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Radio stations appeal Internet royalty decision

WHASINGTON (Broadcasting Network) - Radio stations have asked a federal appeals court to rule that they do not have to pay musicians and recording companies when they play music on the Internet because they do not pay royalties for regular, over-the-air broadcasts.

In a motion filed late Monday, a group of radio stations said a federal court in Philadelphia and the U.S. Copyright Office had misinterpreted the law when they said that radio stations had to to pay musicians and recording companies when they "stream" their songs over the Internet.

The Copyright Office established a rate of 0.07 cents per listener per song in June, which means that Internet-only "Webcasters" and broadcast giants like Clear Channel Communications Inc.(NYSE:CCU) would be on the hook for 70 cents for each song played to an audience of 1,000 listeners.

The rate was decried as onerous by radio stations and Webcasters, many of whom said they would be forced to shut their doors.
Webcasters did not participate in the appeal of the August 2001 decision, which was filed in the Eastern District of Pennsylvania.

Radio stations have historically been required to pay per-song royalties to songwriters but not performers, recording companies, and anyone else who own the rights to the "sound recording" of a song.

Congress said sound-recording owners should get paid for Internet transmission when it updated copyright laws for the digital era in 1995 and 1998. But Congress intended the law to apply only to services that would enable users to select and download songs, not online radio-style broadcasts that do not allow users to save songs, the broadcasters said in their appeal.

While downloadable music may dampen CD sales, radio broadcasts over the air and through the Internet stimulate sales, they said. "Congress has long recognized the mutually beneficial relationship between the radio and recording industries, particularly the enormous promotional benefits derived by the recording companies from radio airplay of sound recordings," the appeal said.

The Recording Industry Association of America, which represents the five major labels, said it hoped the radio stations would lose their appeal. "Rather than seek special treatment from the courts, we encourage the broadcasters to work with the labels and artists as our industries transition into new businesses," said Steven Marks, a senior vice president at the RIAA.

The appeal was filed by the National Association of Broadcasters and radio firms Bonneville International Corp., Clear Channel, Cox Radio Inc (NYSE:CXR)., Emmis Communications Corp.(NASDAQ:EMMS), Entercom Communications Corp.(NYSE:ETM) and Susquehanna Radio Corp.

The RIAA represents music divisions of Vivendi Universal AOL Time Warner Inc EMI Group Plc Bertelsmann AG and Sony Corp.

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