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Music publishing organizations such as ASCAP and BMI have long worked out licensing deals with radio broadcasters, who pay royalties in exchange for playing music over the air. A US Copyright Office panel is now suggesting that online broadcasters also pay royalties, this time directly to the record labels, in a recommendation that has so far left all parties unhappy, particularly broadcasters.

The Copyright Office ruled late in 2000 that royalty fees would be required from broadcasters who also stream their signals online, stating, "Transmissions of a broadcast signal over a digital communications network such as the Internet are not exempt from copyright liability."

The government panel announced last week that it will recommend that online broadcasters pay royalties to the record labels holding the copyrights based on the number of listeners tuning into an individual song. The proposed royalty rates vary from 0.07¢ per song (which works out to 70¢ for 1000 listeners) for a radio broadcast to 0.14¢ for all other copyrighted works distributed online.

Lower rates are suggested for nonprofit groups broadcasting online: 0.02–0.05¢. The Corporation for Public Broadcasting and National Public Radio say they have worked out their own rate, which was not disclosed.

Before the royalty recommendations become final, the proposals will be open for discussion by the industries involved. According to the Copyright Office's David Carson, once input from the Internet broadcasters and copyright holders is concluded, the proposed rates would require approval from government lawyers and the librarian of Congress.

Eric E. Van Loon, who chaired the panel, comments, "We feel that this is a thoughtful, carefully reasoned decision." However, representatives of the online broadcasters organization, the Digital Media Association say they are "extremely disappointed" that the recommendation is for such a high rate. The DMA's Jonathan Potter states, "A lower rate would more accurately reflect the marketplace for music performance rights and the business environment of the Webcast industry."

Although the recommended rate is reported to be ten times greater than that sought by the broadcasters, The Recording Industry Association of America's Hilary Rosen, representing the record labels, still says, "We would have preferred a higher rate." Rosen adds, "Artists and labels, who have supported these new businesses from the start with their music, are one step closer to getting paid."