Netcos square off against record labels

Indie labels and artists’ reps hit Capitol Hill Tuesday in an 11th-hour bid to push through a new royalty rate webcasters will have to pay for music streamed on the Internet.

Webcasters say the rate set by a special arbitration panel will put them out of business, and this morning will ask the influential Senate Judiciary Committee to intervene.

Congressional hearing comes less than a week before Librarian of Congress James Billington is set to announce the official rate.

The label execs mounting Tuesday’s counteroffensive on Capitol Hill said the record biz is willing to live with the proposed rate, even though it’s not as high as they asked for.

“We’re not here to bellyache and whine,” RAS Records prexy Gary Himelfarb said. “We’re saying, ‘let’s try it, let’s go.’ ”

Himilfarb is a board member of SoundExchange, the entity set up to collect and distribute the new royalties.

Those making the Capitol Hill rounds with Himilfarb included SoundExchange toppers John Simson and Barrie Kessler, and National Academy of Recording Arts & Sciences exec director Daryl Friedman.

Webcasters seek lower rate

Conversely, webcasters want Billington to toss the proposed rate, and come up with a lower figure.

Webcasters and the record industry have been at odds over the appropriate rate ever since the online royalty was established in 1998 under the Digital Millennium Copyright Act. The online startups scoffed at the labels’ early proposals, which they claimed were prohibitively high.

Last year, a Copyright Arbitration Royalty Panel was convened by the U.S. Copyright office to hash out an appropriate per-play rate for music streaming. The CARP essentially split the difference between the label and webcaster proposals, setting a rate of 0.14 cents for online-only broadcasters, and 0.07 cents for radio stations that duplicate their broadcasts online.

But Webcasters still cried foul, asserting that such a rate, compiled over millions of plays per month, would sap the fledgling music netcos’ paltry revenues in no time.

And last week, several of them went to Washington to spread that message to lawmakers, holding meetings with several influential congressmen in advance of the Judiciary committee’s hearing.

“We’re here to let everyone know there’s a significant number of us that, should the CARP ruling be adopted as proposed, will be forced to simply cease operations,” said Kevin Shively, director of interactive media at webcaster Beethoven.com.

Rates set for long term

The industry countered that the rates were established with the long term in mind, noting that what is currently a closet industry could generate millions a decade from now. By then, the labels say, today’s rates could look like a bargain.

Webcasters are trying to paint the battle as one between the little fry vs. the big record labels, when this isn’t the case, Himilfarb said.

The broadcast biz has a heavy stake in the CARP rate, with the National Assn. of Broadcasters actively involved in the matter. NAB enjoys a great deal of influence on Capitol Hill.

Those testifying on behalf of the record biz at today’s hearing include Recording Industry Assn. of America topper Hilary Rosen and recording artist Dan Navarro, who will rep the American Federation of Television and Radio Artists.

On the opposing side, Arbitron Webcasting Services Division topper Bill Rose will testify, as will Digital Media Assn. topper Jonathan Potter.

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