U.S. Reps. Don Manzullo, R-Ill., and Jay Inslee, D-Wash., sponsored the bill to overturn a Copyright Royalty Board (CRB) decision that would require Internet broadcasters to pay three times as much as their over-the-airwaves counterparts for the right to play music.

The Internet Radio Equality Act (HR II), as the new bill is called, was introduced this past Thursday, and could conceivably impact nearly 70 million Americans who, according to Nielson Media Research, listen to online music stations each month. The bill would mandate royalty parity for Internet, satellite, and cable radio, as well as jukeboxes and traditional radio.

The CRB increased royalty rates (PDF) for Webcast music, setting a retroactive rate of $0.0008 per song for 2006. The rate in 2005 was $0.0007 per song. Under the ruling, announced March 2, the amount is set to rise to $0.0019 per song by 2010. That -- plus a $500-per-station fee and the elimination of fee schedules that based fees on a percentage of revenue -- could amount to a 300% increase for large operations and up to 1,200% for smaller operations, according to digital media representatives.

The fairness of the new CRB rules has come under fire by many groups, but the charge against what many see as onerous Internet radio royalty fees is being led by Jack Ward of SaveNetRadio. His group is a coalition made up of artists, labels, listeners, and webcasters. According to their website, SaveNetRadio maintains that the vast majority of webcasters [are] barely making ends meet as Internet radio advertising revenue is just beginning to develop. 

Mr. Ward and his coalition believe that Internet radio services will go bankrupt and cease webcasting if the new CRB royalty rate is not reversed by the Congress. “The webcasters’ likely demise will be swift and would ultimately mean a great loss of creative and diverse radio”, states Mr. Ward. “Surviving webcasters would need sweetheart licenses granted by major record labels.  Something they will be only too happy to offer, so long as the webcaster permits the major label to control the programming and playlist”. 

The CRB's rules are scheduled to take effect May 15, and Internet broadcasters will be hit not only with an increase in current rates but a bill for the retroactive fees.

When queried by activist groups, the RIAA referred questions about the bill to SoundExchange, which represents record labels and artists. That organization said the proposed legislation would "gut the fair market rates.

John Simson, executive director of SoundExchange, said: "The idea that this bill would help small Webcasters or artists is ludicrous since less than 2% of all royalty payments in 2006 came from small Webcasters. The true beneficiaries are the mega-multiplex services like AOL, Yahoo, Microsoft, and Clear Channel, which will benefit from rates substantially lower than those set by the Librarian of Congress in 2002."

Reps. Manzullo and Inslee echoed the concerns of Internet music providers and supporters who have said the increases will bankrupt some companies and force others to stop streaming on-air programs over the Internet.

"This titanic rate increase is simply untenable for many Internet radio broadcasters," Inslee, a member of the House Energy and Commerce Subcommittee on Telecommunications and the Internet, said in a prepared statement. "You can't put an economic chokehold on this emerging force of democracy. There has to be a business model that allows creative Webcasters to thrive and the existing rule removes all the oxygen from this space."

Stay tuned…the new bill is on a fast track in Congress, but will that be quick enough to beat the May 15^th deadline?

 
Daniel Martinez is Chief Editor for Phonecasting Global News.