may have seen a lot of headlines over the weekend screaming
about the death of Internet radio that was supposed to happen
on Sunday. It didnít happen. Hereís what happened:
New royalty rates set by a federal board were supposed to
go into effect on Sunday. These rates were proposed by the
major record companies (who would be collecting the lionís
share of the revenues) and rubber-stamped last spring by the
federal board. Compared to the rates previously in effect,
the new rates were insanely high, and, unbelievably, retroactive.
So, if these rates went into effect, many Internet stations,
which are fledgling and donít exactly have great revenue streams,
would be not only out of business, but bankrupt as well. The
bill for the retroactive royalty payments would simply transform
the stations into hopeless debtors.
The effective date of the new rates was set for last Sunday;
in the meantime Web advocates went to court and to Congress
to get the new rates repealed. They struck out in court late
last week, and meantime Congress has been taking a hard look
at the issue, and telling the parties to try to resolve all
of this with a compromise agreement. SoundExchange, the record
company-backed organization thatís in charge of collecting
and disbursing these royalties, has made some significant
offers of reduced royalty obligations, especially for the
smallest Webcasters, the folks Webcasting out of their basements,
the real fringe folks. And negotiations are continuing.
So right now it looks like this: the new rates are technically
ďin effect,Ē but theyíre not being enforced while Congress
huffs and puffs and the various players are coming closer
and closer to reaching some sort of agreement. The big issue
right now seems to be how long a rate dťtente will lastólarger
Webcasters want a long term agreement, so they can have some
certainty going forward that they can continue to invest in
their ventures and not have this royalty nightmare repeat
in a couple of years. The record companies want a short-term
agreement, because if Web radio blossoms and becomes a big-money
deal, they want to share in the action through a greater royalty
Meantime, Web radio looks generally safe, at least for now.
The tiny community radio station Iím involved with, for instance,
wonít see a dramatic increase in royalty payments for its
Web stream, which maxes out at 20 listeners. Neither will
the lunatics who play Hawaiian death metal 24-7 for a handful
of fellow lunatics around the world. The folks whoíll get
dinged the worst will be the big Webcasters, like AOL and
Yahoo, who can readily be able to pay the royalties, even
if the money isnít coming directly out of their Web-radio
In other news, the renegade Russian download site, AllofMP3,
is back. The site, which sold songs for a fraction of what
iTunes charges, claimed that its operations were perfectly
legal under Russian law, and even had a Russian court decision
to back it up. Record companies everywhere claimed they werenít
getting paid, and tons of diplomatic and economic pressure
was brought to bear on AllofMP3, including a pullout of service
support by Visa, Mastercard and American Express. For a while
the only major credit card that would work was Dinerís Club!
The site disappeared a couple of months ago, but was resurrected
this week with the new name MP3Sparks.com. The site looks
and feels the same as AllofMP3, and for now itís claiming
to accept all major credit cards.
Who knows whether the site will still be there by the time
you read this, but it took the powers that be a couple years
to kill AllofMP3, so maybe itíll hang in for a while. You
can bet that there are a bunch of lawyers, diplomats, and
trade officials going through conniptions right now.
Finally, a British economist just published a study about
the optimal term of copyright. Using a dizzying array of assumptions,
theories, formulae, calculations, and big words, this guy
came to the conclusion that the societal optimal term of copyright
is about 14 years. The term of copyright has been repeatedly
increased since the laws were first created in the late 1700s.
Fourteen years is a lot shorter than the present term of the
life of the author plus 70 years, which is tantamount to forever.
Itís also pretty remarkable (or not) that 14 years is the
original term of copyright provided for in the Copyright Act
of 1790. You can read the study at www.rufuspollock.org.
Rapp is an intellectual-property lawyer with offices in Albany
and Housatonic, Mass. He teaches art-and-entertainment law
at Albany Law School, and regularly appears as part of the
Copyright Forum on WAMCís Vox Pop. Contact info can
be found at www.paul rapp.com. Comments about this article
can be posted at rapponthis .blogspot.com.