WASHINGTON — A federal appeals panel has declined to delay a substantial increase in royalties that Internet radio stations must pay for playing music, clearing the way for the rates to take effect Sunday.
Webcasters had sought an emergency stay from the U.S. Court of Appeals for the District of Columbia Circuit, arguing that the higher rates would drive many of them out of business.
Some small Internet radio stations already have stopped broadcasting to avoid accruing royalty payments because the rate hike is retroactive to Jan. 1, 2006.
Big webcasters such as Yahoo Inc. and RealNetworks Inc. also are fighting the new rates, as are National Public Radio stations and other traditional broadcasters that stream music online.
The court made its ruling Wednesday and released the decision Thursday.
The Copyright Royalty Board, an obscure group of federal judges, set the new rates in March, eliminating a provision that allowed small webcasters to pay 10% to 12% of their revenue instead of a set per-song fee for every listener. The current rate of .0762 of a cent each time a song is played will more than double by 2010, and many Internet radio stations will face royalty payments greater than their revenue.
Many broadcasters earn little or no money from their online stations, so the decision makes webcasting prohibitively expensive.
Although the appeals panel declined to stop the rate hike before it kicked in, an appeal was still pending before the court. Congress also is considering legislation that would halt the increase, although it could be months before a bill comes up for a vote.
In the meantime, webcasters are negotiating with SoundExchange, the organization that collects and distributes Internet music royalties. It has the power to strike separate deals.
"We're hopeful that Congress will take steps to ensure that Internet radio is not silenced, and that webcasters and SoundExchange will find a way to compromise and maintain the diversity and opportunity of Internet radio," said Jonathan Potter, executive director of the Digital Media Assn., a trade group that represents many Internet broadcasters.
A meeting Thursday between SoundExchange and webcaster representatives, convened by Rep. Edward J. Markey (D-Mass.), failed to produce an agreement. But John Simson, executive director of SoundExchange, said talks were continuing on separate deals.
"We're going to work very hard with our partners on the webcasting side to get this done," he said.