Major Players Near Online Royalty Rate

Music industry and Internet trade groups' reps say they are hopeful, but far from confident, that ongoing discussions regarding a joint agreement for new digital-performance royalty rates and terms will turn fruitful. Otherwise they say that by law, they may have to again turn the matter over to a government arbitration panel to determine the rates this spring.

The negotiations are for new rates for those Webcasters who choose a statutory license rather than elect to negotiate directly with labels. The old rate structure ended Dec. 31, 2002. The rates would be worked out for Webcasters with a revenue of more than $1 million. Rates for small Webcasters have already been negotiated through 2004.

Neither side says it wants another Copyright Arbitration Royalty Panel (CARP) like the one in 2001, which was criticized by Webcasters and their lawmaker allies for its high fees and misguided calculations in determining rates and terms.

"In these ongoing discussions," Recording Industry Assn. of America (RIAA) senior VP of business and legal affairs Steve Marks says, "we are trying to reach an industry-wide settlement that we would then propose to the Copyright Office . . . in lieu of arbitration."

Marks says the negotiations with commercial Webcasters have been "productive so far, and we hope to reach an agreement soon."

Jonathan Potter, executive director of Webcaster trade group DiMA, says, "If there's a good deal to be had, we intend to jump on it." DiMA members include indie companies but also amazon.com, America Online, Real Networks, Yahoo, and Verizon.

Potter says another CARP would not only be expensive for Webcasters but for the RIAA and artists' groups as well. "It would certainly be a very expensive undertaking, at a time when people are not looking to spend more money on lawyers than one receives in royalties." But, he adds, "we're not so anxious to get out of [a CARP] that we'd settle for a bad deal and bad precedents for future negotiations."

The U.S. Copyright Office wants to see the details of the deal between Webcasters and music-industry interests by March 5, or the matter could end up back before a CARP. Both sides make clear that they could continue to negotiate past that date and another deadline of May 5.

American Federation of Television and Radio Artists (AFTRA) director of sound recordings Ann Chaitovitz says, "We hope there will be a settlement with the larger Webcasters as well [that will] avoid costly and uncertain litigation. The lengthy CARP process generates unnecessary legal fees; without it, artists earn more and Webcasters pay less. AFTRA supports the valuable alternative that Webcasters provide for artists and audiences, but we must ensure that the artists are fairly compensated."