The Internet has opened up a number of highly publicized issues concerning distribution of copyrighted material, and a pending ruling from the U.S. Copyright Office could bring radio stations that simulcast on the Internet into the fracas.
The ruling is in response to a petition by the Recording Industry Association of America (RIAA) asking broadcasters that make their over-the-air signal available on the Internet to pay licensing fees to owners of the sound recording (a.k.a. record companies). Radio stations currently pay fees only to the holder of the song's copyright, not to the holder of the recording copyright. Those fees, paid to ASCAP and BMI, are in the neighborhood of $300 million per year.
"Section 114 of the Copyright Act has an exemption for broadcasters, and it's clear it covers over-the-air transmission," says Bill Roberts, senior counsel, U.S. Copyright Office. "The issue is whether the same exemption covers when a broadcast station puts its signal over the Internet."
The potential problems between the RIAA and broadcasters could disrupt what has been a long, successful marriage. Radio stations play the music for free, and record companies provide it for free. Radio sells advertising, record companies sell records.
"There's never been a performance-rights fee for broadcasters because Congress recognized that, were it not for our stations' playing this music, there would be no compensation to the record companies," says NAB spokesman Dennis Wharton. "When Eminem gets a song played on the radio station, it encourages people to go out and buy the CD, and that money goes right to the bottom line of the recording companies. So this is obviously an attempt by them to generate more revenue that we don't think was ever intended to be produced."
RIAA executives were unavailable for comment.
The ruling by the Copyright Office is only part of the strain between the NAB and the RIAA. In response to RIAA's petition, the NAB filed a lawsuit against the RIAA in the federal court for the Southern District of New York to uphold the exemption. Wharton says NAB believes that the court will uphold the exemption, but there has been little movement on the action since June.
If the radio stations lose exempt status, they'll have to do one of two things. Option one is to apply for compulsory-license status. The problem there is that, to receive such status, they need to meet nine conditions, including no pre-announcing of songs and a limit on the number of cuts that can be played by one artist in a given period. The other option is to negotiate with individual record companies for each song played.
"If radio stations aren't exempt, it would be difficult for them to comply with the nine conditions needed for the compulsory license," says Benjamin Ivins, NAB senior associate general counsel, intellectual property and international legal affairs. "That would mean that each radio station would have to negotiate with every record company for every sound recording that it would want to play."
According to Ivins, a number of radio broadcasters filed last year to be eligible for the compulsory license in case they lose the exemption.
Compulsory-license fees could be retroactive to the date when the stations began streaming the over-the-air broadcast. The size of those fees is still to be decided and would be set by the Copyright Office in an upcoming proceeding, Roberts says.
Wharton points out that broadcasters already pay more than $300 million each year to copyright organizations, such as ASCAP and BMI, which distribute the funds to composers rather than to recording companies. "This would constitute a double billing to broadcasters. That's why Congress has always exempted us."
Mark Cuban, president and chairman of the board at Broadcast.com, believes there's no way that radio stations should pay. "The Net is just an extension of their signal. The transport of that signal should be irrelevant."
He describes the fees the RIAA is already trying to charge Webcasters as "ludicrous," explaining that some proposals equate to a CPM of $90 hourly. "It's the equivalent of a death sentence for the Webcasting industry. The RIAA knows it. I've told them so, but they don't care."