Radio org sues RIAA

Webcasters say royalty rates anti-competitive

The ongoing conflict over Webcasting royalty rates hit another snag Wednesday as a coalition of small online radio stations sued the RIAA, alleging that the major labels engaged in anti-competitive conduct when negotiating previously agreed rates.

“They have deliberately manipulated the market rates to set the barrier of entry for Webcasting so high that they can control the content and distribution channels,” said Ann Gabriel, president of Webcaster Alliance, which claims more than 400 members, mostly independent online stations.

The group has threatened to sue the RIAA for months and is seeking injunctive relief from paying royalties until more favorable rates are set.

The Library of Congress set Webcasting royalty rates last summer at 0.07¢ per song with payments retroactive to 1998, an amount many Webcasters said would put them out of business. In response, Congress passed a law that led to an agreement for small Webcasters to pay a discounted rate relative to earning power. Webcaster Alliance members, however, say those rates, which were reached without their participation, are also prohibitively high and have not made any payments based on them.

“Record companies and artists have worked earnestly and diligently to negotiate a variety of agreements with a host of new types of radio services,” the RIAA responded. “This lawsuit is a publicity stunt that has no merit.”

While these small Webcasters continue to protest, many others have reached agreements with the major labels and artists. In June, non-commercial Webcasters such as schools made a discounted deal, and in April, high-powered members of the Digital Media Assn. including AOL and Yahoo! agreed to rates but called for a reform of the process.