Royalty Hike Could Hit Web Radio Hard

The Post and Courier By Prentiss Findlay
The Post and Courier
Saturday, July 14, 2007

Local Webcasters lash out against rate increase

On Sunday, Internet radio will owe big record labels $1 billion in unpaid music royalties, a bill that will cripple most of the industry, which grossed $200 million last year, Internet broadcasters said.


"It's an assault on the medium. These record companies just want to take control of Web radio," said Bunky Odom, who operates the Radio Free Charleston on Sullivan's Island.

This week, the U.S. Court of Appeals for the District of Columbia denied a request from Web radio broadcasters to halt a steep increase in royalty rates approved by the U.S. Copyright Royalty Board. The new rates, which are retroactive to 2006, take effect Sunday.

The Save Net Radio campaign says the 300 percent to 1,200 percent increase of the recording royalties Webcasters pay to play music online has been hotly contested by Webcasters, Internet radio listeners and more than 6,000 artists.

Odom said that, on Sunday, he will play only music from independent labels instead of the major labels that pushed the royalty increase for Internet radio. "I hate to do that because my audience needs to listen to Bob Dylan," he said.

Web radio has 77 million listeners, said Reed Bunzel, president and chief executive of Mount Pleasant-based American Media Services-Internet, which operates 40 online radio stations.

Bunzel said some Internet broadcasters will knuckle under and pay the new royalties, but that's going to be impossible for most. Some have discussed not paying the rates.

"We do intend to go by the letter of the law. We have been reserving cash to pay for our streaming fees, and we will pay them. But we are part of the effort to have the rates overturned in Congress," Bunzel said.

American Media Services-Internet has contacted the Recording Industry Association of America to try to negotiate the issue, so far with no success, he said.

"It's not going to change our business plan. We're going to go forward with what we're doing," he said.

Legislation currently before Congress, the Internet Radio Equality Act, would vacate the Copyright Royalty Board's decision and set a 2006-10 royalty rate at the same level currently paid by satellite radio services, which is 7.5 percent of revenue, officials said.

Bunzel said his company is working on Capitol Hill with South Carolina Sens. Lindsey Graham and Jim DeMint, as well as Rep. Henry Brown, to try to overturn the Copyright Royalty Board decision.

"It's an extremely unfair and egregious rate structure," he said.

Royalty payments are calculated by multiplying the royalty rate times the number of songs played times the number of listeners, Bunzel said. "It adds up very quickly," he said.