RADIO STATION WEBCASTERS BEWARE
By Steven K. Lee
(2001)

Under a controversial regulation recently issued by the U.S. Copyright Office, radio stations must pay royalties to transmit music over the Internet (“webcasting”), even though they are exempt from paying such royalties for broadcasting the same music over traditional airwaves.  The controversy arises from the Digital Performance Right in Sound Recordings Act (“DPRA”) and the Digital Millennium Copyright Act (“DMCA”), which created an exclusive right for sound recording copyright owners (typically, record companies) to publicly perform sound recordings by means of digital audio transmissions, subject to certain limitations and exemptions.  Although U.S. copyright law historically did not provide for a public performance right in sound recordings, the DPRA and DMCA created such a right, along with a complex royalty and licensing scheme, for the digital performance of sound recordings.  

It was not clear, however, whether traditional AM/FM radio stations which are exempt from paying royalties to record companies  for broadcasting music over the airwaves are entitled to the same exemption when they broadcast the identical music over the Internet.  The U.S. Copyright Office, through its new regulation which became effective this past December, determined that traditional Federal Communications Commission (“FCC”) licensed radio stations are not exempt from the limited public performance right for digital transmissions of sound recordings and therefore are subject to the same royalties as Internet-only webcasters.

The Copyright Office issued the regulation after considering comments from numerous industry groups, including the National Association of Broadcasters (“NAB”) and the Recording Industry Association of America (“RIAA”).  The Copyright Office also contemplated the legislative history behind the DPRA and DMCA.  It found that Congress created three exemptions under the DPRA for nonsubscription transmissions of sound recordings, including an exemption for a “nonsubscription broadcast transmission” (the “Broadcast Exemption”).  The NAB and other broadcasting groups argued that any transmission by an FCC-licensed broadcaster, whether made over the airwaves or the Internet, is within the scope of the Broadcast Exemption.  The RIAA and other copyright owners, however, maintained that the Broadcast Exemption only covers traditional over-the-air broadcasts and that webcasts are not covered by the exemption; their position was that Congress could not have intended to exempt such webcasts since Congress had not even considered webcasting when it enacted the DPRA.

The Copyright Office agreed with the arguments of the RIAA and the other copyright owners and concluded that its new regulation was consistent with Congress’ intent and public policies underlying the DPRA and DMCA.  It reasoned that Congress’ intent would be undermined if an FCC-licensed radio station could transmit its radio signal over the Internet without complying with the programming restrictions established by the DPRA and DMCA.  The Copyright Office further reasoned: 

This approach preserves the traditional relationship between the record companies and the radio broadcasters as it existed in 1995.  In effect, it allows for the continued transmission of an over-the-air radio broadcast signal without regard to whether the transmission is made in an analog or a digital format.  Such signals, however, are limited geographically under the licensing standards of the FCC.  At the same time, it subjects all other digital transmissions made by a noninteractive, nonsubscription service to the terms and conditions of the statutory license in order to compensate record companies for the reproduction of a sound recording directly from the transmission instead of purchasing a legitimate copy in the marketplace, a risk that is clearly greater when the recipient is receiving the transmission on a computer, which can instantly replicate and retransmit the transmission.

The impact of this new regulation on the music industry remains uncertain.  The NAB has filed a federal lawsuit against the Copyright Office challenging the new regulation.  If the regulation survives judicial review, the likely result will be millions of dollars in additional webcasting royalties for record companies, artists and other sound recording copyright owners.

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