The Webcaster Alliance filed an antitrust complaint against the
Recording Industry Association of America (RIAA) and its leading
members on Wednesday, alleging that they had set royalty rates at
an excessive level in order to drive independent webcasters out of
business.
The Webcaster Alliance is a trade organisation for independent
webcasters - internet radio broadcasters. It was set up to
assist members in dealing with the royalty payments that have to be
paid in respect of copyrighted songs broadcast on-line.
In 2001 a Copyright Arbitration Royalty Panel (CARP) was set up
to recommend the rates to be paid between October 1998 and December
2002. After some changes the Librarian of Congress then set the
rates in July 2002 (the LOC rates). These amounted to 0.07 cents
per song and were to have retrospective effect.
According to Webcaster's complaint, "Based on the LOC rates,
small webcasters faced immediate extinction because the
back-royalties from the period commencing October 1998 were
catastrophically high."
In order to help the small webcasters, the US Congress then
enacted the Small Webcaster Settlement Act, which effectively
changed the rates to those set out in a private agreement between a
division of the RIAA, SoundExchange, and another trade association
called the Voice of Webcasters (VOW).
These rates were based on a percentage of revenue, rather than
on a per song basis. According to the complaint they were:
"not only unreasonably high, but actually put many small
webcasters in worse position than under the LOC Rates by among
other things, increasing by four-fold the minimum fee found to be
reasonable by the CARP."
As a result, says the complaint, competition in the market for
"domestically recorded sound recordings and in the market for
internet distribution for such sound recordings" has been
restricted.
The complaint alleges:
"RIAA and the Labels were acutely aware that certain VOW members
faced significant back royalties under the LOC Rates and that these
members would be effectively out of business if such royalties
became due on October 20, 2002. Using such negotiating leverage to
its maximum effect, RIAA and the Labels coerced certain VOW members
to support a small webcasting agreement that would be applied to
all small webcasters under SWSA."
According to Ann Gabriel, president of the Webcaster
Alliance:
"It is time for the RIAA to be held accountable for years of
manipulating an entire industry in order to stifle the growth of
independent music and control internet content and distribution
channels. Their ruthless campaign has also had the devastating
effect of destroying the hopes and dreams of thousands of
independent internet radio stations. It is time for us to stand up
to the RIAA and fight for the American consumer's freedom of
choice."
A spokesperson for the RIAA dismissed the complaint, telling
CNet News.com, "This lawsuit is a publicity stunt that has no
merit".
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