When Our Leaders Fail Us

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This is Celia Hirschman with On the Beat for KCRW.

Last week, I discussed the overpriced new music royalties facing all Internet radio stations. The deadline to pay these new and retroactive fees is this Sunday.

A three-panel board of judges on the Copyright Royalty Board, or CRB, instituted the fees. Congress appointed the CRB. Now with these new fees, it appears large Internet streamers like AOL, Yahoo, Live 365 and Pandora will perish.

How did the situation get so out of whack? It doesn't happen often, but even judges can make mistakes.

The CRB determined the royalty rates on a "willing buyer, willing seller" basis. This means the CRB would choose rates that were most likely to have been negotiated in the marketplace at that time. To their credit, they held hearings for several years. In the end, they followed the rate suggestions of a group called Sound Exchange.

Sound Exchange is an offshoot organization of the Recording Industry Association of America, or RIAA.

Despite all the hearings, the CRB failed to see if the Internet stations could actually pay the new rates. Now, networks like Yahoo, AOL Music, Live 365 and Pandora face immediate extinction with their royalty rates and fees totaling several billion dollars.

Regardless of the discrepancy, 2006 and 2007 fees must be paid by Sunday. If stations fail to pay in full, sizeable fines await.

Looking back at the situation, Sound Exchange has been acting far less than honorably in this whole mess.

First they attempted to quiet community outrage by issuing a press release announcing that any opposition to the new rates was simply corporate greed.

But web-radio stations objected and opened their books. Petitions were initiated on the web and listeners joined in to ask Congress to look into the rate inequality. Many stations want Congress to pass a new law called the "Internet Radio Equality Act", which would require Internet radio to pay the exact same rates that satellite radio pays.

When Sound Exchange realized a widespread movement could undermine their forthcoming plans, they began to backpedal, first with small webcasters, then with large. Within a month, Sound Exchange announced that they would cap the CRB administrative fees for each streaming channel, explaining that the Board hadn't been given all the facts when they ruled on the decision.

But even the new olive branch from Sound Exchange was tainted.

In this latest offer, Sound Exchange failed to mention that fee cap was only applicable, if the radio station rescinded their petition to Congress to support the Internet Radio Equality Act. In other words, Sound Exchange would issue a limited fee, in place of the one they freely admitted was unjust, only if the radio station surrendered their rights to redress the situation with Congress.

I find all this behavior very disturbing. A fair royalty rate should be paid. Artists and labels should be paid. Fair means reasonable.

Congress should pass the Internet Radio Equality Act, and quickly. Then, we can all get back to the business of enjoying music, wherever we listen.

This is Celia Hirschman for On the Beat on KCRW.