Stations Ordered to Pay Royalties to Labels, Artists for Web Simulcasts

Radio stations must pay record companies for permission to broadcast musical programming over the Internet, the federal copyright office ruled Friday.

The decision handed a major win to the Recording Industry Assn. of America, which has been locked in a battle with broadcasters for control of millions of dollars in potential revenue created by online radio.

An estimated 4,000 of the nation’s 13,000 radio stations simulcast their programming on the Web. If the ruling is upheld, it would force American broadcasters to pay the record labels for songs played on the Internet, fees they don’t owe for over-the-air programming. The exact amount would be determined by an arbitration panel.

“We are gratified the U.S. Copyright Office agreed with our position,” said Hilary Rosen, chief executive of the RIAA. “They reached the right conclusion as a matter of law and sensible policy. This is an important right for artists and record companies.”

U.S. broadcasters now pay an estimated $300 million a year in fees to music publishers and songwriters, but nothing to the record labels or performers. Performers and the record labels would split the new fees for Internet play equally, said Steven Marks, vice president for business affairs at the RIAA.

But the matter is far from settled. The National Assn. of Broadcasters, which lobbies for thousands of U.S. radio stations, has sued the industry in federal court in New York seeking a ruling that could trump the copyright office decision.

The NAB believes the copyright office ruling Friday “is directly contrary to existing federal law and Congressional intent as expressed in the Copyright Act,” said Edward O. Fritts, the NAB’s president.

In its arguments to the court, the NAB said its members shouldn’t be subject to record companies’ fees because their longtime exemption for over-the-air broadcasts was intended to cover Internet transmissions. But the RIAA said the online broadcasts represent a digital copy of the over-the-air program and should trigger the additional fees.

Ironically, the world’s largest record corporation, Seagram Co.’s Universal Music Group, is defending itself for allegedly violating copyright laws in much the same fashion. An organization of songwriters this week sued Universal for copying songs onto its music-service servers without permission. Universal said it has followed the law.

In a separate action, the copyright office declined to define whether Web-only radio stations should be considered “interactive,” saying the stations can let consumers can have some influence over playlists without triggering another set of fees.

Jonathan Potter, director of the Digital Media Assn., a trade group for online broadcasters, said the ruling was “a huge win” for consumers who want to personalize their online stations.

But the RIAA’s Marks said the decision didn’t change existing law. Online radio stations would still have to negotiate license fees with the record industry or face copyright infringement lawsuits, he said.

A copyright panel is scheduled to take up the question of how much the labels will be able to charge, with a decision expected next summer. Potter said the RIAA members had asked Webcasters to pay 15% of their gross revenue, which is about 10 times what Webcasters have to pay songwriters for licenses.