Web music royalty fee challenged

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Canada sets its first royalty rate for Internet music. Story on page 4.



WASHINGTON — NPR, the Digital Media Assn. and other groups have mounted the first legal challenges to a new royalty rate for music delivered on the Internet, asking a panel of copyright law judges Monday to redo its decision.

In its filing for rehearing before the Copyright Royalty Board, the public radio service argued that the rate could make it impossibly expensive for NPR to stream music in its broadcasts and that the rate structure formulated by the board is "unworkable."

The filing is a first step by webcasters who plan to challenge the CRB's decision in federal court.

"The manifest errors committed by the judges in reaching their determination as to NPR are beyond the scope contemplated (by the law)," NPR attorneys wrote in their petition. "NPR thus reserves all its rights to challenge the decision on appeal — on the grounds that it was arbitrary and capricious, and abuse of discretion and/or unsupported by sufficient evidence."

According to the March 2 ruling, Web broadcasters must pay each time a listener hears a song, at a rate that began at 0.08 cents in 2006 and rises to 0.19 cents in 2010. Besides increasing the charge for each song, the ruling established a $500 minimum payment for each Web channel.

While commercial webcasters have decried the decision, NPR also contends that the CRB ignored the public radio network's mission as a nonprofit.

"The board's decision to dramatically raise public radio stations' rates was based on inaccurate assumptions and lack of understanding of the issues," NPR spokesman Andi Sporkin said. "The new rates inexplicably break with the long-standing tradition of recognizing public radio's noncommercial, nonprofit role, while the procedures we're being asked to now undertake for measurement are nonexistent, arbitrary and costly."

DiMA, a trade group representing webcasters also asked the board to reconsider the decision, arguing that the new rate will lead to "inequitable and erroneous results that were not intended by the board."

In its motion, DiMA contends that the new rate will force most Internet-based radio stations to shut down.

"We do not believe that the Copyright Royalty Board intended to shut down the vast majority of legitimate online radio services immediately when it issued its decision, yet that is the sober reality facing many services," DiMA executive director Jonathan Potter said. "We hope that the judges will rehear these three issues as they will have a particularly negative and immediate impact on our industry."
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