Wednesday's recommendations are the latest step in a struggle between the record industry, broadcasters and the government to determine the price of music in the Information Age.
The royalties would go to the record companies that hold the copyrights for the songs. Based on each recipient of a broadcast sent online, the rates range from seven-hundredths of a penny per song for a radio broadcast to fourteen-hundredths of a penny for all other copyrighted audio sent on the Internet.
For example, if 1,000 people use their computers to tune into a song broadcast online by a radio station, the broadcaster would have to pay for each of those listeners, or 70 cents. Record companies do not receive fees for songs played only on radio broadcasts.
The U.S. Copyright Office panel issued its recommendations after hearing seven months of testimony from more than 50 witnesses, including musicians such as Alanis Morissette and various officials from the recording, broadcast and Internet industries.
"We feel that this is a thoughtful, carefully reasoned decision," said Eric E. Van Loon, chairman of the arbitration panel. The proposed rates were released Wednesday and the details of the proposal will probably be made public within a week.
For the next month, various parties from the music and Internet industries will be able to issue comments about the recommendations, which don't become final until they are approved by government lawyers and the librarian of Congress, said David Carson, general counsel with the Copyright Office.
The recommendations left both sides of the issue wanting more.
"We would have preferred a higher rate," said Hilary Rosen, president of the Recording Industry Association of America. She said, however, that the recommendation is about 10 times the amount sought by Web broadcasters.
"Artists and labels, who have supported these new businesses from the start with their music are one step closer to getting paid," she said.
The Digital Media Association, which represents companies that deliver music and video online, said it was "extremely disappointed" that the proposed rate was not lower.
"A lower rate would more accurately reflect the marketplace for music performance rights and the business environment of the webcast industry," said Jonathan Potter, executive director of the association. Potter added that the proposed rates are better for the Internet industry than what the record companies had asked for.
Nonprofit groups broadcasting online would be charged a lower rate of .02 to .05 of a penny, Carson said.
In December 2000, the Copyright Office ruled that radio stations that stream their broadcasts over the Internet must pay additional royalty fees.
"A public performance of a copyrighted work contained on a radio sinal occurs each time it is retransmitted over a digital communications network, such as the Internet," the ruling said.
The ruling was a major defeat for operators of radio stations, many of whom also operate Web sites that carry the content of their broadcasts live.
Broadcasters have argued that they already pay licensing fees to songwriters and music publishers so that they can play the copyrighted material on radio airwaves. Paying record companies to transmit songs and other content on the Internet would be double-dipping, they said.
In August 2001, a federal court threw out a broadcasting industry challenge to the ruling. U.S. District Judge Berle M. Schiller said that although it might make sense for Congress to treat Internet broadcasts in the same manner as traditional broadcasts, the law does not specifically call for that. The broadcasters have appealed.
By David Ho © MMII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed