Kazaa's Plan to Pay Artists

Internet audio file-sharing service Kazaa is the music industry's pariah—and it wants artists to get paid for their work.

Kazaa has teamed up with telecommunications giant Verizon to propose a system of compulsory Internet copyright licenses that could generate as much as $2 billion annually from Internet service providers alone. Proceeds from the licenses could be used to compensate performers and songwriters who currently get nothing for the sales of their creations by music industry-backed commercial sites pressplay and MusicNet.

"We're proposing the idea of a copyright compulsory license for the Internet, so peer-to-peer distribution would be legitimate and the copyright community would get compensation," said Verizon vice president Sarah Deutsch. Under the licensing program, ISPs, computer makers, blank media makers, software companies, and others involved in the distribution of online music would contribute. "We're talking about a modest fee on all the parties who benefit from the availability of this content, " said Kazaa lobbyist Phil Corwin.

The Recording Industry Association of America (RIAA) has dismissed the proposal, possibly because it seeks to pay creators rather than copyright owners. RIAA president Hilary Rosen called the Kazaa/Verizon plan "disingenuous and ridiculous," according to USA Today reporter Jefferson Graham.

In a related development, Internet radio stations are protesting a proposed royalty plan scheduled to begin in late May. The royalty rates proposed by the US Copyright Office are so high that they could be forced out of business, the stations have told Congress. In February, a Copyright Office panel recommended that the royalty rate be set at 14/100ths of a cent per listener per song. Radio stations that Webcast their regular programs would pay half as much, and noncommercial broadcasters would pay less, according to the plan.

Station operators told the Senate Judiciary Committee on May 16 that the rates would make them pay out more than they could pull in from advertising, effectively bankrupting most of them. The rates are supported by the music industry, which has generally backed the growth of Internet broadcasting, as opposed to file-sharing. "If Webcasters don't succeed, artists and record companies stand to lose an important new revenue stream," Rosen stated. "We fervently believe . . . that Webcasters can succeed while compensating the creators of the sound recordings upon which they have built their business." Unlike file-sharing services, Webcasters haven't been accused of piracy or copyright violations.

Traditional radio stations pay out an average of 3.5% of their revenues for royalties. (In the US, songwriters, rather than performers or copyright holders, receive the royalties for radio play, thanks to an odd twist in the copyright laws.) The Copyright Office proposals could force some small Webcasters to pay out as much as 78% of their revenue, according to protestors in Washington. Senator Orrin Hatch (R-UT) and Committee chairman Patrick Leahy (D-VT) are said to be working on a compromise, although Leahy told reporters that he wasn't sure "what the solution would be." The Librarian of Congress will rule on the royalty proposal on May 21.