NEWS FLASH (7pm CDT, Thursday): Congressmen Inslee and Boucher decry decision and are considering legislative response. Click HERE to jump down this page to that story.

Other key points: (1) Minimum royalty payment remains $500/year. (2) Noncommercial broadcast stations get reduced rate of $.0002/performance for archived programming and first two side channels (down from CARP's recommended $.0005). (3) Ephemeral copies royalty reduced from 9% surcharge to 8.8% surcharge (a trivial difference). (4) "Effective date" of rate is September 1st, so retroactive payments (back to October 1998) will be due October 20th.

Read the decision on the Copyright Office website here. Excerpts from the decision follow.

"The RIAA/Yahoo! deal was the best evidence..."
"The Librarian is required to accept the CARP’s determination unless he concludes that the determination is arbitrary or contrary to the applicable provisions of the copyright law. When aspects of the CARP’s determination are found to be arbitrary or contrary to law, the Librarian may substitute his own judgment for that of the CARP, but he will still give deference to those aspects of the CARP’s determination which were not arbitrary or contrary to law.

"Applying those principles, the Librarian accepted the CARP’s conclusion that the RIAA/Yahoo! agreement represented the best evidence of what rates would have been negotiated in the marketplace between a willing buyer and a willing seller for a license to engage in webcasting of radio retransmissions and Internet-only transmissions...."

CONTINUED BELOW

Include YOUR firm! Call Kurt at 1-312-527-3879 or e-mail us here.

CONTINUED FROM ABOVE

"Significant error regarding promotional value..."
"However, the Librarian concluded that the CARP misinterpreted some aspects of the RIAA/Yahoo! agreement. One of the most significant errors by the CARP was its conclusion that the parties must have agreed that radio retransmissions have a tremendous positive promotional impact on sales of phonorecords – an impact that it did not find Internet-only transmissions have – and that this promotional impact explained the decision of RIAA and Yahoo! to set a higher rate for Internet-only transmissions.

"In fact, both the broadcasters (who benefited from the CARP’s conclusion regarding promotional value) and RIAA agree that there was no evidence in the record to support the conclusion that RIAA and Yahoo! considered and made adjustments for promotional value for radio retransmissions. The Librarian agreed with the Register of Copyrights that the CARP’s conclusion about promotional value was arbitrary and was not supported by the evidence in the record, which provided no basis for concluding that radio retransmissions provide a promotional value that Internet-only transmissions do not provide..."

"Percentage of revenues approach was less desirable for a number of reasons..."
"Webcasters and broadcasters asked that the Librarian reject the CARP’s approach and provide them with an option to pay a rate based on a percentage of their revenues, rather than a per-performance rate. However, the Panel concluded that a percentage of revenue approach was less desirable for a number of reasons. Those reasons included the CARP’s conclusion that a per-performance rate is directly tied to the right being licensed (i.e., the right of public performance).

"The CARP also observed that due to varying business models among webcasters, some of which offer features unrelated to music, identifying the relevant revenue base against which a percentage should be applied consistently would be complex and difficult. Finally, the CARP noted that because many webcasters are currently generating very little revenue, a percentage of revenue rate would require copyright owners to allow extensive use of their property with little or no compensation. The Librarian found these conclusions reasonable and saw no reason to abandon the CARP’s per performance approach..."

...

... The Librarian was constrained by Congress's instructions When Congress passed the Digital Millennium Copyright Act (DMCA) in 1998, they instructed the Librarian of Congress to set a rate based strictly on what a willing buyer and willing seller would pay. Constrained by that instruction, this may have been the only decision the Librarian and the Copyright Office felt could be made. -- KH ...

Re: Ephemeral recordings:
"Webcasters argued that ephemeral recordings have no economic value, relying on a 2001 report by the Copyright Office that was critical of the Section 112 statutory license and concluded that there was no rationale for the imposition of a royalty obligation under a statutory license to make copies that have no independent economic value and are made solely to enable another use that is permitted under a separate license. But the Register could not recommend that the Librarian follow this approach, observing that the Librarian’s obligation in this proceeding is to apply the law as it is, rather than disregard the law in favor of the Register’s policy preference.

[an error occurred while processing this directive]

"'Unfortunately, these rates are a direct result of the flawed "willing-buyer/willing-seller" standard that Congress mandated the Librarian of Congress use in determining these rates. Instead of assessing a fair rate, the flawed standard instead requires the arbitrators to try to replicate willing buyers and willing sellers in an already flawed marketplace.

"'While the Librarian of Congress clearly went to great lengths to change the burdensome Copyright Arbitration Royalty Panel (CARP) ruling, we believe that such a contorted process and poor outcome can be avoided by changing the standard guiding the Librarian's decision-making and removing other obstacles in current copyright law that were identified by the Librarian.

"We will be considering legislation to change the standard from "willing-buyer/willing-seller" for Internet radio to the traditional fair market formula used by other CARPs. In addition, we want to ensure that all future Carps must take into consideration small business concerns and allow effective participation of small, niche and noncommercial entities. We believe these standards will allow for the development of a viable Internet radio industry and ensure that artists, writers, and record labels are fairly compensated.'

"The 'willing-buyer/willing-seller' standard requires that the CARP establish royalty rates for Internet radio based on market transactions between the record labels and the Internet broadcasters. There has only been one such transaction in the marketplace since the law was passed, and that contract was terminated prematurely by the webcaster. Therefore, the CARP did not have enough information on viable contracts from which to make a rate determination."