Nonprofits provide a valuable communications and information sharing infrastructure alternative to commercial broadcast media through varied network of national, regional, and local community media outlets-- including public access cable, public broadcast television and radio, and increasingly through webcasting channels. Changes in federal rules, however, regarding royalty payments and the entities required to make them to copyright holders of recorded and broadcast work provide a barrier for webcasting entities and their ability to utilize the Internet to provide content that might not otherwise be heard. -------------------------- The Other Broadcasters -------------------------- Today, nearly 20% of all U.S. Internet users tune into roughly almost 5,000 commercial stations that have set up online webcasts or simulcasts as a way to foster a more dedicated listening community, as well as to provide an outlet for music and programming that might not be attractive to advertisers, but that might appeal to a listening audience. Listeners also have some 50,000 noncommercial webcast options, (including Individual and nonprofit webcasting efforts) reflecting a unique interest in a wide range of diverse content, providing an invaluable archive for speeches, news, events, in addition to music, that might otherwise never be captured or lost as older media deteriorates or becomes difficult to store and access. Though the audiences tend to be smaller and more niche-oriented than their offline counterparts, the dizzying array of online channels and the growing numbers of people tuning into them points to information needs not being met by traditional broadcast media. A number of commercial entitles, in fact, arose in the mid- to late-1990s devoted solely to providing hosting services to small outlets in order to grow the still-nascent webcasting arena. Because the barriers to entry are minimal compared to even an independent (or pirate) media station-- a computer, basic digitizing tools, a server to store media clips that's open to listeners, and a steady base of content-- nonprofits have a cost-effective way connect content and information services that might otherwise never see the light of day among more visible outlets with a public eager to receive it. So it would seem to be no problem, except for one little thing: despite all the ambition and effort and civic potential webcasting holds, the main content base is music, a large part of which is commercially available and copyright protected. Under current arrangements, all broadcasting entities pay a percentage of their revenue towards composers and publishers for permission to play songs. The actual copyright holders-- including music labels and actual artists-- however, are not compensated when songs are broadcasts. ------------- DMCA & DRPA ------------- Since 1870, copyrights in America have been handled through the U.S. Library of Congress, which also houses the U.S. Copyright Office. In addition to serving as the official record for copyrights, USCO provides advice, analysis, and technical assistance on intellectual property issues to Congress and other countries. CARP, was established by Congress under the 1995 Digital Performance Right in Sound Recordings Act (DPRA) and the 1998 Digital Millennium Copyright Act (DMCA). CARP sits under the authority of the Library of Congress, which also has responsibility for the U.S. Copyright Office. Under a provision in the DMCA, traditional broadcasters (radio stations, including those with online simulcasts) are exempt from the broadcast fees levied against online-only broadcasters, on the grounds that the former have a historical tradition of actively promoting recorded content, rather than webcasting entities which simply play content. A Copyright Office December 11, 2000 final rule, meanwhile, held that broadcasters who simulcast AM or FM broadcasts over the Internet would be obligated to follow the DRPA's "public performance rights" provisions. This meant that copyright owners could set the terms for licensing broadcast of their content through online services, and that traditional broadcasters were now subject to the same rates as online broadcasters. After losing a challenge against the rule, the broadcaster community appealed to the U.S. Court of Appeals for the Third Circuit, and filed a motion to stay the December 2000 final rule, pending the Third Circuit's opinion. ------------------------- Something to CARP About ------------------------- In February 2002, the Copyright Arbitration Royalty Panel (CARP) issued its recommendations regarding the royalty payment structure for recorded works, including material provided through webcasts and online radio stations. The CARP recommendations, which were to have taken effect on May 21, 2002, stipulated the terms under which webcasting entities-- commercial, independent, and nonprofit-- were to be charged for broadcasting musical content based upon the number of listeners who heard each song, retroactive to October 1998 and forward only to December 31, 2002. Past payments would be due October 2002, and new payments beginning in November 2002. The royalty rate structure called for a "performance fee" of $1.40 per 1000 listeners for each song for commercial webcasters, $0.20 per 1000 listeners for each song for nonprofit webcasters, and $0.70 40 per 1000 listeners for each song for traditional broadcasters. CARP also proposed an additional 9% of the performance fee to be levied as an "ephemeral fee"; to be applied to the ability of broadcasters to make digital copies of recorded works available for use in their webcasting streams. On 5/21/02, Librarian of Congress James Billington signaled his intention to reject the CARP recommendations, without stating any actual basis for his decision. On 6/21/02, the Librarian's final determination was issued, and a final rule was promulgated shortly thereafter. The rule eliminated the CARP two-tier rate system, instead adopting a flat royalty rate of $0.07 per song per performance for webcasters and traditional broadcasters with an 8.8% ephemeral fee. A separate, reduced royalty rate structure was established for nonprofit webcasters (those not affiliated with the Corporation for Public Broadcasting, which arranged its own royalty rate agreement). Under the rule, Web simulcasts of AM or FM radio broadcasts, as well as archived recorded content broadcast over the Internet or substituted programming (content provided in lieu of authorization to carry a radio broadcast online) through up to 2 side channels (websites), would cost $0.02 per performance. Any webcasts through additional side channels would cost $0.07 per performance. The ephemeral fee was the same as that for commercial webcasters. Individual webcasters expressed concern that the volume of traffic they successfully generated would paradoxically lead them to financial ruin, as a greater amount of listeners would raise the level of fees they would have to pay to play music and other content, as well as the amount of information they would need to collect from each user. Recording industry and artists, however, considered the fee structure fair, but lower than the potential market value of content broadcast through traditional radio. Under law, any set of interests, is able to challenge the royalty structure in the federal appellate court for the District of Columbia within 30 days of the final rule, and by August 2002, both webcasters and music industry interests had done so. -------------- A Compromise? -------------- On September 1, 2002, the royalty rate structure was put into effect. On September 17, 2002, the Copyright Office issued a request for public comment with respect to the aforementioned motion to stay the December 2000 ruling. Comments were accepted up until September 27. In response, Rep. James Sensenbrenner (R-WI), chairman of the House Judiciary Committee, introduced a bill on September 26, 2002 to allow for a six-month suspension of the royalty rate structure, in order to allow for the courts to rule on the appeals to the decision currently before them, and to provide a period of time for all parties, especially individual and small webcasters, a window under which their financial obligations can be better met through a more workable compromise with the recording industry. The bill, H.R. 5469, could be voted on by early October, without amendments but requiring a two-thirds vote fo the House, under suspension of the rules. However the House leadership pulled the bill from consideration six days later, at Chairman Sensenbrenner's request, in response to word that broadacasters and music industry representatives were close to reaching a compromise by October 4, 2002. Equally significant is the the potential compromise's practical effect of rendering the Library of Congress ruling, and the entire CARP arbitration process, moot. There is speculation, however, that noncommercial, education, community, individual, and institutional webcasters are not effectively represented in the negotiations, according to the Save Our Streams campaign and the 10/1/02 Radio and Internet Newsletter (the latter also includes a running list of webcasters which have been forced to cease operations due to prohibitive royalty fee structures). [Originally posted on 7/8/02; updated 10/2/02]