As the clock ticks down to the July 15 effective date of the royalty rates for Internet Radio as determined by the Copyright Royalty Board, webcasters held a Day of Silence today, June 26, to demonstrate to listeners what may well happen if the rates go into effect, and to galvanize their listeners to ask Congress for relief. With the Day of Silence bringing publicity to the Congressional efforts to put the webcasting royalties on hold and to change the standard applied by the Copyright Royalty Board so that it is not focused completely on a hypothetical "willing buyer, willing seller" model, it’s worth looking at some of the other issues that have arisen in the royalty battle in the last few days – including further pleadings filed in connection with the Motion for Stay currently pending in the US Court of Appeals, and the Congressional hearing that will occur on Thursday.
As we’ve written before, there is currently pending a Motion for Stay of the CRB decision which was submitted jointly by the large and small webcasters and NPR. Last week, the Department of Justice, acting on behalf of the Copyright Royalty Board to defend the royalty decision, and SoundExchange, each filed oppositions to the Motion for Stay. Each raised many of the same arguments. First, they argued that the large webcasters had procedurally forfeited their rights to challenge the question of the $500 per channel minimum fee by not raising their objection early enough in the CRB proceeding. The DOJ also argued that the damage from the minimum fee was speculative as there was no way to know how that minimum fee would be interpreted. The DOJ contended that, as it was unclear that SoundExchange would prevail on any claim that those Internet Radio services that produced a unique stream for each listener would have to pay $500 for each such stream, the question might end up in a lawsuit – but wouldn’t inevitably lead to the irreparable harm that is necessary for a stay to be issued.
As to the Small Webcasters, the DOJ seemed to acknowledge that irreparable harm would occur if the stay wasn’t granted as the royalties would exceed the revenues of these webcasters, though SoundExchange seemed to take the position that if some webcasters went out of business, that might not be irreparable harm as the loss of some of these webcasters would not harm the overall industry. SoundExchange also contended that, if the appeal were ultimately successful, these webcasters could get a refund of any fees that were higher than a rate that was eventually decided (seemingly overlooking the fact that these webcasters could not pay in the interim). Finally, the parties argued that the Small Webcasters had not addressed the reasons that the CRB had given for rejecting the percentage of revenue royalty that they had requested. Interestingly, the DOJ concluded its brief by suggesting that if any stay was granted, it should be limited to small webcasters who were paying royalties under the Small Webcaster Settlement Act.
Finally, the oppositions argued that NPR had not shown that it was arbitrary for the CRB to determine that they should pay royalties at the commercial rate (if they streamed over 158,000 aggregate tuning hours in a month – the amount that noncommercial streaming companies can stream for the $500 minimum fee), and that NPR had not demonstrated that their members could not track the on-line listnership of their stations, as had been claimed in the Stay request.
On Friday, the webcasters filed their Reply to these Oppositions. The webcasters, of course, contended that the oppositions had misread the evidence. The large webcasters pointed to places in the record where they had argued with the minimum fee proposal of SoundExchange, and also pointed to services like those provided by Yahoo!, Pandora, and Live 365 to show the irreparable harm that would occur if the stay was not granted. The Small Webcasters took issue with SoundExchange’s position that their demise did not constitute irreparable harm, and pointed out that their proposal to base a percentage of revenue royalty on their entire revenue addressed all of the CRB’s reasons why a percentage of revenue royalty was not proper (i.e. there was no definitional question of what revenue was subject to the royalty, and the definition of a small webcaster was easy – it was any entity willing to pay based on a percentage of their total revenue). NPR also pointed to evidence that it alleged refuted the contentions of the parties defending the CRB decision.
With the filing of the Reply, the Motion for Stay is now ripe for judicial action. There is no time frame in which the Court must act, though it is certainly hoped that the decision is released before the July 15 deadline so that services know where they stand before the new royalties have to be paid.
In addition to the appeal, Congressional action on Internet radio continues. On Thursday, the Small Business Committee of the House of Representatives holds a hearing on the effect of the CRB royalties on small businesses. Both webcasters and musicians will be testifying. The witness list for the hearing can be found here.
And finally, there was today’s Day of Silence to drum up support for the Internet Radio Equality Act (see our summary here). While most webcasters, including some of the largest webcasters in the country (Yahoo! and Pandora) are participating, as well as most NPR affiliates, press reports indicate that many commercial broadcasters (with the notable exception of Greater Media and Saga) did not observe the day. While broadcasters are about to be faced with a push for similar royalties for their over-the-air broadcasts (see our story here), many seemingly have yet to recognize the threat that these royalties present to their Internet operations. Throughout the royalty proceeding, only a few broadcast groups actively participated in the proceeding (Clear Channel, Salem, Bonneville, Susquehanna CBS for a portion of the proceeding). Many broadcasters remained on the sidelines, and continue to be ambivalent to their support of efforts to overturn the decision. While the NAB has now, belatedly, joined in the fight by seeking intervention in the pending court appeal, the failure of radio broadcasters to join in the day of silence may indicate a continuing ambivalence on the part of some as to whether Internet radio is a threat or an opportunity, so many remain unsure what to do. A post in Mark Ramsey’s hear 2.0 blog, here, discussing his take on the ambivalence of broadcasters in this debate is worth reading.
With all these efforts and continuing settlement discussions ongoing, one hopes that today’s Day of Silence is not a precursor of things to come.