c) 2002, San Jose Mercury News (San Jose, Calif.) Visit Mercury Center, the World Wide Web site of the Mercury News, at https://www.sjmercury.com Distributed by Knight Ridder/Tribune Information Services