Appeals court rejects Webcast royalty delay

By Brooks Boliek

WASHINGTON (Hollywood Reporter) - The federal appeals court here on Thursday rejected Webcasters' request to postpone implementation of a new royalty rate for music they air over the Web.

The decision hands a court victory to the music industry and performers who have been warring with Webcasters over the rate. By denying the Webcasters' stay, the court let stand the July 15 "true up" date when they are required to give copyright holders a new, higher royalty payment for digitally delivered music.

"This is a major victory for recording artists and record labels whose hard work and creativity provides the music around which the Internet radio business is built," SoundExchange executive director John Simson said. "Notwithstanding this victory, we continue to reach out to the webcasting community to reach business solutions."

SoundExchange was created to distribute the royalty following the 1995 Digital Performance Right in Sound Recording Act. The royalty is split 50-50 between copyright owner, typically a label but sometimes the artists or other entities, and the performer.

Webcasters had challenged the royalty, contending that a panel of copyright royalty judges erred when they dramatically increased the rate this year.

"Digital Media Assn. members and all Webcasters are disappointed by the court's decision and are now forced to make very difficult decisions about what music, if any, they are able to offer," executive director Jonathan Potter said. "The result will certainly be fewer outlets for independent music, less diversity on the Internet airwaves, and far fewer listening choices for consumers. We're hopeful that Congress will take steps to ensure that Internet radio is not silenced, and that Webcasters and SoundExchange will find a way to compromise and maintain the diversity and opportunity of Internet radio."

BATTLE NOT OVER

The music industry and many artists organizations contend that the royalty is a fair payment for the products that drive consumers to Webcasters' sites, giving them something upon which to build their businesses. While the court declined to grant the Webcasters' stay, the battle over the royalty doesn't end there. Congress is taking a look at the issue as Webcasters are pushing a bill that would roll the rate back to one that is lower than what they currently pay.