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Paying for net play

Radio broadcasters will have to pay additional royalties to copyright holders to stream their signals over the Internet, the U.S. Copyright Office ruled last week.

Broadcasters argued that they should be exempt from new fees because they already pay music licensers ASCAP and BMI some $350 million per year to play music on the radio, and the signal they stream is an exact replica of that radio signal. But according to the ruling, broadcasters now will have to pay into a second royalty pool to be able to stream those signals.

The Recording Industry of America, which won the decision, argued that in the 1998 Digital Millennium Copyright Act, Congress narrowly tailored the law to apply only to over-the-air broadcasters who are converting from analog to digital. Broadcasters argued that digital covered their Internet streaming activities as well, but the Copyright Office didn't see it that way.

"This is an important right for artists and record companies. We look forward to working with the broadcasters for a smooth transition into this marketplace," said Hilary Rosen, president and CEO of the Recording Industry Association of America.

A smooth transition is highly unlikely at this point, because broadcasters plan to continue fighting the Copyright Office's decision in at least one court, the federal district court for the Southern District of New York. There, the National Association of Broadcasters and RIAA are fighting the same battle, and that court has yet to rule.

"NAB believes this ruling is directly contrary to existing federal law and congressional intent as expressed in the Copyright Act. That's why NAB has asked a federal district court in New York to settle the issue," said NAB President Eddie Fritts. "Broadcasters currently pay hundreds of millions of dollars annually to the licensing societies representing the authors, composers and publishers, and have never been required to pay additional fees to the record companies and artists."

But even if the New York court rules against broadcasters, they still can seek relief by asking Congress to change the law, or they can challenge the Copyright Office's decision in the U.S. Court of Appeals for the D.C. Circuit.

In the meantime, broadcasters will likely apply to be included in blanket music licenses the Copyright Office is preparing to give Webcasters. An arbitration panel that is scheduled to begin May 21, 2001, will determine Webcasters' royalty fees. Radio stations that apply for the license will be approved by the Copyright Office based on their ability to meet nine criteria. One of the most difficult for radio stations to meet is a requirement that stations not pre-identify a song and then go immediately to a commercial before playing it.

Still, many radio stations meet those criteria and should be able to qualify for the blanket licenses, said Seth Greenstein, an attorney with the Washington law firm of McDermott, Will and Emery, outside counsel for the Digital Media Association (DiMA).

"I don't think this decision is going to affect broadcasters in a negative way," Greenstein said. "Quite to the contrary, it's going to force them to think more creatively about the Internet and how to use it to advance their business objectives."