[JPL] New Net radio rules draw fire on Capitol Hill
drjazz at drjazz.com
Thu Mar 8 12:10:51 EST 2007
New Net radio rules draw fire on Capitol Hill
By Anne Broache
Story last modified Thu Mar 08 06:01:00 PST 2007
WASHINGTON--A key Democrat in the U.S. House of Representatives on
Wednesday slammed new federal rules that would require many Internet radio
services to pay higher fees to record companies.
Rep. Edward Markey (D-Mass.) had harsh words for
<http://news.com.com//2061-10799_3-6164865.html>a ruling released Tuesday
by the U.S. Copyright Royalty Board. It proposes raising the amount that
commercial Internet radio services pay to record companies by 30 percent
retroactively to 2006 and in each of the next three years through 2009.
Each station would have to hand over a minimum $500 royalty payment.
The pricing inquiries arose in part because Mel Karmazin, CEO of Sirius
Satellite Radio, whose proposed merger with XM Satellite Radio is being
scrutinized by House members, seemed to indicate at a House hearing last
week that prices would never increase, even on the combined service.
"This represents a body blow to many nascent Internet radio broadcasters
and further exacerbates the marketplace imbalance between what different
industries pay," Markey said at
hearing here titled "The Future of Radio". The hearing was convened by the
House panel on telecommunications and the Internet, of which Markey is
chairman. "It makes little sense to me for the smallest players to pay
proportionately the largest royalty fee."
CRB's new rules (PDF), which are subject to appeal, most Webcasters
calculated their requisite royalty rates based on a percentage of their
revenue. According to calculations by the Radio and Internet Newsletter, an
advocate for Net radio services, the new retroactive 2006 rate would
require Webcasters to pay approximately 1.28 cents per listener per
hour--enough to cripple some smaller services, the group argued.
"One can easily imagine Web radio looking more and more homogenized,"
--Robert Kimball, general counsel, RealNetworks
The CRB's decision has imperiled Webcasters by widening the gap between
what Internet radio and satellite radio services must pay, RealNetworks
general counsel Robert Kimball told politicians. He was also speaking for
the Digital Media Association, whose members include Amazon.com, Apple,
Microsoft and MP3.com, a property of CNET Networks, publisher of News.com.
If the decision is not overturned, "one can easily imagine Web radio
looking more and more homogenized," Kimball said. That's because the higher
rates may force Internet radio operators to reduce the number of songs they
carry or increase their advertising prices and frequency, which could make
it a less desirable place for advertisers to invest, he said.
Kimball suggested the
<http://news.com.com//2061-10802_3-6160483.html>proposed merger between XM
and Sirius should be put on hold until Congress "corrects the Copyright
Act's bias against the Internet," thereby allowing Internet radio companies
to compete more fully with satellite firms.
For instance, the Copyright Act prohibits Internet radio from offering its
own recording devices and portable radio devices, but it does not levy the
same restrictions on other radio services, Kimball said. (A recording
industry-backed effort is under way in Congress, however, to
new restrictions on satellite radio devices.)
Copyright law also places a number of programming restrictions exclusively
on Webcasters, Kimball said, including forbidding them from announcing
upcoming songs and playing more than two songs consecutively or four songs
over a three-hour period by the same artist.
Rep. Anna Eshoo (D-Calif.) said she believes Internet radio could face
threats from another source: "broadband providers who have the ability and
incentive to limit consumers' access to the content of their choice." She
called for passage of
neutrality legislation, which failed to pass Congress last year, that would
prohibit such a practice.
Questions about XM-Sirius
Although Internet radio played some role in the hearing, many politicians
continued to focus their questions about the proposed $13 billion merger
between satellite radio players XM and Sirius.
Just a week after a House panel that oversees antitrust issues
him, Sirius CEO Karmazin agreed to field similar questions from Markey's
Several politicians on the committee, including Markey, said they planned
to scrutinize the proposed deal for potential conflicts with the public
interest. Some voiced outright reservations about approval of the deal.
"It's hard to see how prices of satellite radio will go down" as a result
of the merger, said Rep. Gene Green (D-Texas).
The broadcast industry opposes the deal on the grounds that combining the
two companies would amount to a government-sanctioned monopoly. Consumer
groups also have voiced fears that the merged entity would result in higher
prices for satellite subscribers.
Karmazin again argued the combined companies would give more programming
choices to listeners and would not result in raised prices--at least on the
individual services. He reiterated that the same receiver would be able to
get content from both services, eliminating the need for customers to
purchase another device if the deal goes through.
"You will not pay more than $12.95 for that service after the merger," he
told the committee. He added that the combined company plans to offer the
option of purchasing smaller batches of channels for a lower price.
Pressed by Markey on the combined company's pricing plans, Karmazin
acknowledged that customers who want to receive content from both XM's and
Sirius's previous offerings may have to pay more than $12.95. He declined
to give an exact figure but estimated that price would be "closer to $10"
less than the $25.90 it would currently cost to subscribe to both services.
It will ultimately be up to the Federal Communications Commission and the
U.S. Department of Justice to decide whether the merger favors consumers or
would hinder competition. FCC Chairman Kevin Martin made it clear as
recently as an interview published Wednesday in The New York Times that the
companies have high hurdles to jump. The Senate Judiciary Committee also
has <http://judiciary.senate.gov/hearing.cfm?id=2601>scheduled its own
hearing on the matter for March 20.
CNET News.com's Desiree Everts contributed to this report.
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