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CARP: What It Means to Radio
by Craig Johnston
The Internet radio copyright front turned white hot
in recent weeks when the Copyright Arbitration Royalty Panel returned
its recommendations for royalty payments to music copyright holders
for music streamed over the Internet.
That was a body blow but only the latest in a long
stream of punches terrestrial radio stations have taken in this
area.
As it stands now, the CARP’s recommendation is that
radio stations that retransmit their over-the-air signal on the
Internet will owe 0.07 cents (7/100th of one cent) per song per
listener for the music they play. This is retroactive to late 1998,
when the Digital Music Copyright Act was signed into law.
Internet-only streamers will pay double that amount,
0.14 cents, per song, per listener.
Transient copies
In addition to these rates, both terrestrial and
Internet-only radio stations will pay an additional 9 percent of
the above fees for what is termed an "ephemeral" license,
which covers the buffer copies made when files are transferred from
one computer to another.
However, the U. S. Copyright Office last year asked
Congress for a new law on this matter as well as other points in
the DMCA. It stated then that buffer copies "have no independent
economic significance" and therefore should not be subject
to the royalty payments.
Rep. Chris Cannon introduced the Music Online Competition
Act last summer. The MOCA proposes to correct the questions that
buffer copies create, among other areas of contention in the digital
age.
But rather than amending the DMCA, MOCA aims to clear
up digital transmission issues in the U.S. Copyright Act. The bill
is supported by the Digital Media Association and is opposed by
the Recording Industry Association of America.
Like almost every other national issue in the United
States, MOCA was put on a back burner by the events of Sept. 11.
However, Cannon’s office promises hearings on the bill later this
year.
End nowhere in sight
Despite a hue and cry from Webcasters that the CARP’s
recommendations spell the end to Internet radio, the matter is far
from settled.
"Though the CARP itself was required by statute
to present its final determination to the Librarian of Congress
within 180 days of commencement of the arbitration proceeding,"
said veteran copyright attorney Bennett Lincoff, senior counsel
at Darby & Darby, PC, "the Librarian, in turn, has an additional
90 days in which to review and either adopt or reject the decision
of the CARP."
This means that the Copyright Office must make a
final ruling on or before May 21. Either side may then appeal the
decision of the Librarian to the U.S. Court of Appeals for the District
of Columbia Circuit, according to Lincoff.
"Many decisions of the predecessor agency to
the CARP, the Copyright Royalty Tribunal, were appealed beyond the
Copyright Office to the federal courts," he said.
Percentage
As the CARP’s decision was announced, many broadcasters
wondered why the rates are based on a flat fee instead of a percentage
of revenues, as the American Society of Composers, Authors and Publishers
collect.
The argument in support of the percentage rate structure
proposed that until Webcasters achieved profitability, the most
reasonable system would ask only for a percentage of whatever the
streamer earned.
But DiMA Executive Director Jonathan Potter, whose
organization was one of the parties representing Internet broadcasters
before the CARP, defended the flat fees as prudent over the long
haul.
Potter’s argument is that a station’s Web site offers
e-commerce and other revenue possibilities. Webcasters don’t want
to have to share those monies, which could become considerable,
with copyright owners whose music has nothing to do with that part
of the business.
Thicker and deeper
As onerous as the royalty rates recommended by the
CARP seem to be, the reporting requirements may be worse. In simple
terms, these consist of two elements: what music was played by which
Webcaster and when, and who listened to it.
Using current technology, such reporting can be complicated.
Eighteen fields of data are required to answer the first requirement,
including such things as the Universal Product Code on the album.
Seven fields of data are required for the second,
the most difficult to obtain being a "unique user identifier."
Assuming privacy issues can be surmounted and the
individual user identified, the difficulty would be to match that
information to the "song played" information. While no
vendor appears to have equipment that performs that task at present,
engineers for several companies told Radio World they could readily
adapt their systems to gather and connect such information.
Not exempt
Terrestrial radio streamers suffered a key setback
last August when a federal district court in Philadelphia refused
to overturn the Copyright Office decision that the stations would
be subject to pay royalty fees to recording companies for music
they streamed over the Internet.
The radio stations, through the NAB, had insisted
the exemption they enjoy from such fees for over-the-air broadcasts
was extended to the Internet via the DMCA.
Keith Meehan, executive director of the Radio Music
Licensing Committee, sees the matter as far from over.
"I think it’s going to be a very lengthy process
to resolve that. My opinion is that this will end up with Congress
amending the DMCA. I’m hopeful that that’s how this will be resolved,
because I don’t see any other reasonable solution to it, given all
of the conditions that are in the DMCA."
Beyond CARP
Meehan said the fees and reporting requirements recently
recommended by the CARP are only one part of the equation which
terrestrial radio finds objectionable. There are other DMCA conditions
for streaming of copyrighted music on the Internet that also trouble
stations.
Three, in particular, that RMLC’s Meehan cites are:
— No pre-announcement of music to be played is permitted.
(This does not prevent announcement of a song immediately before
it is played.)
— The number of songs from a recording or by a particular
artist that can be played in a several-hour time period is limited.
— A requirement to provide visually information such
as the artist, label and song title.
"The DMCA basically precludes a radio station,
in its normal activity, from streaming its signal onto the Internet
because of the conditions that are attached to what they have to
do," said Meehan. "That’s not how radio operates."
Asked what Congress would grant if he got his entire
wish list, Meehan said it would eliminate all of those conditions
that preclude a radio station from streaming its current signal
onto the Net.
"And it would acknowledge that the exemption
for terrestrial radio stations is there for Internet streaming of
those radio stations. It would basically exempt the radio stations
from paying fees for streaming their signal onto the Internet."
Net-only
Pure Internet radio broadcasters object to that solution,
which would result in an exemption for terrestrial broadcasters
streaming music online that the Net-only Webcasters would pay to
play.
One advantage both terrestrial and pure Internet
radio broadcasters enjoy from the DMCA is the compulsory nature
of the licensing. Lincoff said that because the CARP, not the record
labels, sets the rates, the labels will not be able to set fees
so high that Internet radio would be squeezed off the Net.
"If you’re a non-subscription, non-interactive
Webcaster and you comply with the other provisions in the statute,
then you qualify for the statutory license," said Lincoff.
"If you qualify for the statutory license and pay the fee in
a timely way and you meet the reporting requirements as to song
usage and such, then you are licensed as a matter of law for the
uses of the sound recording that you’re making."
Is a radio station playing a request operating "interactively"?
Congress considered this when constructing the DMCA and as long
as an Internet streamer’s programming is not substantially composed
of playing requested music within an hour of the request, it is
not deemed "interactive." (All-request radio is out, but
some-request radio is OK.)
While not considered in the CARP proceedings, such
all-request services exist. MEDIAmazing.com, the Internet-only,
listener-formatted service, is one that persists. As of late last
year, the record labels, with some other partners, launched their
own subscription services, such as MusicNet and FullAudio Corp.
The worldwide Web
If you, as an Internet broadcaster, can still rest
easily amid all this uncertainty, Lincoff points to another fly
in the ointment.
"The DMCA insulates qualifying Webcasters from
infringement liability only to the extent that their transmissions
occur entirely within the United States.
"Therefore, despite having complied with U.S.
law, to the extent their transmissions are available worldwide,
they remain exposed to an unknown quantum of infringement liability
under foreign legal regimes. This result, flows from the principle
that national copyright laws do not have extra-territorial effect,"
Lincoff said.
He said no one should want it otherwise.
"In the absence of worldwide harmonization,
it is not in the interest of copyright owners to support a rule
that would allow the territory with the least protection to become
the world’s arbiter of intellectual property law on the Internet.
Such a result also would not be in the interest of Webcasters whose
own IP rights would thereby be at risk," Lincoff said.
But it also calls into question what rights fees
a Webcaster will owe when the worldwide bill comes in. In early
March, the European Union announced plans to impose a tax on products
delivered online — including audio, video and music — to EU consumers
from other nations.
A final note on the acronym CARP: The Copyright Arbitration
Royalty Panel was originally to be named the Copyright Royalty Arbitration
Panel. But the words were rearranged so that family-friendly publications
such as Radio World could print the panel’s acronym.
Craig Johnston is a Seattle-based Internet and
Multimedia developer who is a frequent contributor to Radio World.
Contact him via e-mail to craig@craigjohnston.com
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