Court rejects Webcasters' appeal to delay royalty hike

Webcasters experienced a major setback on Thursday when a federal appeals court rejected their request to postpone implementation of a new royalty rate for music they air over the Web, giving the green signal for the rates to take effect Sunday (July 15).

According to the SaveNetRadio, a coalition of artists, labels, listeners and webcasters lobbying Congress, the federal appeals panel has rejected to delay massive royalty hikes that Internet radio stations must pay for airing music.

Webcasters, who had filed their petition in U.S. Court of Appeals for the District of Columbia Circuit, had sought an emergency stay from the court, contending that the higher rates would drag many of them out of business.

"We are disappointed that the Court failed to acknowledge the irreparable and quite frankly, devastating effect these new royalties will have on the Internet radio industry," said Jake Ward, a spokesperson for the SaveNetRadio coalition.

"The Court's failure to act has put the ball squarely in the hands of Congress and Members of Congress work for the people, many of whom enjoy net radio everyday," Ward added.

However, the court panel, which made its ruling Wednesday and released the decision Thursday, rejected petition for the emergency stay in a single sentence, saying "Petitioners have not satisfied the stringent standards required for a stay pending court review."

The new retroactive royalty rates levied by a panel of judges appointed by the librarian of Congress on the Copyright Royalty Board (CRB) and recommendations of SoundExchange on 6th March 2007 could mean a 300% payment increase for large stations, 1200% for smaller broadcasters.

Under the new royalty fee structure for Internet radio companies, the webcasters will have to face a fee hike of 0.08 cents for every song that they play, almost triple than before, to SoundExchange, the organization that collects and distributes Internet music royalties.

The rate that began at 0.08 cents in 2006 is expected to rise by 30% every year until it reaches 0.19 cents per song till 2010. Besides the price hike for each song, the ruling also mandated minimum annual payment of $500 for each Web channel.

SoundExchange, which is responsible for collecting royalties from Internet radio, satellite radio and digital cable services on behalf of record companies, touted the ruling as a major victory for recording artists and record labels.

Meanwhile, a meeting yesterday between SoundExchange and webcaster representatives, convened by Rep. Edward J. Markey-chairman of the House Commerce Committee's telecommunications and Internet subcommittee, failed to reach an agreement.