The SaveNetRadio coalition is a response to the royalty increase in the March 2007 Copyright Royalty Board (CRB) ruling. The coalition consists of artists, labels, listeners, and webcasters that believe another solution must be created in order to prevent internet radio stations from shutting down. The CRB decision will harm millions of music listeners, performers who depend on the internet radio to increase their audience, and webcasters who make a living from streaming music online.
     SaveNetRadio exposes the unreal myths and harsh facts about the cost of webcasting. While the internet radio is the smallest medium within the radio business, it pays the most royalties. Broadcast radio and satellite radio are subject to small or no royalties at all. The predicted combined revenue for internet radio services is $73.6 million, but 58% of that revenue will be used for royalty payments. Internet radio is one of the most important sources for music listeners. About seven million Americans a days use internet radio. Although the popularity of internet radio has increased tremendously, it is still a small, growing industry. Most webcasters do not generate enough revenue to cover the royalties since they do not have enough sponsors or advertisements to sustain them.
     Another myth concerning royalty rates is that artists and record companies were not being fairly compensated for their work prior to the CRB decision. The reality is that if royalties are too high, internet radio will go out of business, and then performers definitely will not be paid for their work. The high royalties will not allow small or large webcasters to survive, and even if large webcasters can afford the royalties, it will not promote competition and diversity in the internet radio services. While the increase in royalties may seem negligible, tripling the per-song royalty rate adds up to an enormous royalty payment. Besides the per-usage rate, webcasters are also subject to a minimum fee per station and have no option to opt for a revenue-based royalty system.
     SaveNetRadio is an important topic in my paper. It demonstrates the outrage of the music community to the CRB decision. The myths and facts of the cost of webcasting clearly describe the toll that increased royalties will have on small and large webcasters. SaveNetRadio.org is an extremely useful and interesting source. I think it is an excellent way to bring music fans together to fight the unfairness in the royalty system for internet radio stations.

    On March 2, 2007, the Copyright Royalty Board (CRB) released its decision for 2006-2010 royalties for the use of sound recordings by internet radio stations and webcasters that stream music online. Musical works and sound recordings are the two categories of work eligible for copyright protection. The “Services,” as the CRB refers to them, are the internet webcasters or broadcast radio simulcasters that stream music. They are divided into commercial webcasters and noncommercial webcasters. In order to qualify as noncommercial, the webcaster must be a tax exempt organization under Section 501 of the Internal Revenue Code or a governmental unit.
    The CRB determined the new royalty rates based on the willing buyer and willing seller standard. This standard requires that the willing buyers, which are the Services, agree upon a rate with the willing sellers in the marketplace, which is marketplace in which no statutory licenses exist. The two parties, however, disagree on the degree of competition in the marketplace. The CRB believes this standard is efficient since it encompasses the economic and competitive evidence presented by the parties and also takes into consideration the promotional or substitional effects of the use.
     Another decision made by the CRB was to determine a single receiving agent for the royalty fees. SoundExchange, Inc. is a non-profit performing rights organization that represents record labels and artists who have specifically authorized SoundExchange to collect royalties on their behalf. It is controlled by an 18-member Board of Directors compromised of equal numbers of representatives of copyright owners and performers. The CRB eventually chose SoundExchange, Inc. over Royalty Logic as the receiving agent.
    The CRB judges agreed on different royalty systems for commercial and noncommercial webcasters. However, both types of webcasters are subject to a $500 minimum fee rate per channel or station. The purpose of this minimum fee, according to SoundExchange, is to “protect against a situation in which a licensee’s performances are such that it costs the license administrator more to administer the license than it would receive in royalties.” Besides the minimum fee, commercial webcasters must pay a per performance usage rate. Webcasters will have to pay $.0008 per performance in 2006, $.0011 per performance in 2007, $.0014 per performance in 2008, $.0018 per performance in 2009, and $.0019 per performance in 2010. Noncommercial webcasters have a specified cap of 159,140 Aggregate Tuning Hours (ATH), where they are exempt from the performance rate. ATH means the total hours of music streaming; for example, an hour of streaming to ten listeners would equal 10.
    This source is extremely important to my paper. This is the ruling that sparked all the conflict and debate between the Copyright Royalty Judges and the internet radio companies. This source demonstrates the point of view of the copyright judges, which is crucial to explaining why the new royalty rates were chosen. It also explains the new standard for determining the royalties, which is the main source of conflict for the new rates. My thesis opposes the new royalty rates and standard, and so this source is the copyright ruling I will prove is unfair and unjustified in my paper.

    On April 25, 2007, the House of Representatives presented the Internet Radio Equality Act with the purpose of nullifying the March 2, 2007, Copyright Royalty Board’s ruling on webcasting and royalty rates. The act proposed a new standard of determining royalties according to Section 801b of the Copyright Act. It also established a transition rule for commercial webcasters for 2006-2010, which offers a choice between paying $0.33 per hour of sound recording to a single listener or 7.5% of the annual revenues received by digital transmission of sound recordings. For noncommercial webcasters, the act proposed a payment of 150% of the royalty fee paid in 2004. The act also proposed a study to determine the competitiveness of the internet radio marketplace. Research is also being conducted to study the effects of the proposed rates on local programming, the diversity of programming, and the entry barriers into the internet radio market.
    The Internet Radio Equality Act is an important source for my paper. It demonstrates the efforts Pandora and other internet radio companies are making to fight the Copyright Royalty Board’s last ruling. It also argues that the standards for determining royalty rates should be the same as the ones proposed in the Copyright Act. This bill is important to argue the different sides of the royalty issue in my paper, since it offers the perspective of the internet radio companies. It also allows me to defend the point that there is a better model to determine the rates.