Staying afloat in the Internet stream: how to keep Web radio from drowning in digital copyright royalties.

• Author: Harwood, Emily D.

1. INTRODUCTION II. COPYRIGHT LAW AND MUSICAL RECORDINGS A. Early Regulations B. The Birth of the Internet C. Digital Performance Right in Sound Recordings Act D. The Digital Millennium Copyright Act E. Bonneville Int'l Corp. v. Peters III. THE DEATH OF INTERNET RADIO? PROPOSED ROYALTIES AND NEW SOLUTIONS A. The CARP Panel Recommendations B. The Librarian of Congress's Approach C. The Small Webcaster Settlement Act D. The State of Net Radio After the SWSA E. Internet Radio, Reinvented F. Challenges and Changes to the New System IV. WHY ALL NONINTERACTIVE, NONSUBSCRIPTION TRANSMISSIONS DESERVE THE SAME COPYRIGHT PROTECTION A. Congress Enacted the DPRA to Address Concerns with Interactive Services . B. Streaming Radio Stations are Developing a Symbiotic Relationship with the Recording Industry . V. CONCLUSION I. INTRODUCTION

   More than 20 years ago, WOXY-FM, an independently-owned station based on Oxford, Ohio, launched its modern rock format, making it one of the first stations of its kind in the country. (1) Also known as "97X--The Future of Rock and Roll," the station had garnered a small, but loyal, audience in its listening area. (2) Those who tuned in on their radios, however, comprised just a portion of WOXY's fan base. Following the advent of the World Wide Web, the music of 97X reached a much broader group of listeners, making it one of the most popular stations on the Internet. (3)

   On May 13, 2004, WOXY's Internet and radio listeners heard its transmissions for the last time. When WOXY's owners sold their broadcast license to the Dallas-based First Broadcasting, they did so with the intent of continuing the Web transmission. (4) Due to the costs of webcasting, however, 97X's Internet streams died on the same day that the broadcast stopped airing. According to the station's owners, the costs of running an Internet station exceeded those of operating the traditional station. (5)

   Ironically, it was WOXY's online popularity that may have also been its downfall. Unlike AM/FM radio stations, who pay a fairly fixed amount for the right to play songs, webcasting fees are assessed based on the number of people who listen to a station. (6) Although the station's owners hope to return to the Internet eventually, for now, the Future of Rock and Roll has fallen silent.

   WOXY is not the only station unable to afford an Internet transmission. In June of 2002, the Librarian of Congress issued new royalty rates for Internet radio stations, also known as webcasters. Commercial stations choosing to transmit music via the Net would now be required to pay $.0007 per musical performance. (7) For a station with 1,000 listeners, that could total more than $1,000 per hour, crippling small and independent webcasters who generated little or no revenue. Unable to garner the advertising base necessary to help pay royalties, many webcasts, including simultaneous Internet transmissions of AM/FM radio stations, went silent in the months leading up to, and following, the Librarian's recommendations. (8)

   Although many stations could not afford operation costs, the new royalties did not usher in the complete annihilation of Internet radio. In fact, Web stations continue to draw more and more listeners each year, with many of the most successful stations being owned by Internet mega-companies like Yahoo! and America Online ("AOL") that can afford to pay the costs of webcasting. The success of such stations, however, should not be a sign that all in the webcasting world is fine and well. Many stations that lack the financial base and advertising power to pay existing royalties have been unable to survive. (9) Losing these stations also signals the loss of the diverse, independent spectrum of voices that helps make the Internet such a unique medium.

   This Note traces the rise, the fall, and the reinvention of the Internet radio industry. It argues that, as Internet radio gathers more and more listeners, the medium will continue to resemble the AM/FM industry in terms of its relationship with the recording industry and its ability to generate record sales. Therefore, copyright laws should treat Internet stations that behave much like AM/FM stations (i.e., those that are not interactive and do not require a subscription) the same as their traditional counterparts. Part II gives a brief history of music copyright law, from its beginnings in the U.S. Constitution to its post-Internet changes, culminating in the passage of the Digital Millennium Copyright Act ("DMCA"). Part III reviews the most recent history of Internet radio regulations, including current legislation that may have a positive effect on the CARP system. Part IV discusses why Congress should consider a return to the exemption for all nonsubscription, noninteractive transmissions, as set forth in the Digital Performance Right in Sound Recordings Act ("DPRA"). Part V concludes with a plea for Congress and the recording industry to make provisions that will best help webcasters negatively affected by the DMCA.

2. COPYRIGHT LAW AND MUSICAL RECORDINGS

   1. Early Regulations

      Beginning with the adoption of the U.S. Constitution, the government has placed a priority on artists' rights to share their creations as they see fit. Article I of the Constitution grants Congress the power "to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (10) In 1790, Congress adopted the first Copyright Act, which granted little protection when compared to today's version. (11) "In the first decade of U.S. copyright law, only five percent of the books published received copyright protection; copyrighted works joined the more numerous uncopyrighted works in the public domain after just fourteen years." (12) Today, however, "virtually every creative work imaginable is automatically copyrighted." (13) This includes musical creations. (14)

      Two copyright privileges exist in musical recordings. The "musical composition" copyright, usually granted to the songwriter, is the right to the "original words and arrangement of the music." (15) The "song recording" copyright, on the other hand, recognizes a right in the recorded version of the song. (16)

      Until recently, the government only recognized the "musical composition" copyright (17) The public performance of a sound recording, including transmission via AM or FM radio, (18) generally "require[d] a license from the owner of the musical composition; no permission was required from the holder of the copyright in the sound recording itself." (19)

      In the 1920s, the music industry asked Congress to extend copyright protection to sound recordings as well as to the actual recording of the performance, but Congress was hesitant to do so. (20) It was not until the second half of the twentieth century that Congress granted this request, albeit in a limited fashion. The Sound Recording Amendment Act of 1971 ("SRA") (21) gave provisional rights for music reproduction and distribution, "[b]ut the amendment made clear that it was not conferring a public performance right." (22) When Congress revised the Copyright Act in 1976, it made the provisional rights of the SRA permanent but granted no additional rights. (23) In refusing to acknowledge a sound recording right, Congress recognized the mutual benefit that artists and broadcasters provide each other:

      The history of copyright protection for sound recordings reflects a dominant, recurring theme: Congress repeatedly took pains to ensure that the grant of copyright protection did not affect the symbiotic relationship between the radio broadcasters and the record industry. Congress recognized both that the record industry reaps huge benefits from the public performance of their recordings by radio stations, and that the granting of a public performance right could alter that relationship to the detriment of both industries. (24) It took almost two decades, and the advent of an entirely new broadcast medium, for Congress to rethink this position.

   2. The Birth of the Internet

      The 1990s saw the development and subsequent explosion of the Internet, which provided an entirely new stage for the public performance of sound recordings. One Internet-related development came in the form of "streaming audio." Streaming, unlike downloading, does not enable listeners to request and permanently store audio files on their computers. On the other hand, it is more like listening to a radio station--the listener only has access to what is playing at that moment. (25) In 1995, the development of the RealAudio player made it simple for anyone with Internet access to listen to music on the Web. The demand for the technology was great. "More than 100,000 people logged onto Progressive Networks' computer" to access the free download on the day it was introduced. (26) Other companies such as Nullsoft and Microsoft followed suit with their own media players, helping give rise to "Web-based radio stations.., providing everything from rebroadcasts of existing, traditional radio station programming to interactive jukeboxes where users could create their own play-lists of their favorite songs." (27)

      In the years following the development of streaming audio technology, Internet radio has proven its staying power. Thousands of stations exist online. (28) Arbitron, a media research and rating service, estimates that more than 108 million Americans have listened to or watched online programming, (29) and approximately 51 million Americans stream information in a given month. (30) The top ten Internet radio networks draw more than 2.8 million weekly listeners. (31)

      One explanation for Internet radio's popularity is its eclectic mix of musical styles not often heard on "lobotomized playlists of broadcast radio." (32)

      Webcasters and fans of Internet radio would readily agree that the diversity that is (by many accounts) missing in the...