BY PAUL MALONEY
Attorney David Oxenford told RAIN that though it appears broadcasters got a break on the CARP webcasting rates, when it comes to the Internet-only webcasters, "The RIAA is the clear winner." Oxenford (pictured right) is a partner with the firm Shaw Pittman, which represents the International Webcasting Association.

The RIAA is the Record Industry Association of America, the industry group that represents the major record labels, who hold the vast majority of performance copyrights on musical works.

"They (the RIAA) were asking for about a third of a cent per song per listener," Oxenford told RAIN yesterday shortly after the rates were made public. "They got almost half that."

The Digital Media Association (DiMA) had offered to pay copyright holders 0.15 cents per listener per hour. Instead, they'll pay nearly that rate per song, should the Copyright Office honor the CARP recommendation (of 0.14 cents "per performance," or 14/100ths of a penny for every song streamed multiplied by the number of listeners).

Broadcasters, however, will only pay 0.07 cents per listener per song to retransmit their over-the-air signal on the Internet. Notice that CARP also gave noncommercial stations the break for which many had been lobbying: 0.02 cents for broadcast retransmissions, and 0.05 for "Internet-only" or two or less "side channels."

Example: Say WLUP-FM/Chicago averages ten songs per hour. Ten songs multiplied by 24 hours per day, 365 days per year, times the rate of $0.0007 (remember, the rate is listed in "cents"), yields an annual average "per listener" cost of $61.32. If an average of 1000 people are listening to The Loop on the Internet at any given moment, this will cost the station over $61,000 for the year.

If it's reasonable to assume that an FM broadcaster like WLUP can sell ads at a rate that boils down to about one cent per listener, just one ad per hour ($0.01 x 24 x 365) should cover the royalty bill.

A pure webcaster like the AOL-owned multicaster Spinner faces a much steeper charge. Playing next to no ads, they'll fit closer to 14 songs in an hour, for which they'll pay a rate double that of broadcasters. In fact, in a year they'll end up paying $171.70 per listener, assuming these numbers. With current ad rates (we assume) most likely lower than a those of a major market FM, it's clear to see that it will take a quantum leap of an increase in the business fortunes of webcasters to handle these charges.

This is not to mention the fact that nothing from yesterday's announcement indicates there's any change in the plan to make these fees retroactive to October 1998 -- when it was decided that webcasters would have to pay "performance" copyright fees. It's still unclear how reasonable it will be to expect webcasters to be able to produce three and a half years of accurate streaming logs the RIAA will need to figure out a bill.

"We are pleased that the arbitration panel has recommended royalty rates for Internet radio broadcasting, and that its recommendation is much closer to the royalty rate proposed by the webcast industry than was proposed by the recording industry," DiMA executive director Jonathan Potter (pictured left) said in statement yesterday. "We are extremely disappointed, however, that the Panel's proposed rate is not significantly lower, as a lower rate would more accurately reflect the marketplace for music performance rights and the business environment of the webcast industry."

In fact, it was the hope of many webcasters that the fee CARP recommended would have been based upon a percentage of the webcasters revenue. That way, the industry could grow, and the record industry could make money right along with it (more revenues for webcasters, higher webcasting fees).

But Mr. Oxenford told RAIN that sometime last month it had become clear that the arbitration panel had decided it would indeed base the fee on "per performance" rate (except for the "Business establishment service").

"We would have preferred a higher rate," RIAA president Hilary Rosen (right) told the press. "But in setting a rate that is about 10 times that proposed by the Webcasters, the panel clearly concluded that the Webcasters' proposal was unreasonably low and not credible."

The minimum fee per license has been set at $500. Mr. Oxenford also said that there is indeed an appeal procedure in place for official participants of the CARP process to voice objections to the rate recommendations before an official decision is made. Appeals after that time would have to go through a federal court.

Another issue contended by webcasters and the record industry is that of "listener influence" or "personalization" of streams, and at what rates they'll be covered. Webcasters insist these streams -- in which through listener input the selection of songs is affected, but not so much as an "on-demand" service -- should fall under the statutory rates.

But copyright holders believe higher rates should be paid for these types of services. And indeed, several services have made separate agreements with record labels to offer these services and protect themselves from unexpected charges and legal liability. Yesterday's release did not deal with these issues of "interactivity."

CARP is the Copyright Arbitration Royalty Panel, the body that was appointed to recommend a copyright royalty rate for music streamed on the Internet to the U.S. Copyright Office. Yesterday CARP revealed the first half of their conclusions, in the form of a document called "Schedule A." This document lists the rates that, if adopted by the Librarian of Congress in May, will be what webcasters must pay (according to the Statutory License) to recording companies to use their music.

Reuters reports that the rates would not go into effect until approved, and will only last until the end of the year, but would serve as a benchmark for later negotiations.

The table below was taken from "Schedule A," on the US Copyright Office site here. It lists the basic fees. A "Schedule B," to be released soon (RAIN hears Monday), promises to clarify definitions and provisions for the statutory license.

"Ephemeral" recordings, you may remember, are backup or "cached" copies of the same song (used to facilitate streaming, etc.). We're assuming this means services using ephemeral recordings will pay nine percent more on top of their fees for this right.

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