We plan to update RAIN throughout the day with more on the Copyright Office's decision to reject the CARP recommendation. Please scroll down to see Kurt Hanson's analysis, and some reaction from key industry figures. Also in today's issue, a guest essay from attorney David Oxenford (here), and coverage webcasting on "NBC Nightly News" and The Boston Globe (here).

From a notice posted at 10AM EDT this morning on the U.S. Copyright Office website:

The reference to 17 U.S.C. 802(f) links to the following paragraph in the Copyright Law portion of the US Code: "Within 90 days after receiving the report of a copyright arbitration royalty panel under subsection (e), the Librarian of Congress, upon the recommendation of the Register of Copyrights, shall adopt or reject the determination of the arbitration panel. The Librarian shall adopt the determination of the arbitration panel unless the Librarian finds that the determination is arbitrary or contrary to the applicable provisions of this title. If the Librarian rejects the determination of the arbitration panel, the Librarian shall, before the end of an additional 30-day period, and after full examination of the record created in the arbitration proceeding, issue an order setting the royalty fee or distribution of fees, as the case may be."


Screenshot of Copyright Office's announcement:

Which links to...





BY KURT HANSON
This morning's announcement from the Librarian of Congress makes perfect sense, as the likely impact of the Carp's recommendation — the virtual shutdown of Internet radio — would have been totally contrary to the legislative intent of establishing a statutory royalty rate in the first place!

One benefit of attending the Copyright Office's roundtable on recordkeeping requirements two weeks ago (see RAIN story here) was the chance to see and hear Register of Copyrights Marybeth Peters (pictured) and General Counsel David Carson and realize that they seem to have an excellent handle on the issues involved. The decision on an appropriate royalty rate seems to be in good hands.

Certainly Peters and Carson have got all the information they need to make a decision. According to the CARP report, there are almost 15,000 pages of written transcripts, plus thousands of pages of exhibits and post-hearing submissions. In addition, there were hundreds (if not thousands) of pages of comments and reply comments filed by CARP participants responding to their report.

(Actually, what they don't have in the record is testimony from the smaller independent webcasters, who were essentially shut out of the CARP process. (But hopefully the larger webcasters represented their position on key issues well enough for purposes of establishing the rate.))

So, for the next 30 days, it's primarily a waiting game.

Hopefully, the Copyright Office will conclude that a "willing buyer" and a "willing seller" would agree on a rate that's somewhere in the ballpark of the rate that composers receive. Hopefully they will also conclude that true "marketplace" negotiators would agree on a royalty rate that's expressed as a percentage of revenues, so that compensation to artists and labels can grow as the advertising market for Internet radio develops. And hopefully they'll set recordkeeping requirements that strike a reasonable balance between costs and benefits.

Meanwhile, while Peters and Carson and their staff are working on the statutory rate, there's no reason that webcasters and labels can't be working together to come up with a voluntary rate that works for both sides. (See Friday and Monday's two-part "RAIN Editorial" here and David Oxenford's essay below.)

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With a brief announcement on the US Copyright Office website, Register Marybeth Peters and Librarian of Congress Dr. James Billington gave the webcasting industry new hope by rejecting the CARP proposal on webcasting royalty rates.

This means the Office, after examining the record (the CARP report and participants' reply comments), was not satisfied with the rates proposed by the arbitration panel on February 20th (see main story in today's issue).

Here's what some key figures in the industry have told RAIN about the decision:

Bill Goldsmith RadioParadise.com KPIG.com	"I'm not surprised that the LOC rejected the proposal. Its flaws were obvious, even if the Librarian disregarded (as he was required to do) all of the public commentary, press coverage, and the testimony presented by webcasters to Congress. It's now time for the RIAA members to show their true faces. Will they try to maintain the fiction that we are "building our business on the backs of the artists?" Or will they accept the fact that Internet radio is good for the artists, good for the public, and yes, good for the labels too? If they continue to push for a rate structure that allows only the large deep-pocketed webcasters to survive, I'll continue to rally my listeners and make as much noise as possible. All that we webcasters are asking for is basic all-American fairness - and I'm confident that we'll get it, one way or another. The record labels can either play fair now - or be forced to by Congress and the Copyright Office."
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Dan Halyburton, Senior VP/GM Susquehanna Radio	"Now the hard work begins. We need a long term solution. Broadcasters and webcasters must be united. Our adversary will try to divide us. If negotiations take place it's time for the "win/lose" tactics of that adversary to be swept aside for a genuine effort to find an opportunity to grow an industry and compensate performers fairly.
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David Oxenford, Partner Shaw Pittman LLP	"I think that the Librarian must have realized what the webcasters have been arguing since the CARP decision was released - that the rates were simply unrealistic to allow a webcasting industry to develop. One contract, agreed to by an atypical webcaster, cannot set a market rate, particularly a "market" rate that kills the market by wiping out most if not all of the industry. I hope that this decision sets the stage for some realistic negotiations between the parties to establish a rate that will allow the webcasting industry to develop and thrive, while still providing fair and reasonable compensation to performing artists. If that doesn't happen, I hope that the Librarian will weigh the evidence, and establish a rate that is realistic for the great majority of the webcasting industry."
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From the early morning (pre-Copyright Office ruling) edition of RAIN:


BY DAVID OXENFORD
for RAIN: Radio And Internet Newsletter
May 10th's Copyright Office Roundtable discussion finally gave small webcasters the opportunity to be heard in Washington, even if their voice was being considered only on the limited issue of the record keeping requirements required by the provisions of the Digital Millennium Copyright Act.

In the past week, RAIN has chronicled the events which transpired at the Roundtable, and subsequently at the hearing before the Senate Judiciary Committee. To me, however, more important than that which was said at these gatherings, was the missed opportunity to reach the consensus that both the Register of the Copyrights, Marybeth Peters and Judiciary Committee Chairman Patrick Leahy have sought.

From my perspective, both the webcasters and the copyright owners have made impassioned pleas in support of their positions. Unfortunately, the passion often obscured the fact that the two parties were agreeing on many matters at the heart of the issues now before the Copyright Office.

Both side agree on importance of records
At the Roundtable, both the webcasters and the RIAA agreed that records needed to be kept so that the royalties could properly be distributed. While it was somewhat difficult to discern through their focus on the technicalities of the record-keeping and distribution process and their dogged defense of the legal position that they have staked out concerning their entitlement to all of the information they have requested, the RIAA did not seem to be insisting on record-keeping for the sake of record-keeping.

Instead, the RIAA seemed to be acting out of a genuine desire to properly and accurately distribute the royalties to the copyright owners and artists that are entitled to them.

(US Copyright Office General Counsel David Carson is pictured right).

There even seemed to be agreement around the table that the existence of small webcasters was a good thing -- contributing as it does to the exposure of new artists not heard on much of today's commercial over-the-air radio. With agreement on that point, contrary to the opinions of some conspiracy theorists, it does not seem likely that the RIAA is insisting on the record-keeping requirements (and, by extension, on the high royalty fees) for the purpose of driving the small webcaster out of business.

With so much agreement on that Friday, why was the tension level in the room so high for most of the eight hour-long hearing? Why couldn't the parties simply sit down and agree on a plan for the development of a fair method of record keeping -- one that would allow a fair distribution to the artists while not imposing unreasonable costs on the webcaster?

A uniform system, adopted over time
Several good ideas thrown out at the hearing seemed to be overlooked in the debate. At least two parties suggested that the RIAA and the webcasting community get together to develop a simple, uniform system that would easily and efficiently track the music played on an Internet radio station.

While such a system might take time to develop, there seemed to be virtual unanimity among the webcasters that they could today live with a system of record keeping based on a sample of the music that they play, provided that the information requested during such sampling was reasonably available. Artist, song title, album title (if the song came from an album), and record label seemed, for the most part to be agreeable to the webcasters. The copyright owners seemed to agree that this information would allow them to identify the vast majority of the music played over the Internet.

Given this accord, why not agree to a sample-based system with the four pieces of information for the time being, as the collection of this information is certainly better than the collection of no information, as is currently the case (and may well continue to be the case if any imposed system of record keeping is unsatisfactory to either party and further litigation ensues). Agree to a sample based system for a trial period of perhaps three years while the parties work on some sort of mutually agreeable automated system.

Such a system would be one that will easily and cheaply gather information on all of the songs played on every webcaster's stream, and lead to a uniform unique identifier system, available to everyone, which seemingly all parties agreed would be a desirable outcome.

A quick and easy compromise solution such as this, that could be implemented tomorrow, seems far superior to battling for years over a system that one side or the other may be forced, kicking and screaming, to accept.

(CONTINUED BELOW)