Report: Online Radio Rules Are Broken, Here's How Congress Can Fix Them

The Information Technology and Innovation Foundation released a report that takes the Copyright Royalty Board to task for implementing a royalty system that overwhelmingly benefits terrestrial radio stations to the detriment of online radio stations, many of which could go out of business on July 15th if the new rates are not altered soon.

Here's a summary of the thirteen-page report (full PDF), along with excerpts from its three recommendations to Congress:

"The U.S. policy on Internet radio has failed for two reasons: it discriminates against non-terrestrial radio and it fails to establish a competitive, market-based rate for the statutory license. Terrestrial radio benefits from being the only technology exempt from a performance copyright for sound recordings. The emergence of digital terrestrial radio (HD radio), and its continued exemption from paying sound recording performance royalties, further illustrates the irrationality of this exemption. Current policy continues to discriminate against non-terrestrial radio by imposing a performance copyright on sound recordings for all non-terrestrial radio broadcasts. Congress should promote technology-neutral policies to ensure a fair and competitive market for all forms of radio."

And here are the recommendations ITIF makes to Congress:

"Recommendation 1: Promote Innovation by Eliminating Technology-Specific Policies

To ensure that Internet radio competes on a level playing field withterrestrial radio, Congress should uniformly apply the performancecopyright for sound recordings to all broadcasts..."

"Recommendation 2: Adopt Competitive Pricing for Statutory License Royalties

If Congress decides to apply the sound recording performance royaltyto both Internet radio and terrestrial radio, it should change the wayin which royalties are set. Every song is not the same, but by creatinga statutory license with a single rate for all music, Congress hasessentially eliminated competitive pricing for sound recordings. Tocorrect this but still maintain the benefits of a statutory license,
Congress should create a new system where sound recording copyrightowners can establish separate royalty rates for each sound recording.
Congress should mandate that SoundExchange, in conjunction with theLibrary of Congress, create a national online catalogue of all soundrecordings and allow copyright owners to determine the statutorylicense rate for each of their works at or below a statutory rate...

"Recommendation 3: Enable Small and Noncommercial Webcasters to Negotiate Separate Royalty Rates

The new statutory rates do not sufficiently address small ornoncommercial webcasters (like NPR). Congress should modify the termsof the statutory license to accommodate these webcasters so they cancontinue to function and copyright owners can continue to receiveroyalty payments... legislation should reduce the minimum fee forwebcasters to no more than $500 annually per broadcaster, regardless ofthe number of channels broadcast..."