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Web radio firms cry foul over DRM proposal

Cap offer comes with anti-piracy strings

The smart choice: opportunity from uncertainty

Internet radio broadcasters have claimed that a last-minute record company deal offered to them is a ruse to force them to use digital rights management (DRM) technology.

The webcasters' industry association has called the demands "unreasonable [and] unworkable" in a dispute that internet radio companies claim could put them out of business.

Webcasters have been in dispute with SoundExchange, which acts for rights holders and record companies, over the fees they should pay for the right to webcast music. The Copyright Royalty Board (CRB), a part of the US Library of Congress, has set higher fees for using music which were due to come into force on 15 July.

Webcasters claimed the fees would be too high for most stations, and that in many cases they were higher than the total revenues earned by companies.

SoundExchange offered webcasters a last minute deal. The body said it would not impose the new fees, but would negotiate further with webcasters.

It has emerged, though, that SoundExchange's offer was to reduce fees only for firms which actively prevented the pirating of the webcasts.

"Under the new proposal…SoundExchange has offered to cap the $500 per channel minimum fee at $50,000 per year for webcasters who agree to provide more detailed reporting of the music that they play and work to stop users from engaging in ‘streamripping’ – turning internet radio performances into a digital music library," said a SoundExchange statement.

The Digital Media Association (DiMA), which represents a number of the biggest webcasters including Pandora, Napster, and Yahoo!, said this qualification to the deal is a "disappointing turn".

"SoundExchange has demanded enforceable technology mandates that are unreasonable, unworkable and way off-topic," said Jonathan Potter, executive director of DiMA. "They seek to leverage this absurd fee to impose mandates that they have unsuccessfully sought elsewhere."

"DiMA companies are prepared to set a time to meet with the SoundExchange Board to negotiate the royalty rates for the 2006-2010 CRB term. At that time, we can also discuss the establishment of working groups that would address other technical industry concerns,"; he said.

DiMA claims that the fixed fee which SoundExchange would cap in return for copy protection is excessive and has opposed that fee. "The uncapped $500-per-channel minimum fee generates more than $1bn annually for what the CRB determined are supposed to cover SoundExchange's administrative costs," said Potter. "This is far more money than needed to administer a mere $20m in internet radio royalties."

The deal from SoundExchange is only available to smaller web radio operators. "We do expect commercial webcasters like Yahoo! and AOL to pay the new royalty rates set by the CRB due 15 July," said SoundExchange executive director John Simson. "It is essential that recording artists and content owners receive full and fair compensation from the webcasters making use of their creative works."

Copyright © 2007, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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