Small Webcasters Sue RIAA

killthiskid writes "The Webcaster Alliance, a small group of 198 webcasters has sued the RIAA. CNET has the news, along with a growing number of other sites (google news). As many /.'ers know, in 2002 the Library of Congress decided on .07 cents per song (retroactive to '98). After that another bill was passed to protect smaller webcasters. Aparently, many webcasters are still not happy." Their complaint is online.

Yah, that's gonna happen

[Sc00ter]

Regardless of what you think about it the RIAA does own the rights to the songs and you're not legally entitled to play the songs to the general public without permission. If you don't like it find music from people that are not RIAA memebers and get the rights.

Re:Oh shock and horror

[Student_Tech]

Look at one of the articles off of Goolge News, it seems as if they don't like the $0.07/song/listener, and would like to have it set at 3-5% of the revenue that is generated.

Gabriel's organization would like to see the per performance royalties eliminated. Instead, a flat percentage of commercial Webcaster revenues, somewhere between 3 and 5 percent, would be a fair fee to pay, she said.

-Information Week Article [informationweek.com]

Correct Information

[Jaguar777]

As many /.'ers know, in 2002 the Library of Congress decided on .07 cents per song (retroactive to '98).

According ot the legal document that was linked to.

In his July 2002 final rule, the Librarian of Congress found, among other things, that the fair market rate for licensing sound recordings was $0.0007 per performance.

So is it .07 or .0007?

For those that think PDF and adobe sucks..

[Anonymous Coward]

COMPLAINT

Perry J. Narancic, SBN 206820 LEXANALYTICA, P. C.
160 West Santa Clara Street Suite 1100
San Jose, CA 95113 Tel: [phone]
Fax: [phone]
Attorneys for Plaintiff WEBCASTER ALLIANCE, INC.

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA

Webcaster Alliance, Inc.
Plaintiff,
v.
Recording Industry Association of America, Inc., Universal Music Group, Inc., Warner Music Group,
Inc., Bertelsmann Music Group, Inc., Sony Music Entertainment, Inc., Capitol-EMI Music, Inc.

Defendants.

) )
) )
) )
) )
) )

Case No.:
COMPLAINT
(1) Unlawful restraint of trade in the market for domestically copyrighted
sound recordings (Sherman Act § 1)
(2) Illegal maintenance of monopoly in the market for domestically copyrighted
sound recordings (Sherman Act § 2)
Demand for Jury Trial

Plaintiff alleges as follows:
I. NATURE OF PROCEEDINGS
1. This is an action brought under the antitrust laws of the United States to restrain

anticompetitive conduct by the Defendants which threatens to injure Plaintiff and its members as
a result of Defendants' exclusionary conduct in the markets for domestically copyrighted sound
recordings and Internet distribution of such sound recordings.
2. Plaintiff is a trade association whose members are engaged in the business of
Internet radio, also known as webcasting. Webcasting is the Internet equivalent of terrestrial radio 1

2 COMPLAINT

whereby digital data is transmitted in real-time, without downloading any physical files. But
unlike the broadcasting of signals in traditional radio, Internet radio involves the transmission of
streams of data to an individual listener.
3. Internet radio is a vital form of media that allows ordinary individuals to transmit
ideas, music, opinions and other content to an international audience. Like traditional terrestrial
radio, Internet radio is an important medium that allows for the free expression of ideas, news and
opinion. However, the commercial success of Internet radio as a viable line of commerce is
dependent on securing access to suitable content, which is subject to the intellectual property
rights of its owners.
4. To allow for the growth of this medium, Congress enacted the Digital Millennium
Copyright Act of 1998 (" DMCA") to provide certain non-subscription Internet radio stations
with a compulsory license to perform copyrighted sound recordings. Under the DMCA, the
royalty rates for such compulsory licenses can be established by either a voluntary agreement, or
failing such voluntary agreement, the Copyright Office may initiate a Copyright Arbitration
Royalty Panel (" CARP") in order to establish such rates.
5. A CARP proceeding commenced in April 2001 to establish royalty rates for Internet
radio for the period October 28, 1998 - December 31, 2002 (the "CARP")
6. The Recording Industry Association of America, Inc (" RIAA"), a trade association
controlled by the five major labels who account for over 80% of all domestically copyrighted
content produced and distributed in the United States (the "Major Labels"), acted as a negotiating
agent on behalf of its members in the CARP proceedings.
7. The CARP submitted its report to the Librarian of Congress on February 20, 2002,
which report included certain recommendations as the appropriate webcasting royalty rates. (the
"CARP Rates").
8. However the Librarian of Congress rejected, in part, the CARP report, and the
Librarian of Congress set the rates in a final order that was announced on June 20, 2002, and
which was published on July 8, 2002 (the "LOC Rates") 2

3 COMPLAINT

9. The LOC Rates were primarily based on the royalty rates that were agreed to in a
licensing agreement between Yahoo, Inc., the second largest commercial webcaster in the world,
and RIAA (the "Yahoo Agreement"). In his July 2002 f

Re:Correct Information

[glgraca]

Oops, 3 people who cant do maths with
moderation powers!

In my book .07 cents is 0.0007 dollars.

+3 Informative?

[Surak]

Informative? $0.0007 == 0.07 cents. D'oh!

$200 a year?

[Jonny Royale]

If I'm reading this right..the webcasters have to PAY ~200 US a year (3 min song avg.) to the recording industry to play their music?

So why aren't radio stations paying this? They use RIAA "protected" material all the time. Is there a diference between broadcasting on the 'net & broadcasting over the radio (from a legal standpoint, that is)? I can get input from a radio station wired into my PC & record it...does that mean I'm pirating music? Or the fact that I bypassed all the storage media to get that music the real issue here?

*begin sarcasm* Or is that "lisence fee" covered in the payola they get from the music industry to push the latest "pop-phenom"..??*end sarcasm* sarcasm

Re:Good for them

[Rahga]

Ever hear of ASCAP and BMI, or SESAC? You are right, radio doesn't have to pay the RIAA... instead they get to pay those other performance rights organizations, and trust me, they do get paid. The songwriters for everything from "Louie Louie" to "Baby Got Back" are going to continue to get royalties paid to them for quite some time....

The only difference in web streaming is that the RIAA moved themselves into a positions where webcasters must answer to the RIAA... ASCAP and others do have online licesnsing and so on, but that's not the same thing that RIAA got in on.

Re:Yah, that's gonna happen

[Anonymous Coward]

The grossly unfair aspect of the law is that radio stations don't pay a cent for playing songs over the air. The law is not about bringing in more revenue for RIAA members - it was obvious at the time that the result would be to eliminate small, hobby-type webcasting. I think the intention was much the same - to destroy an emerging competitor to commercial radio.

What you are not seeing...

[Hell O'World]

... is that web broadcasting functions like traditional broadcasting. Playing a song owned by the RIAA is advertising the RIAA's product. Although I agree with you, that ideally bypassing the RIAA would be the solution. A nice free market solution. Now if we were only monopoly free...

A quick summary for those who don't want to click

[Teknogeek]

The complaint goes like this:

Prior to when the current webcaster royalty rates were determined, the RIAA met with Yahoo! to work out rates seperate from those put forth by the Librarian of Congress, or LOC. The LOC, in turn, used the Yahoo! rates as the baseline for a "fair market" royalty value.

A similar case occured between SoundExchange (a wholly owned subsidiary of the RIAA) and the Voice of Webcasters (VOW) organization, except that the rate was now four times what the Copyright Arbitration Royalty Panel (what the LOC based the final decision on) had deemed okay.

The lawsuit alleges that the RIAA unfairly inflated the Yahoo! royalties to the point where they would not legitmately be a 'fair market value'...it was price-fixing, with Yahoo! as (possibly) an unsuspecting ally.

But what about Voice of Webcasters? Good question. The suit also claims that the RIAA/VOW negotiations were in bad faith on the part of the RIAA, and that the RIAA forced those VOW members who remained for the entire negotiation to enter into an agreement, later encoded into law as the Small Webcaster Settlement Act of 2002, that would make it even harder for webcasters to survive.

Basically, the Webcaster Alliance wants the RIAA to be barred from enforcing their copyrights against webcasters until a legitimate, non-abusive rate can be found, and that the RIAA pay for their legal fees.

They're also asking for a jury trial. IANAL (duh), so I don't know if that's a good or bad idea.

Re:Yah, that's gonna happen

[Dr. Zowie]

Actualy, no, you are entitled to play the songs to the general public. The whole point of CARP is to mitigate the restrictions inherent in monopoly control. Remember, copyright is an artificial monopoly that is ostensibly intended to encourage creativity. The problem is that, perversely, copyright discourages dissemination of valuable ideas if the owner of those ideas loses interest in exploiting them, or perversely refuses to license them. The CARP is a kludge designed to fix that problem, by forcing content providers to license their content to anyone at a reasonable rate.

Multiply that

[yerricde]

I would GLADLY pay 7/10000 dollars for the right to broadcast a song. That's 0.07 cents per song!

Multiply that by the number of listeners. Multiply that by the number of songs you play in a month.

Re:Correct Information

[cdrudge]

Your right. $.336 per day per stream isn't that much, until you consider that they are streaming multiple streams. They could have several thousand streams going at once. Lets assume that are a very small shop and have 10 streams going. That is now $3.36 a day or $1226.40 a year. A larger shop doing 100 streams would pay $12,264 a year. 1000 streams would be $122,640 a year. Spinner.com does 22 million songs a week. That's $800,000 a year . Now they will have to pay those fees back to 1998, so you are going to have to multiply those figures by 5. Now do you see where the problem is?

The only winners

[EvilNutSack]

... in this whole mess will be the lawyers, not the consumers. Hang on, I wonder if the RIAA can get nailed under the Patriot Act for being a terrorist organisation; law suits instead of bombs?

There IS no "RIAA-safe" model!

[Adolatra]

bypassing the RIAA would be the solution.

Actually, it wouldn't.

The RIAA's subsidiary, SoundExchange [soundexchange.com], is currently the sole designated agent for collection distribution royalties, as per the U.S. Copyright Office.

What this means is that SoundExchange, a.k.a. the RIAA, is authorized to collect on behalf of all copyright holders. Even those who aren't members of the RIAA proper.

To put it another way, even if I were to start a band, and a Shoutcast station devoted solely to my band, or to local unsigned bands throughout my city, the RIAA (as SoundExchange) could knock on my door and demand royalties! And since none of us are members of the RIAA, we wouldn't see a red cent!

This is just a taste of the asinine legislation currently binding webcasters thanks to the RIAA's powerful lobbying power.

Re:Good for them

[thumbtack]

Webcasters pay for performance royalties, terrestial radio doesn't.

Webcasters have to pay the performance royalty based on the number of listeners, Terrestial radio doesn't pay performance royalites, period.

Both have to have ASCAP, BMI, SESAC licensing.

As an example when you hear Britneys Pears on the radio while driving, the songwriter gets paid (about 8.5 cents as I recall) no matter how many listeners are tuned in. When Britneys Pears is played on a webcaster, the song writer still gets theirs, but in addition Britney and her label get a royalty based on the number of listeners..Hence if you can afford the equipment, its cheaper to broadcast rather than webcast. (at least licensing wise)

Re:Oh shock and horror

[3terrabyte]

Nobody said a webcaster has to play RIAA music.

SoundExchange is the company in charge of collecting the royalty payments by the webcasters. They don't collect royalties just for the RIAA copyrights, they are in charge of collecting for ALL songs that are copyrighted. Even non-RIAA.

So you don't even need to play 1 RIAA song, you still are slapped with these royalty payments. You actually would have to get an individual agreement with EACH individual copyright holder, to be allowed to play their song, and abide by whatever means you come up with them.

This is a tedious process, and although plausible... ?? Not only that, but if each and every webcaster that wanted to play non-RIAA songs went to each of these indy labels to come up with an agreement... I am sure the indy labels would find it difficult to keep track of each arrangement. I suppose they would find it easier to just go with SoundExchange.

Re:Yah, that's gonna happen

[Klaruz]

Ahh yes, the RIAA member companies own the copyrights, but the playback rights belong to the songwriters. Those are collected via ASCAP/BMI and don't go to the labels. Here's how it worked in the past:

Analog stations paid ASCAP/BMI
Digital stations paid ASCAP/BMI

Now here's how it works:

Analog stations pay ASCAP/BMI (and get payola, that's another story...)
Digital stations pay ASCAP/BMI AND the RIAA (because when you listen to a digital station, it's like them giving you a copy of the song, so the station has to pay for every user's piracy, no, really, that was the RIAA's argument to get the law passed)

Sound fair? Nope. If an analog station had to pay the royalty rates they want digital stations to pay they would go out of business. Running a digital station costs just about as much as running an analog station of the same size (bandwidth/severs vs towers/amps/huge fcc license fees), so why should special rules be made for internet broadcasters? Because there are more of them than the RIAA can control with payola, and this is a threat to them.

People whine and complain about the RIAA all the time, the only real way we have to shut them down is with the mindshare of the people. If you want the mindshare of the people, we need independent internet radio to ween society off the RIAA.

Re:Excuse me for asking, but

[Sulihin]

This pertains to domestically copyrighted sound recordings. Your "who want to be freely heard" presumably own the copyright to their speech and can thus distribute it in any manner they desire. The RIAA only cares about stuff for which they own the copyright.

Re:$200 a year?

[GarthSweet]

Try a calculator my friend:

24 hrs/day
x 60 min/hr
/ 3 min/song
x 365 days/year
x 0.07 cents/song
==========
= $12,264.00

That's not even figuring on the fact that it's 7 cents for every time a song is played per user.

Re:Yah, that's gonna happen

[proj_2501]

Wrong. Radio broadcasters pay a fee for every song that is played over the air. The killer for web broadcasting is that the license fees are per song PER LISTENER, shoving not only higher fees onto smaller radio stations, but also more recordkeeping requirements.

Re:$200 a year?

[Catbeller]

.07 cents. Not 7 cents. 7/100 of a cent.

The Answer

[cybercuzco]

You ask faceotously, but theres a real answer to this. Its "free" speech if its not written down beforehand, i.e its not IP if its extemporaneous. For this reason, Martin Luther King's "I have a dream" speech results in no royalties for the king family because king did not write it down beforehand, he spoke from the heart. So, if its written down, youre listening to IP, if its not youre listening to free speech.

Re:maybe i'm missing something about the rate

[Anonymous Coward]

Additionally, as stated in news reports, these small webcasters are angry about a four-fold increase in the _minimum_ fee required of each webcaster which was originally instituted by the Library of Congress. The intial fee structure was modified by VOW and the RIAA during closed negotiations under the auspices that the VOW represented ALL webcasters. In fact, they only represent the largest of the current webcasters who can afford and need not worry about minimums due to their already established businesses. Thus, it bars small webcasters from competing with the larger ones by VOW agreeing to prohibitively high fees that it knows will reduce competition in this emerging market. This reduction in competittion helps both the RIAA and VOW, but not the rest of the world's webcasters. This is why the RIAA is being sued under the Sherman Act (antitrust). The shady agreement effectively kills the business of many small webcasters while at the same time handing the market to VOW _and_ settling on the exact terms of the RIAA ensuring their continued monopoly.

You are not only paying the per user per song fee, you also have a yearly ~$2,000 minimum to even have the right to play their music in the first place and even if no one ever listens to a single song that you are webcasting. .0007 does not seem like much, until you go through the complex equations necessary to determine how much running even a moderately successful internet radio station would cost. It gets really expensive, really fast.

I think I would have to hire an accountant simply to be sure I did all of their math correctly (under penalty of prison for copyright infringement). Their fee structure is an unbelievable behemonth as it is currently written... not to mention they clearly state that they have the right to change the fees any time at their will. Check out the RIAA's site and look at the details of the fees. I would have linked directly, but it looks like the RIAA site is down once again!