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RAIN 7/9: L.A. Times examines why it took so long to reach a webcast royalty deal

Posted on: 07/09/2009


The time it took to reach an agreeable royalty deal for pureplay webcasters seemed a “virtual eternity” to L.A. Times columnist Jon Healey. The sentiment was shared by webcasters — anxious about the future of their business — and copyright owners — unclear on when, or if, they would ever see the money owed to them for the use of their music — alike. In an article today, Healey outlines four elements that he believes slowed the negotiation process.

One sticking point was that, “major labels and performing artists weren’t offended by the prospect of high rates driving struggling websites out of business.” In other words, Healey writes, “the copyright holders’ interest [was] in maximizing the amount of revenue, not maximizing the number of webcasters.” While that approach might work towards the record industry’s short-term goals, it probably would have killed the webcasting industry. In the long run, a healthy webcasting industry will probably be beneficial to artists and labels.

The diversity of the types of webcasting businesses was another factor in prolonging the process, Healey writes (here). This “hindered agreement on a percentage-of-revenue model,” as larger businesses didn’t want to pay a percentage of their total revenues when their Internet radio stream accounted for only a fraction of their operations. Thirdly, the very fact that both sides knew they could eventually rely on the Copyright Royalty Board for a determination also probably slowed the negotiations, and made both sides less willing to compromise. Finally, Healey thinks webcasters were holding out hope for Congressional relief (like the Internet Radio Equality Act, RAIN coverage here).

While his observations as why it took so long for the two sides to shake hands seem about right, Healey’s appreciation for SoundExchange’s “willingness to accept a percentage of revenue” is somewhat misplaced. He fails to mention is that webcasters only pay a percentage of revenue if that amount is greater than what would be paid using per-performance rates. While a step in the right direction, SoundExchange has not made the leap Healey says they have.


The U.S. Appellate Court’s decision this week to uphold the Copyright Royalty Board’s satellite radio royalty rate determination once again affirms the importance of the 801(b) standard — especially when comparing the satellite royalty rate to the one the very same CRB set for Internet radio.

RAIN readers may recall that the CRB determined satellite radio should pay 6%-8% of its revenue for royalties to the owners of copyright sound recordings. It reached its decision using the standard from Section 801(b) of the Copyright Act. That standard, as industry attorney David Oxenford (pictured) points out, mandates that arbitrators take into account the potential impact the royalties would have on the industry (in this case, satellite radio). The CRB actually came up with a figure below what it determined the “fair market value” of the royalty to be.

In determining a rate for webcasting, however, the CRB uses a different standard, known as “willing buyer-willing seller,” and is not allowed to consider the negative ramifications of its decision on the industry. Thus, a wildly different final decision.

Oxenford writes (here), that this “demonstrates again the difference that a standard can make. The 801(b) standard, taking into account the public interest factors, produces a rate that the music users can actually support…while the ‘wiling buyer, willing seller’ standard produces royalties which, even after a settlement substantially reducing the royalty, brings only grudging relief. This issue should be assessed by Congress when it reviews the Copyright Royalty Board’s status if, as suggested by this Court, the webcasting court finds the CRB to be unconstitutional.”

For more on the 801(b) and “willing buyer-willing seller” standards and their effect on royalty determinations, see Kurt Hanson’s essay “Copyright law and the CRB: What went wrong?” here.

Also significant, Oxenford points out, is that a U.S. Appellate Court judge also once again brought up the possibility that the appointments to the Copyright Royalty Board — which determined webcast and satellite radio royalties — are unconstitutional. A judge “stated that the fact that the Board’s judges were appointed by the Librarian of Congress, and not by the President, ‘raises a serious constitutional issue,’” according to Oxenford. The question of the legitimacy of the CRB appointments surfaced during the appeal’s oral arguments in March (RAIN coverage here), as well as in the appeal of the webcasting royalty determination (RAIN coverage here).


RadioTime has published the Top 19 Programs, a list of the most listened-to programs on the company’s Net radio directory for the month of June. The company will publish a new list each month.

This month, Rush Limbaugh, Steve Harvey, The Savage Nation, Glenn Beck and Laura Ingraham top the list. RadioTime hopes the list will showcase how the company “enables users to discover lesser-known shows airing around the world.” For more, check out RadioTime’s announcement here.

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