Download: Webcasting: Profit or pit?

OK, so it's mid-2002, and you are wondering how Webcasting is doing. Is now the right time to jump in? The topic of whether it is a profitable business or a pit can be summed up in four letters — CARP. No, not the fish — the Copyright Arbitration Royalty Panel.

On Feb. 20, 2002, CARP delivered a report with recommendations on “Rate Setting for Digital Performance Right in Sound Recording and Ephemeral Recordings.” While this article is about Webcasting music over the network, don't be fooled. The precedence set today in the music streaming market will be applied in the next generation of large-scale streaming applications — video. Already, MPEG-4 is in danger of never becoming a ubiquitous standard due to the current licensing philosophies.

CARP's proposed rates are onerous and will effectively force most small independent Webcasters out of business, including almost all educational and community stations. The fact that these rates would be enforced retroactively going back to 1998 will compound the issue as small broadcasters find themselves with huge unexpected bills.

The Digital Millennium Copyright Act (DMCA), passed by Congress in October 1998, gave record companies the ability to receive royalties retroactively as determined by the U.S. Copyright Office. The copyrighted works are subject to royalty payments whenever they are played via a digital broadcast media. The good news, however, was that the DMCA guaranteed that Webcasters could receive an automatic license to those copyrighted works without having to negotiate with each record company.

The CARP's ruling on Feb. 20, 2002, recommended a royalty rate of 14 cents per song, per listener, for Internet-only Webcasters; seven cents per song for commercial radio station simulcasts; and two cents per song for non-commercial radio simulcasts. These royalties, as per the DMCA, are due retroactively to October 1998 and payable within 45 days of acceptance.

From my previous articles, you may know I am a big believer in creating and storing metadata for all kinds of content. CARP has proposed that each Webcasting station generate and report the following information for every streamed program: transmission date, time and time zone; location of the transmission within the program; transmission duration (to nearest second); transmission genre or format; service name; program channel or station ID; program type (archived/looped/live); album and song title; recording artist; music label; catalog number; recording ISRC code; UPC code; copyright notice date(s) and copyright owner information; unique user identifier; users' time zone and country; and times and dates of login and logout.

Webcasters, generally small operations, are now faced with a tremendous burden that involves collecting information that sometimes is just not available. Currently, there is no automated way to input IRSC, UPC or release date of the album. That means that someone has to sit down at a computer with the music disk and enter the information manually. If you have ever seen a radio station CD collection, then you know that half of them have holes drilled through the UPC Code or have property stickers all over the disc, making it extremely hard to get at the data. Additionally, believe it or not, there are still many Web broadcasters that use vinyl and would have to import all this data by hand, not even able to use a CDDB type service. The RIAA states that the information is easily obtainable; however, while it may be obtainable, there is a big difference between obtaining the information and logging and reporting it!

The Internet radio industry is still very young, and very few Webcasters have much, if any, revenue. The proposed royalty rates seem high when compared to over-the-air radio broadcasters, but royalties do need to be paid. Artists, record companies and promoters all should be able to make a living. Whether the RIAA, BMI, ASCAP or the government, for that matter, is the right group to collect the money, I honestly don't know. Whether the rates set under the CARP document are too high or too low, again, I can't say.

I find the issue of reporting extremely troubling, however. The accounting and reporting functions will require added expenses that not even the mainstream broadcasters are required to fund. Even worse is the invasion of privacy. By law, Blockbuster has no right to collect and use my movie-buying habits. Why should the RIAA or any other entity have this right when it comes to my musical tastes? Could you imagine what my friends might do if they found out that last night I listened to the Sex Pistols, Dead Kennedys, Misfits, Bad Religion, Lars Frederiksen and the Bastards, and Miranda Sex Garden?

Fortunately, the Librarian of Congress rejected the recommendations of the arbitration panel. This is good news for this nascent industry, and let's hope that the copyright holders and the Internet broadcasters can work something out that has a positive impact for both sides and acts as a precedent for future cooperation between copyright holders, technologists and new forms of distribution.

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Steven M. Blumenfeld is vice president of technology, AOL Time Warner CTO's office.