My paper, Internet Radio: The Case for a Technology Neutral Royalty Standard, was published in the December 2009 issue of the Virginia Law Review. The body of the paper is available at: http://www.virginialawreview.org/volumes/content/internet-radio-case-technology-neutral-royalty-standard and the Appendix (Summary of Royalty Rates) is available here.
Note: The pagination of the PDF version available above does not precisely match the printed version. A copy of the paper is also available as a scanned PDF.
Internet Radio: The Case for a Technology Neutral Royalty Standard
Citation: Andrew Stockment, Note, Internet Radio: The Case for a Technology Neutral Royalty Standard, 95 Va. L. Rev. 2129 (2009).
Since its debut in the mid-1990s, internet radio (or “webcasting”) has grown rapidly and now attracts more than 69 million listeners very month—more than a quarter of all U.S. internet users. Internet radio listeners can select virtually any conceivable genre of music and listen to their selection anywhere they have an internet connection.
All digital radio providers—internet radio, digital cable radio, and satellite radio—must pay a royalty for the performance of the sound recording. This royalty is imposed by § 114 and § 112 of the Copyright Act and the rate is determined by the Copyright Royalty Board (CRB). In 2007, the CRB issued a rate determination that threatens to shut down internet radio. The royalties required by the decision would demand internet radio operators to pay rates approaching or even exceeding 100% of revenue. Meanwhile, for the sound recording performance royalties for the other forms of digital radio—cable radio and satellite radio—the CRB adopted rates of 6-15% of revenue. Thus, the current copyright regime has a strong bias in favor of certain technologies providing digital radio (cable radio and satellite radio) and against another (internet radio), resulting in disproportionately high royalties for internet radio. While a variety of agreements between webcasters and SoundExchange adopted under the Webcaster Settlement Acts of 2008 and 2009 have delayed the onset of industry crushing royalties, the threat continues to hang over internet radio’s future.
In this paper, I provide an overview of internet radio and the current copyright royalty regime, and I present and critique the recording industry’s argument that internet radio is a threat. I then analyze the economic impact of current royalty rates on internet radio and contrast it with the impact of the royalties for the other forms of digital radio. After showing the devastating impact of the current royalty rates, I analyze the source of the royalty rate inequities. I demonstrate that the disparate treatment of the different forms of digital radio has resulted from the statutory imposition of two standards for determining digital radio royalties: “§ 801(b)(1)” vs. “willing buyer, willing seller.” I then make constitutional and policy arguments for having a single, technology neutral standard for determining the royalties for digital radio. I conclude by demonstrating that the standard that should be adopted is the § 801(b)(1) standard, and I propose amendments to the Copyright Act to effectuate the change. Amending the Copyright Act to apply a consistent, technology neutral standard would ensure that all forms of digital radio continue to thrive and would ensure that the music keeps playing for the 69 million Americans who tune in to internet radio every month.
- Appendix: Summary of Royalty Rates
The electronic version of this article that is available on the Virginia Law Review website omits the appendix, which appears as pages 2173-2179 in the published article. The appendix is available here.
- Comparison of the Outcomes under the Two Standards
This table compares the different royalty rate outcomes achieved by application of the two royalty rate standards (801(b)(1) vs. “willing buyer, willing seller”).
Additional Resources [tentative]
- History of Internet Radio
This material had to be cut from the published version of my paper due to space constraints. I plan to revise and post this material online.
- History of the Royalty Rate Dispute
Portions of this material had to be cut from the published version of my paper due to space constraints. I plan to revise and post this material online.
- Empirical Research of Internet Radio Costs & Royalty Payments
The majority of this material was cut from the published version of my paper due to space constraints. I might post additional details about my empirical research.
- Detailed Summary of All Internet Radio Royalty Rates
Some of the details were cut from the published version of my paper due to space constraints. I plan to post this material online.
- Interactive Royalty Calculator
The vision for this is an interactive tool that will enable the user to enter the relevant data points (e.g., monthly ATH, revenue, expenses) and the application will display the projected royalty amounts under each of the various royalty rates for internet radio. I do not anticipate developing this tool, but I would be happy to collaborate with anyone interested in creating it.