Copyright Rulings and Legislation

The National Association of Broadcasters has lost a round in its fight to avoid paying royalties for music streamed over the Internet.

On August 1, the US District Court for Eastern Pennsylvania ruled against the broadcasters' challenge to a US Copyright Office requirement, enacted late last year, that they pay the same fees to record labels as other webcasters do. The NAB, whose members include radio and television stations, had argued that the Copyright Office acted outside its jurisdiction in making the ruling. Most radio stations now offer Internet feeds of their programming; many have available multiple streams, with both real-time and archived programs.

Because radio stations already pay some types of fees (payments to authors' organizations ASCAP and BMI, for example) for the material they use, the NAB argued that they should be exempt from royalties charged to web-only broadcasters. In the challenge, NAB plaintiffs called the Copyright Office ruling "arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law." The court rejected that argument, determining that the Copyright Office had the right to rule on the matter.

The Recording Industry Association of America applauded the decision as a victory; NAB president Edward O. Fritts said he was "disappointed." By insuring a single cost structure for all webcasters, the ruling may prevent radio stations from obtaining an unfair advantage over their Internet-only counterparts.

In a related development, two US Congressmen have introduced legislation that may help level the playing field for Internet music distributors. Sponsored by Utah Republican Chris Cannon and Virginia Democrat Rick Boucher, the Music Online Competition Act (MOCA) would insure that independent online music distributors have the same terms available to them as do ventures backed by major music companies. (Media conglomerate AOL Time Warner has a three-way Internet distribution deal in place with Bertelsmann AG, parent company of BMG Entertainment, and EMI Group PLC. Sony Corporation and Vivendi Universal are cooperating on a similar concept.)

Boucher described MOCA as "narrow intervention to encourage market competition." The legislation evolved from hearings earlier this year on the rapidly developing Internet music business.

"This bill has something for everyone, and it also has a provision that will give various members of the music industry heartburn," Cannon said, presumably referring to a MOCA clause that allows users to make backup copies of legally acquired music files to guard against data loss from computer glitches. The bill also allows online music distributors to make multiple in-house recordings, needed for efficient distribution of music in various file formats. Furthermore, MOCA will let online music companies obtain rights to published music from the US Copyright Office, instead of having to negotiate separately with songwriters or their agents. The US House of Representatives will consider the bill this fall.

Final note: Napster's prolonged moment in the sun appears to be waning. The upstart service and former media darling that startled the music industry from its stupor has been deemed "irrelevant" by 65% of 8520 voters in an online poll conducted by Billboard.com in midsummer. Only 10% of the respondents believe that an online music subscription service will offer significant cost savings over paying retail for CDs, a brief analysis stated.

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