Online Radio's Day Of Silence Heats Up Royalty Debate

Webcasters protesting plan that requires them to pay fee to artists, labels.

If you tuned in to your favorite Internet radio station Wednesday, what you didn't hear could be the future sound of online radio, many webcasters say.

Hundreds of online radio stations protested a recently proposed royalty rate by going dark Wednesday for an Internet radio "Day of Silence." Some stations halted their broadcasts all day, while others only stayed silent for a 12-hour period. Many of those that did not go dark aired a 12-hour talk show informing listeners about the new rate plan, which would require webcasters to pay a fee to record labels and artists in addition to the one they, as well as conventional stations, already shell out to songwriters and publishers through organizations like ASCAP and BMI.

The rate, proposed by the Copyright Arbitration Royalty Panel in February (see "Online Radio Facing Possible Extinction"), would require stations that broadcast exclusively over the Web to pay 0.14 cents per listener per song, while conventional stations that stream their broadcast online would pay a rate of 0.07 cents. If enacted into law, the additional fees would be retroactive to October 1998 and could force many online stations to shut down. Webcasters contend that the rate should be set as a percentage of their revenue, not based on the size of their audience.

When users visited Web sites of stations participating in the protest, they were met with an explanation of the shutdown and directed to the Radio and Internet Newsletter's Save Internet Radio page.

As an indication of how widespread outrage over of the silence was, the site, which had approximately 90,000 page views prior to May 1, had more than tripled its traffic to 286,000 as of Thursday afternoon, according to a site spokesperson. The Web site's server crashed twice Wednesday as a result of the traffic, the spokesperson said.

Additionally, more than 22,000 faxes were sent to members of Congress via LightningCast, an ad-insertion technology company that volunteered its services to the cause by enabling visitors to its own site to voice their opinion via a form letter.

Congress.org, a Web site that assists users in writing their congressional representatives, had sent approximately 4,700-4,800 e-mails and hand-delivered letters about the issue to Capitol Hill, according to a site spokesperson, who added that the Internet radio debate was the most popular issue they've had apart from topics surrounding the Middle East. By comparison, the site usually sends 1,500-2,000 letters per day on all of their available topics.

"This highlights how average citizens, who are passionate about an issue, can harness the power of the Internet to take action and effect change," said Bob Hansan, president of Capitol Advantage, the company that powers Congress.org.

Participating webcasters have also encouraged yesterday's disappointed Net radio listeners to write editorials to their local papers and urge media outlets to report on the issue.

The war over online royalty rates is grounded in the Digital Millennium Copyright Act passed in 1998. It essentially states that when a song gets played over the Web, both labels and artists should get paid. This creates an additional expense for Net stations, since they, like conventional radio stations, were already paying a royalty rate to publishing organizations like ASCAP and BMI. Terrestrial stations do not pay anything directly to labels and artists.

One of the few things online broadcasters and their adversaries, the labels and artists, agree on is that they don't agree with the CARP's proposed rate. While the broadcasters view the rate as too high, the labels and artists think it's too low.

An alternate petition is being offered by SoundExchange, an organization composed of industry executives and artists that counts among its boardmembers Aimee Mann, Recording Industry Association of America President Hilary Rosen and former Recording Academy President Michael Greene. SoundExchange's form letter to Congress reads in part:

"Congress should not interfere with the results of the CARP process, which Congress established to set the royalty rate. ... I ask you to oppose any attempts by the webcasters and broadcasters to persuade Congress to interfere with that arbitration — and in particular to Arbitron's request for a congressionally imposed moratorium on the new royalty."

The letter also claims several points raised by webcasters are exaggerations. One of its main points is that webcasters and broadcasters pay for all their other operating costs, such as bandwidth, marketing, personnel and software, so why should their content be viewed any differently. It also blasts webcasters for overstating the royalties they would be required to pay by basing projections on audience sizes they don't actually have.

The U.S. Copyright Office, which appoints members to CARP, is expected to vote on the proposed rate by May 21.

Radio MTV.com uses LightningCast technology for its radio advertising.