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 This article examines the phenomena of Internet radio, its near demise at the hands of federal regulators in 2002, and the last-minute involvement of Congress that provided much needed breathing space for the industry.1  The problems with widespread copyright violation in the 1990's, typified by the Napster debacle, created widespread distrust of digitally provided music.  For webcasters, the result of this distrust was an inhospitable legal environment and an unrealistic fee structure.  Webcasting does not create the same risks as file-sharing systems such as Napster, and it is to everyone's best interest, including copyright owners, to create a legal environment which promotes the growth of webcasting.2

 Webcasting brings the ability to reach highly specialized musical tastes and niche markets that cannot be profitably served with traditional radio broadcasts.  While webcasting appears to hold great promise for the future, the legal environment remains treacherous.  Provisions of the Digital Millennium Copyright Act of 19983 set the stage for federal regulations that nearly forced webcasters out of operation in 2002.4  Only eleventh hour intervention from Congress prevented their implementation.  While the Small Webcaster Settlement Act of 20025 does provide protection for some small webcasters for the immediate future, the long-term prospects of the webcasting industry remain in doubt.

 Webcasting is the use of the Internet to transmit audio signals in real-time, sometimes called a "streaming" audio signal.  Webcasting is the Internet equivalent of radio broadcasting.  While it is possible to transmit video signals in this manner as well, the focus of this paper is on the use of webcasting to transmit audio signals, sometimes referred to as "Internet radio."

 One common type of webcaster is the Internet-only station. These are distinguished by the fact that they operate solely through the Internet; they do not have a standard radio transmitter anywhere.6  Internet-only stations may offer several different music formats and styles from which the listener can choose.  These options allow the listener the opportunity to effectively "build" his or her own station, providing a highly customized musical experience.7  Often, the webcaster will display the artist name, song title or album name, or other information during the play of each song.8  The webcaster may even provide links to an online retailer of the music, to facilitate purchase of the album by the listener.9

 Of course, it is also possible to retransmit standard radio transmissions over the Internet by a process known as simulcasting.10  Simulcasters simply utilize both media, transmitting an over-the-air radio signal and a signal over the Internet in real-time.  These simulcasts extend the reach of the station, from about 50 miles for the average FM radio station to global reach.11  Those who live far outside the range of the standard radio transmission may still receive the identical program over the Internet.

 Regardless of whether the webcast transmission is Internet-only or a radio simulcast, receiving the signal is a simple process for the listener who knows the webcasters web location or "URL".12  The listener simply needs to visit the site and click on a "link" to hear the streaming audio signal.  Some sites require the use of external software to access the signal,13 often available at no cost.  The streaming audio signal is then received through the user's Internet browser or through the downloaded media player software.  The signal may be delivered through speakers attached directly to the listener's computer.  The audio signal from the computer can also be fed to an external stereo amplifier, as one would do with the output from a traditional radio tuner.

 Few American cities have access to more than 50 broadcast radio stations, while there are over 13,000 Internet stations,14 providing far greater variety than is available through standard FM or AM radio.  Because the Internet does not have the same limitations of spectrum scarcity that standard broadcast must deal with, it can offer an almost unlimited number of stations.15  This technology makes more competition and greater variety possible.  Further, since a single webcaster can reach anyone in the world with an Internet connection, there is potential for greater specialization and the serving of niche listener markets.  Many of these small markets cannot be profitably reached by standard radio broadcast.16  FM radio is limited to a range of approximately 50 miles, and niche musical tastes cannot be profitably reached by a traditional radio simply because there are not enough listeners of many less popular musical styles in any given 50-mile area to support such a station.  Webcasting has a global reach, and so it can profitably serve niche markets which are otherwise likely to be ignored.

 To understand what happened in 2002 and the legal challenges that webcasters still confront, one must have a general grasp of the relationship of copyright law with music recordings and broadcasting.  While a thorough review of the interface of music copyright and broadcasting law is beyond the scope of this article,17 the following brief analysis is included to aid in understanding the issues facing webcasters.

 Although it may seem counterintuitive, musical recordings involve two copyrights: the sound recording itself, and the musical work contained on the sound recording.18  As R. Anthony Reese describes the distinction, "A musical work is the sequence of notes, and often words, that a songwriter or composer creates. . .A sound recording, in contrast, is a fixation of sounds, including a fixation of a performance of someone playing and singing a musical work."19  Exactly who owns the copyright on the musical work is often determined by contract between the songwriter and publisher.20  Royalties on the musical copyright are collected when it is sold in sheet music form or licensed for public performance.21  The holder of the sound recording copyright receives fees when a copy of the recording is sold.

 Standard radio broadcasting is considered a public performance, one of the exclusive rights of a musical work copyright owner.  Hence, terrestrial radio broadcasters pay a fee to the owner of the musical work copyright.22  However, radio broadcasters have no legal obligation to pay any fees to the owner of the sound recording copyright.

 For decades, the difference in legal obligations has been justified by the theory that broadcasting boosts the sales of recorded music.  As Kimberly Craft wrote, "record companies habitually flood radio stations with thousands of free copies of new sound recordings each year, hoping that the products will receive needed airplay."23  Because airplay provided by broadcasters is thought to increase exposure to and sales of recorded music, thereby increasing the revenue of the sound recording copyright owner,24 broadcasters do not have to pay royalties to the owner of the sound recording copyright.

 Until the mid-1990's, webcasters faced no special copyright rules.  Presumably, their legal obligation to pay fees for the use of copyrighted works was equivalent to that of traditional radio broadcasters.  In 1995, this scenario began to change with the passage of the Digital Performance Right in Sound Recordings Act.25  This law recognized a public performance right for the sound recording copyright owner for the first time in American law.26  As a result, subscription service webcasters27 were required to pay fees on the sound recording copyright as well as the musical copyright.28  Three years later, the Digital Millennium Copyright Act of 199829 (DMCA) changed the law for non-subscription webcasters as well.  The passage of the DMCA meant that all webcasters became required to pay royalties for use of the sound recording copyright.  The precise rates were to be determined later by the U.S. Copyright Office and would be retroactive to 1998.30  Part of the reason for passing this legislation was to bring the United States into compliance with international copyright agreements.31

 Given the large number of sound recording copyright owners, negotiating payment with each of them would be an impossibly complex process.  Therefore, the DMCA designated the Recording Industry Association of America (RIAA) as a clearinghouse for the royalty payments for all of its member record labels.32  The RIAA's member labels effectively dominate the American music market, controlling approximately 90% of music sales.33  Subsequently, the recording industry set up a new organization, SoundExchange, to handle collection and distribution of these royalties for the RIAA members and other recording companies.34  By complying with certain terms of the DMCA, webcasters could qualify for an automatic, statutory license, thereby avoiding the need to negotiate with each copyright owner individually, and also allowing them to make all royalty payments to SoundExchange.35  Unfortunately, the terms of the DMCA's automatic license included a long list of restrictions that traditional, radio-only broadcasters do not face, such as:

"[the webcaster] would not be allowed to play, in any three-hour period, (1) more than three songs from a particular album, including no more than two consecutively, or (2) four songs by a particular artist or [from] a boxed set, including no more than three consecutively.  [P]rior announcements [of upcoming songs] would not be permitted.  Advance song or artist playlists could not be published. . .[webcasters could not] announce the time a song would be played."36

 The biggest difficulty created by the DMCA was that while it provided for the payment of fees to the sound recording copyright owner, the rates were not determined the DMCA itself.38  Rather, the responsibility for setting the rates fell to the United States Copyright Office,39 and the process quickly came into trouble.  In addition to widespread disagreement over the appropriate rates, one commentator reports that "[t]he RIAA wanted webcasters to tag each listener with a unique user identifier, as well as to submit detailed records of user information such as country of origin and local time zone."40 Such provisions raised serious concerns about consumer privacy,41 in addition to placing a burden on webcasters that traditional broadcasters do not face.

 Due to the inability of the parties to reach a resolution, the Copyright Office created a Copyright Arbitration Royalty Panel (CARP) composed of three arbitrators to resolve these issues and set royalty rates.42  The proposed rates were released by the CARP on February 20, 2002 and were as follows:43

Type of DMCA-Compliant Service   Performance Fee
        (per song)

Webcasters & Commercial Broadcasters
AM/FM Simulcast      0.07¢
All other transmissions    0.14¢

Non-Commercial Broadcasters
AM/FM Simulcast     0.02¢
Other Internet transmissions   0.05¢
Transmissions on other channels  0.14¢

Minimum Fee
$500 per year per license

 The more successful a webcaster becomes, the heavier a burden the fees impose.  For instance, using the same numbers as before but assuming 5,000 listeners per day (not at all impossible, given the Internet's world wide reach), the webcaster would owe fees of $2,520 per day, or $919,800 per year, with the rates retroactive to 1998.46

 According to Kevin Shivley, the manager of Beethoven.com,47 the rates would work out to be more than 100% of revenues for most webcasters.48  While there is some debate over whether such predictions are accurate, for an actual simulcast station in a top-20 market, the rates proposed by the RIAA worked out to 51% of revenue.49  Remember also that these fees are in addition to the fee paid to artists and composers for use of the musical work copyright, which amounts to approximately 4% of revenues.50   As one researcher commented, "It begs the question, if the rates proposed by the RIAA would put the 80-year, established, fully-consolidated, profitable RADIO industry out of business, how could they possible [sic] make sense for the fledging Webcasting business?"51  Adding insult to injury, the RIAA remarked that they were "disappointed that the rate set by the Arbitrators is substantially below the rate we requested...".52  Apparently, a rate that had webcasters facing bankruptcy was not enough to please the RIAA.

 Although the fee for simulcasters was only 50% of that charged Internet-only stations, the effect was still severe, and the difference in fees worked to create a split among industry players.53  As one writer described:

"Imagine the furor created now when a radio broadcaster, accustomed for decades to paying only one set of licensing fees. . .for a [terrestrial] broadcast, is now told that, if it desires to broadcast the very same music over the Internet, it must also now pay two licensing fees. . .[T]he web-only stations. . .feel no sympathy for their traditional brethren, who must now pay the piper for dabbling in Internet broadcasting, as well."54

  The reason for choosing such high fees are not entirely clear.  Partially, it may have been caused by an unrealistic assessment of the state of the webcasting industry. "[W]hen Congress passed the Digital Millennium Copyright Act (DMCA) in 1998, they instructed the Librarian of Congress to set a rate based strictly on what a willing buyer and willing seller would pay."57  As two U.S. legislators pointed out, such an approach cannot be expected to be successful in such a fledgling industry.

"The 'willing-buyer/willing-seller' standard requires that the CARP establish royalty rates for Internet radio based on market transactions between the record labels and the Internet broadcasters. There has only been one such transaction in the marketplace since the law was passed, and that contract was terminated prematurely by the webcaster. Therefore, the CARP did not have enough information on viable contracts from which to make a rate determination."58

 There are more basic issues at work as well.  Most probably, the changes created by the DMCA were an example of overreaction to fears of widespread copyright violations fueled by the Napster debacle.  Webcasters send a streaming digital signal, and in theory, this signal could easily be pirated.  The Internet has been referred to as "the world's biggest copying machine"59 and fear of its inherent ability for pirating abounds.  There is little doubt that advancing technology does bring increased risk of copyright violation.  In 1994, when download speeds were generally limited to 14,400 baud and sixty to ninety minutes were required to download the average popular song, more than 7,000 members of the CompuServe community copied a single song during an eight day period.60  Today's transmission speeds vary, but depending on the type of service, can be more than a million baud, making the downloading of music files easy and fast.  Further, the ability of digital technology to make an unlimited number of exact copies without generational degradation does truly present a tremendous challenge to sound recording copyright owners.61

 The theory behind the sound recording fees created under the DMCA is based on the concern that by transmitting a digital signal, webcasters will facilitate uncontrolled violation of the sound recording copyright, resulting in lost revenue for the sound recording copyright owner.  Napster certainly demonstrated that digital technology carries this risk in some circumstances.  However, this mistrust of the digital revolution is misplaced when it is applied to webcasters.  The streaming signal sent by most webcasters is not saved on the listener's computer.  Further, the DMCA implicitly recognized that unsaved copies incidental to the transmission should be non-compensable.62  While the DMCA provided that certain ephemeral recordings made by a webcaster could be compensable, it specifically exempted those situations where one was made if the webcaster making the ephemeral recording was otherwise duly licensed and if the recording was used only for making the webcast, along with other conditions.63  Ephemeral recordings made by the listener's computer for purposes of receiving the streaming signal are not exactly the same thing as ones made by the webcaster's server.  Yet, both types are not saved on the receiving computer, and both have no commercial value other than to facilitate the webcast, so the same legal analysis should apply.

 Webcasters do not operate as Napster did, where full sound files were traded and downloaded extensively.64  Webcasters do not give access to a searchable mass of downloadable files at all, but only stream a signal in real-time.  While it could be possible to record this signal, it could only be done in real-time, which would be rather time-consuming and would require the active involvement of the user to edit out commercials and other announcements.65  Napster allowed a user to seek out the exact files they wanted whenever they wanted, and copy them quickly and efficiently without the interruption of commercials or announcements.  Webcasting is not the same medium, it is not susceptible of the same misuse, and it should not be treated as having these same risks.

 Further, many niche markets are greatly underserved by standard broadcasters.66  Radio stations that carry bluegrass or reggae, for instance, are difficult to find, and for those living outside the range of large-city radio stations, broadcasts of many less popular musical formats simply do not exist.  A radio transmitter limited to a range of approximately 50 miles cannot profitably reach some musical tastes,  but webcasting isn't burdened by geographic limits.  The global reach of webcasting provides the opportunity for copyright owners and musicians alike to greatly expand exposure to all types of musical works.  There exists a tremendous opportunity for all involved in the music industry, including sound recording copyright owners, to develop for their music and increase their revenues if they will work in cooperation with webcasters.

V. Congress Steps In With The Small Webcasters Settlement Act

 Fortunately, webcasters and simulcasters did not sit back and allow themselves to be put out of business.67  After the announcement of the royalty schedule on February 20, 2002, a flurry of activity began in the webcasting industry, including the goal of sending one million faxes from webcasting listeners to legislators.68  Over 15,000 faxes were sent in a single day.69  Websites such as Save Internet Radio70 and Save Our Streams71 were launched to help coordinate webcaster efforts against the royalty schedule, and webcasters joined forces to make their voices heard.72

 In June 2002, the Librarian of Congress responded to these concerns by cutting the proposed rates by 50%, to 0.07¢ per song.73  Unfortunately, this rate was still high enough to bankrupt the majority of small webcasters, largely due to the fact that it remained based on a fee-per-performance rather than a percentage of webcaster revenue.74  Small webcasters continued to feel ignored after this decision, such as Michael Monahan of atlantabluesky.com, who stated, "Even with my small devoted audience, this rate is far beyond my ability to pay, and they know that. . .This decision breaks my freaking heart."75  At the same time, the RIAA voiced opposition to the rate reduction, as they felt that the lower rates meant that copyright owners would be put in the position of "subsidizing" major webcasters, and that "[t]his decision will certainly reinforce the steadfast opposition of copyright owners to compulsory licensing."76   The fact that a one-size-fits-all approach is unlikely to be successful in a new industry apparently did not weigh heavily with the RIAA.77

 As both sides were unhappy with the decision of the Library of Congress, appeals were filed by various parties (including webcasters, simulcasters, and the RIAA) with the U.S. Court of Appeals in Washington, D.C.78 during the fall of 2002.  Many believed that webcasters had little chance of success with the lawsuits.  As one article stated, "[a] streaming transmission over the Internet clearly constitutes a digital transmission performance of the sound recording transmitted and of any musical work contained in that sound recording."79  Fortunately, some members of Congress were also taking note at this time.  U.S. Representative Jay Inslee publicly expressed concern that the rates set by the CARP would harm the growth of this new industry and would work against almost everyone involved.80  Representative Inslee and others publicly questioned the viability of rates based on a hypothetical buyer and seller in this new and rapidly evolving market.81

 In addition to the action in federal court, efforts to overturn the royalty structure by Congressional legislation began in the fall of 2002 in the form of H.R. 5469, originally known as the Small Webcaster Amendment Act.  The efforts initially met with opposition, and an early version of the bill passed the House but was blocked in the Senate in mid-October,82 falling dead without coming to a vote.83

 On November 15, 2002, however, the webcasters fared better, when the House and Senate unanimously passed a revised version of the bill84, known as the Small Webcaster Settlement Act of 2002.85  President Bush signed the SWSA into law in December 2002.

 To determine whether the SWSA will prove an effective basis for the long-term growth of webcasting, it must be examined for what it resolves and what it leaves unsettled.  One particularly positive development is that the SWSA specifically did away with the concept of royalties based on a hypothetical price between a willing buyer and seller.  Instead, the law supported recognition of the nature of webcasting as an emerging business technology and the need for compromise:
"It is the intent of Congress that any royalty rates, rate structure, definitions, terms, conditions, or notice and recordkeeping requirements, included in such agreements shall be considered as a compromise motivated by the unique business, economic and political circumstances of small webcasters, copyright owners, and performers rather than as matters that would have been negotiated in the marketplace between a willing buyer and a willing seller."86

 The agreement provided specific protection for small webcasters through 2004.  Through provisions of the Act and subsequent negotiations, webcasters qualify for this protection if their annual revenues fall below $1.25 million.87  These small webcasters will pay either 8% of revenue or 5% of expenses, whichever is higher, for the "retroactive period" of 1998-2002.88  After this period, the formula changes: "[f]or 2003 and 2004, small webcasters would pay 10% of the first $250,000 in revenue, then 12% of additional revenue -- or 7% of expenses, whichever is higher."89

 In sum, the provisions mean that those webcasters whose annual revenues fall below $1.25 million can obtain a license to stream copyrighted music, with the fees based on a percentage of revenues or expenses.90  Even for those webcasters who exceed the $1.25 million cap, the SWSA is still a positive development because it expressed Congress's intent that a compromise solution be reached, and that the approach of attempting to emulate a hypothetical buyer and seller be abandoned.  The fact that the law passed unanimously in both houses of Congress gives hope that our legislators recognize the problems faced by webcasters.

 However, the SWSA did leave much unresolved.  For those webcasters over the $1.25 million cap, the fees remain undecided, and are left to the negotiation of the parties, albeit with the express instructions of Congress for "compromise".91  The parties involved must "brief the Copyright Office by March 5 [of 2003] on their efforts to hammer out a compromise on royalty payments."92  If an agreement cannot be reached, the rates for those webcasters with revenues over $1.25 million per year will be back in arbitration with another CARP panel.93  Should that occur, it may turn into a battle of attrition between sound recording copyright owners and those webcasters with gross revenues of over $1.25 million.

 In contrast, other digital mediums that compete with webcasting have not faced the same difficulty in the negotiation of fees.94  Early in 2003, "Music Choice, a partnership of Microsoft Corp., Motorola Inc. and other companies, agreed to pay royalties for transmitting music through digital cable TV and satellite systems."95  The royalties amount to of 7 percent of their gross revenue for 2002 and 2003, and 7.25 percent for 2004 to 2007.96  Note that this negotiated agreement followed a percentage of revenue approach, not the per-song fee approach originally proposed for webcasters.  "By reaching an agreement with recording companies and unions that represent musicians, the subscription services avoided costly arbitration proceedings that have plagued Internet radio services."97

 These privately negotiated rates are less than the rates provided for small webcasters through the SWSA,98 and these providers did not have to engage in costly proceedings to make the deal happen.  It is unclear exactly what these facts mean for webcasters.  It could stand as evidence that the battle in 2002 opened the eyes of copyright owners to the enormous potential of new music delivery mediums, and they will now be willing to negotiate similar terms for webcasters.  It also may mean that copyright owners favor certain mediums over others, and will continue to drive a hard bargain with webcasters.

 Webcasters can hope that at a minimum, the deal with Music Choice stands as solid evidence that the fee-per-song approach proposed by the CARP in February 2002 is unworkable, and such an approach ought to be considered dead on arrival.  The terms of the deal negotiated with Music Choice are at least roughly comparable to those of the SWSA.  If an agreement can be negotiated for webcasters on similar terms as the deal with Music Choice, then webcasters will at least be competing on a level playing field.

 It is inevitable that if webcasters are successful, they will outgrow the protections of the SWSA.  Further, the Act's protections are not indefinite.  Barring a major change in the law, it is only a matter of time before the fate of all webcasters, large and small, depends upon negotiation with sound recording copyright owners.  Therefore, the SWSA should be seen not as a permanent solution, but only as breathing space that allows webcasters time to reorganize and prepare for the regulatory challenges that lie ahead.

 It should also be mentioned that the SWSA only affected the fee schedule.  In order to avoid negotiating with each sound recording copyright owner individually, webcasters still are required to meet the automatic license provisions of the DMCA.99  Limits on the numbers of songs that can be played by a particular artist within a given time period remain, and so webcasters are still treated differently than traditional broadcasters.100  As a policy matter, this is an unwise restriction of competition in a developing medium.  These rules restrict the ability of webcasters to fully exploit the interactive ability of the new technology.  Full development of this industry will not be achieved by institution of artificial restrictions.

 Lastly, the sound recording copyright is a relatively new legal development in American law, only developed in the early 20th century.  The U.S. Supreme Court expressly rejected the concept of a copyright in sound recordings in 1908,101 and the concept did not gain acceptance until decades later.  Perhaps the digital era provides a good opportunity to reexamine the goals of copyright law and to question whether or not a copyright interest in sound recordings takes our society in a direction we want to go.  However, given that the concept of sound recording copyright is now embedded in the law of other nations102 and international agreements,103 we should not expect a reversal in this area.  The reality is that webcasters will almost certainly continue to be faced with fees for use of the sound recording copyright.  Yet, our Constitution commands that copyright law be used to "promote the Progress of Science and useful Arts. . ."104, and so Congress must be willing to step in with further action if copyright owners should use their powers against the public interest.  Surely, it is possible to provide compensation to copyright owners without bankrupting webcasters.

 The Napster phenomena created a backlash by copyright holders, and this backlash threatens both webcasters and, perhaps paradoxically, the copyright holders themselves.  "It has been suggested that if the only way a record company can make money is by controlling copying, it will not survive in the digital age."105  While there may be some merit to arguments that past approaches to copyright are obsolete in the digital era, the possibility of doing away with sound recording copyright does not appear to be a realistic one in the near future.  Regardless of whether the concept of a sound recording copyright can endure in the long run, it is in everyone's best interest to encourage webcasting now.

 There are reasons to feel positive about the future of webcasting.  Certainly, the fact that Congress passed the SWSA unanimously shows there is strong legislative support for compromise among the parties, and the SWSA did address some of the most immediate concerns of small webcasters.  Whether or not the Act will provide a foundation for future development of webcasting remains to be seen.  Much may revolve on the general state of copyright protection on the Internet.  The RIAA and other copyright holders appear to be fully prepared to peruse their interests most vigorously, and they will not allow the Internet and digital technology to invade their business.  If widespread copyright violations continue, we should expect that the RIAA and copyright holders will fight back on all fronts, catching webcasters in the foray whether guilty or not.  While the Small Webcaster Settlement Act of 2002 provided a limited reprieve, copyright holders maintain a powerful lobby in Congress, and the SWSA will not shelter webcasters if copyright holders feel threatened by this new medium.

 The technology of traditional FM radio limits its geographic reach, making it difficult to serve niche markets.  In contrast, with a worldwide audience, it certainly appears that webcasting could make it possible to reach even highly specialized musical tastes.  Ignoring this opportunity, and even attempting to strangle it, will not improve prospects for sound recording copyright owners or anyone else in the music industry.  While there may be some risk of copyright infringement inherent in webcasting, these risks do not justify cutting off the tremendous opportunities that exist for musicians, copyright owners, and the buying public.

 The fact that sound recording copyright owners were able to negotiate a workable deal with digital cable music providers shows that copyright owners do perceive the need to expand music delivery beyond traditional radio broadcast, and are not so paralyzed by fears of piracy as to be unable to see the potential created by new technology.  As one commentator described, "[w]ebcasting affords an opportunity for niche operators to meet the need of otherwise unmet markets, bringing programming that would otherwise never see the light of day."106  Growing dissatisfaction with traditional radio broadcasting107 means that it is to the copyright owners' advantage to promote new channels of music delivery, including webcasting.  If webcasters are put at a disadvantage, they will surely not reach their full potential, and the rest of the music industry, including copyright owners and consumers, will be the worse for it.

1The reader should be aware that the law in this area is rapidly evolving.  Research for this article was completed by early March 2003, and certain fee negotiations were still ongoing at that time.  Therefore, some things will probably have already changed by the time you read this article.
2Recording a webcaster's signal is not at all like the file sharing system of Napster.  Napster allowed people to pick and choose from a huge selection of commercial-free tracks at their leisure.  The tracks were in an easily downloadable digital file format, so that a copy could be made quickly.  The recording of a webcaster's signal is more akin to recording the signal from a traditional radio broadcast.  Just like making a recording from FM radio, recording from a webcaster can only be done in real-time and there are commercials and announcements to edit out.  The beginning or end of a song may be cut off or talked over.  The listener does not have a bank of songs to choose from, but only receives them one at a time, as the webcaster plays them.  The risk of piracy from the recording of webcasts is not tremendously greater than the risk of piracy from FM broadcasts, and it should not be treated as carrying risks which do not exist.
3Pub. L. No. 105-304, 1 112 Stat. 2860 (1998).
4Visit Silenced By Royalties, http://www.kurthanson.com/archive/news/091202/index.asp#story2 (September 12, 2002) for a partial list of webcasters that had ceased operations as of September 2002.  For the story of one station that stopped their simulcasts, see KPIG Stops Streaming!, http://www.kurthanson.com/archive/news/071902/index.asp (July 19, 2002).
5Public Law 107-321, 107th Congress (2002).
6Examples of Internet-only webcasters include http://www.spinner.com and http://www.live365.com.  In some ways, these Internet-only operations are similar to cable television stations that are only available through cable.  For instance, HBO, Discovery, and The History Channel are only available through cable; they do not have an over-the-air transmitter anywhere.  However, these cable stations operate on a paid subscription basis, whereas the webcasters discussed in this paper do not charge listeners for their service.
7For an example of this type of operation, visit http://www.spinner.com.  Over 100 channels are available from which the listener may choose their favorites.  By selecting from the myriad channels available, highly specialized musical delivery is possible.
8Spinner.com operates in this manner.
9Spinner.com provides a links to online retailers cdnow.com and amazon.com for the purchase of recordings.
10For an example of a simulcast webcaster, visit http://ksui.uiowa.edu/, and click on "Listen to KSUI".  This is an regular-broadcast NPR radio station, affiliated with the University of Iowa, which simulcasts its radio transmissions over the Internet.  You will need the Real Player software to listen to this station, which is available for download at  http://www.realnetworks.com/products/media_players.html.
11This is similar in function to the cable television station WGN, a standard-broadcast television station located in Chicago, Illinois.  In addition to its traditional, over-the-air broadcast, WGN is also available through much of the U.S.A. by cable service.
12To sample some of the choices available on the web, visit http://www.netradiosearch.com. This website provides links to many American and Canadian based webcasters, arranged by music format and geography.
13For instance, spinner.com requires the user to download their software before the user can listen to their programming.  The software is free.  Some simulcasters also use external software, such as Real Player, in order for the user to hear their programming.  See http://wsui.uiowa.edu/ for an example of a webcaster using this type of external software.  Free versions of this software are also generally available.
14"A typical American city has 20 to 50 broadcast radio stations.  According to BRS Media, which has been compiling a directory of Internet radio stations since 1995, the online listener now has access to more than 13,000 sites."  Sue Cummings, Internet Radio Offers A Wide Choice to a Slim Audience, N.Y. Times, Oct. 25, 2002, at 35, as cited in R. Anthony Reese, Copyright Law and Internet Music Transmissions: Existing Law, Major Controversies, Possible Solutions, 55 U. Miami L. Rev. 237 at n. 4.  However, other data received from BRS Media suggested that the total number of webcasters was considerably less than 13,000.  "[W]hile the current number of radio stations broadcasting their signal on the Net sits at 3940, that number is significantly lower than the all time high of 5710 stations from last year."  BRS Media's Web-Radio Reports a Steep Decline in the Number of Stations Webcasting, http://www.businesswire.com/cgi-bin/f_headline.cgi?bw.091202/222550201 (September 12, 2002).  There seems to be some uncertainty about the total number of webcasters in operation.
15R. Anthony Reese, Copyright Law and Internet Music Transmissions: Existing Law, Major Controversies, Possible Solutions, 55 U. Miami L. Rev. 237, 238 (2001).
16See Mark Lane, All Lute, All The Time - The Short, Happy Life of Web Radio, http://www.news-journalonline.com/2002/Jul/17/FOOTNOTE.htm (July 17, 2002).  Mr. Lane notes that there are webcasters who specialize in all lute music, all Baroque, all bluegrass, and other highly distinct formats.
17For an in-depth analysis of music and copyright, see Reese, supra n. 15.  Mr. Reese's article serves as an excellent primer on the different forms of musical copyright, and is a highly valuable resource for anyone wishing to increase their understanding of the issues facing webcasters.
18Id. at 240.
19Id. at 240-241.
20."Usually, the songwriter and/or the songwriter's publisher hold the copyright on [the] musical work."  Kimberly L. Craft, The Webcasting Music Revolution Is Ready to Begin as Soon as We Figure Out the Copyright Law: The Story of the Music Industry at War with Itself, 24 Hastings Comm. & Ent. L.J. 1, 4 (2001).
21Id.
22Id. at 5.
23Id. at 6.
24This is one frequently mentioned reason for broadcasters' exemption from paying royalties to sound recording copyright holders.  The Recording Industry Association of American maintains that at least part of the reason for the exemption is that the broadcasting industry maintains a powerful lobby in Congress.  This may be true, but it does seem likely that there is a symbiotic relationship between radio broadcasters and sound recording copyright owners.  Id. at 6, Id. at 9.
25Reese, supra n. 15, at 246-247.  See also Pub L. No. 104-39, 1, 109 Stat. 336, 336 (1995).
26Reese, supra n. 15, at 246-247.  See also Pub L. No. 104-39, 1, 109 Stat. 336, 336 (1995).
27Subscription service webcasters include satellite radio and other fee-for-service music providers.  These are not the focus of this article, but they are an important part of the webcasting industry.
28Craft, supra n. 20, at 6-7.  Only fee-for-service providers were affected by the 1995 law.  The webcasters and simulcasters discussed in this paper were not affected.
29Pub. L. No. 105-304, 1 112 Stat. 2860, 2860 (1998).
30Craft, supra n. 20, at 16.  For a brief summary of events leading up to the crisis in 2002, visit http://www.ruf.rice.edu/%7Ewillr/cb/sos/, and click on the "History & Links" option.
31Id. at 15.  "Congress's primary goal in drafting this revision of the Copyright Act was to allow the United States to participate in two new WIPO treaties, the Copyright Treaty and the Performances and Phonograms Treaty, which updated international copyright standards on Internet technology security and anti-piracy measures."  Id.
32Id. at 15.  The automatic license provided for in the DMCA is not available to non-interactive webcasters and simulcasters.  It does not apply to pay-for-service digital music providers, such as a satellite radio.  Those types of services remain separately regulated and are not discussed in this article.
33Id. at 7.
34http://www.saveinternetradio.org/90seconds.asp.  This website has recently been unavailable.  See also the Digital Millennium Copyright Act, Pub. L. No. 105-304, 1, 112 Stat. 2860, 2860 (1998).
35Id.  See also Reese, supra n. 15, at 248-249.
36Craft, supra n. 20, at 16-17.  For instance, a webcaster that wanted to run an "Ella Fitzgerald hour" could not do so without losing their statutory license for that transmission.  Reese, supra n. 15, at 249.  Further restrictions were imposed on the type of webcaster that could qualify for the automatic license, and requirements that the webcaster take affirmative measures to protect the copyright owner's rights were put in place.
37Reese, supra n. 15, at 15-16.
38Id.
39Id.  See also Shannon Hale, The Digital Performance Right in Sound Recordings Act of 1995:  Will the Compulsory Licensing Requirements Really Satisfy the Clearinghouse Function for Copyright Holders? 2001 Syracuse L. & Tech. J. 5 (2001).
40John Newton, DMCA Could Lead to "Mass Exodus From The Internet By College Radio" Warns Student Broadcast Group, http://www.musicdish.com/mag/?id=5765
(April 18, 2002).
41Id.
42Nate Brown, Stream On: New Legislation Threatens to End Internet Broadcasting For Small Radio Stations, http://www.spectatoronline.com/2002-04-10/news_feature.html (April 10, 2002).  See also Kurt Hanson, http://www.saveinternetradio.org/90seconds.asp (accessed in February 2003, website is unavailable as of 3/26/2003).
43Eric de Fontenay, CARP Defies A Century of Public Policy, http://www.musicdish.com/mag/?id=5707 (April 5, 2002).
44Ryan Naraine, CARP 'Sound of Silence' Ruling Under Fire, http://www.internetnews.com/ec-news/article.php/1000981 (March 29, 2002).
45Id.
46Supra n. 30.
47http://www.beethoven.com.  Beethoven.com is an example of an Internet-only webcaster.
48http://www.internetnews.com/ec-news/article.php/1000981.
49Craft, supra n. 20, at 33.
50Catherine Greenman, Royalty Fees Threaten Web Stations, http://www.nytimes.com/2002/04/18/technology/circuits (April 18, 2002).  Other sources say the rate paid by traditional broadcasters has historically been around 3% of revenues per year.
51Craft, supra n. 20, at 33, citing Dave Rahn, Webcasters Royalty Update - Custom Channel's Observations, http://www.customchannels.net. (accessed Aug. 8, 2001.)
52Fontenay, supra n. 43. (emphasis added).
53Craft, supra n. 20, at 6-7.
54Id.
55BRS Media's Web-Radio Reports a Steep Decline in the Number of Stations Webcasting, http://www.businesswire.com/cgi-bin/f_headline.cgi?bw.091202/222550201 (September 12, 2002).  For a partial list of the stations that were shutting down at this time in the face of these fees, see Silenced By Royalties, http://www.kurthanson.com/archive/news/091202/index.asp#story2 (September 12, 2002).
56BRS Media's Web-Radio Reports a Steep Decline in the Number of Stations Webcasting, http://www.businesswire.com/cgi-bin/f_headline.cgi?bw.091202/222550201 (September 12, 2002).
57Inslee Calls Decision Unfair, Weights Legislation to Lower Fees, http://www.kurthanson.com/archive/news/062002/index.asp.(June 20, 2002).
58Id.
59Stephen Summer, Music on the Internet: Can Present Laws and Treaties Protect Music Copyright in Cyberspace?, 8 Currents Int'l Trade L.J. 31, 33 (1999).
60Stephen Summer, supra n. 59, citing Kenneth D. Suzan, Comment: Tapping to the Beat of a Digital Drummer, Fine Tuning U.S. Copyright Law for Music Distribution on the Internet, 59 Alb. L. Rev. 789, 798.
61Summer, supra n. 59, at 32.
62Craft, supra n. 20, at 18-19.
63Id.
64Napster was a legal and technological phenomena in itself, and one could easily write many articles of analysis.  For one case dealing with Napster's operation and copyright violation, see A&M Records, Inc. et. al. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001).  Another related case is Recording Industry Association of America v. Diamond Multimedia Systems, Inc., 180 F.3d 1072 (9th Cir. 1999), which was an attempt to prevent the distribution of MP3 players due to risks of copyright violation.  For an article exemplifying the (sometimes legit) fears of digital technology and copyright violations, see Note: The Digital Performance Right In Sound Recordings Act of 1995: Will the Compulsory Licensing Requirements Really Satisfy the Clearinghouse Function for Copyright Owners?, 2001 Syracuse L. & Tech. J. 5 (2001).
65Recording a webcaster's signal is no more advantageous than recording the signal from a traditional broadcaster.  Just like making a recording from FM radio, it can only be done in real-time and there are commercials and announcements to edit out.  The beginning or end of a song may be cut off or talked over.  While there is probably some temptation to make recordings, it should not be significantly more serious than with standard FM broadcast.
66Fontenay, supra n. 43.
67See http://www.kurthanson.com for information and updates on legal issues facing the webcasting industry.  Kurt Hanson is a webcaster and activist for the industry, and publishes an online newsletter dealing with developments in webcasting.  An online archive of these newsletters is available on his website, allowing one to examine developments in webcasting and simulcasting.
68Paul Maloney, Webcasters Hope Their Listener's Voices Can Save Internet Radio, http://www.kurthanson.com/archive/news/071002/index.asp.(July 10, 2002).
69Id.
70http://www.saveinternetradio.org.   Since early March 2003, this site has not been available.  It may have been removed since the emergency seems to be over, at least for now.  However, the website was run by webcaster Kurt Hanson, and much of the information still exists in archive format on his website, http://www.kurthanson.com.
71http://www.ruf.rice.edu/%7Ewillr/cb/sos/.  This website focuses on serving non-commercial webcasters and simulcasters.
72See the newsletter archives available at http://www.kurthanson.com for details on efforts made by webcasters.
73Librarian Cuts Internet-Only Royalty In Half, Decision Based on Same Yahoo! Deal That CARP Used, Rate Still > 100% of Revenues for Many Webcasters, http://www.kurthanson.com/archive/news/062002/index.asp (June 20, 2002).  A summary of the decision is also available on the Copyright Office's website,  http://www.copyright.gov/carp/webcasting_rates_final.html.
74Librarian Cuts Internet-Only Royalty In Half, Decision Based on Same Yahoo! Deal That CARP Used, Rate Still > 100% of Revenues for Many Webcasters, http://www.kurthanson.com/archive/news/062002/index.asp (June 20, 2002).
75Id.
76Id.  The full statement by Cary Sherman, President of RIAA, was as follows:  "The import of this decision is that artists and record labels will subsidize the webcasting businesses of multi-billion dollar companies like Yahoo, AOL, RealNetworks and Viacom. The rate, which cannot be squared with the decision of the arbitration panel, simply does not reflect the fair market value of the music as promised by the law. This decision will certainly reinforce the steadfast opposition of copyright owners to compulsory licensing."  RIAA's apparent opposition to compromise is ominous for the future of internet radio.
77As evidence of the unworkability of the regulations, see BRS Media's Web-Radio Reports a Steep Decline in the Number of Stations Webcasting, http://www.businesswire.com/cgi-bin/f_headline.cgi?bw.091202/222550201 (September 12, 2002).
78Paul Maloney, Labels, Webcasters File to Appeal Librarian's Royalty Ruling, http://www.kurthanson.com/archive/news/080802/index.asp (August 8, 2002).
79Reese, supra n. 15, at 251.  These lawsuits are not discussed in this article because Congress stepped in with changes in the law a few months later.  The law in this area is still being developed by Congress, federal agencies, and private parties, and so it is difficult to make any predictions about the outcome of any particular lawsuit.  In any case, the Small Webcaster Settlement Act made many of these lawsuits moot.
80U.S. Rep. Jay Inslee Criticizes RIAA Position On Royalty Appeal, http://www.kurthanson.com/archive/news/080802/index.asp (August 8, 2002).  Rep. Insley stated: "The fact that all parties have appealed this decision demonstrates clearly that the standard used to determine royalty rates is not working, and Congress must act expeditiously to correct it.  If the RIAA's preference for the original CARP's decision prevails, it could severely dampen the growth of the Internet as a medium for music broadcasting.  Internet radio is the only broadcast medium that artists have to receive compensation for their work.  Undermining Internet radio, which is what prohibitively high royalty rates would do, is shortsighted and bad for the artists, bad for consumers, bad for webcasters, and even bad for the labels. Congress erred when it created the "willing buyer-willing seller" standard for determining rates, and we will continue our work to change the standard and ensure that we have a "fair but not free" Internet royalty rate."  Id.
81 Id.
82 SWAA Dead In Senate, http://www.kurthanson.com/archive/news/101802/index.asp#story3 (October 18, 2002).  The bill was H.R. 5469 and at the time it was known as the Small Webcaster Amendment Act.
83 Id.
84 Kurt Hanson, Congress Passes SWSA! http://www.kurthanson.com/archive/news/111502/index.asp#story1 (November 15, 2002).
85Public Law 107-321, 107th Congress.  The Act's text and history may be viewed at http://thomas.loc.gov/cgibin/bdquery/z?d107:HR05469:|TOM:/bss/d107query.html.  A summary of the Act is also available at http://thomas.loc.gov/cgibin/bdquery/z?d107:HR05469:@@@D&summ2=m&
86Section 4(c), Public Law 107-321, 107th Congress.  See also supra n. 84.
87Copyright Office Publishes SWSA in Federal Register, http://www.kurthanson.com/archive/news/123002/index.asp (December 30, 2002).
88Id.
89Id.
90Id.
91Supra note 78.
92Id.
93Id.
94Music Choice Agrees to Pay Royalties,
http://seattlepi.nwsource.com/business/107608_tbrf07.shtml (February 7, 2003).
95Id.
96Id.
97Id.  This is important, because many webcasters are small operations that can ill afford protracted legal battles.
98See supra page 19.
99See supra pages 8-9.
100Id.
101White-Smith Publishing Company v. Apollo Company, 209 U.S. 1 (1908) (holding that musical rolls used in player pianos were not copies within the meaning of the Copyright Act).
102For instance, "European radio stations have been obligated by law, for years, to keep meticulous logs and submit detailed airplay reports to artistic collection societies for payment to both [sound recording and musical work] right holders."  Craft, supra n. 20, at 10.
103Id., supra n. 31.
104U.S. Const., Art. I, § 8.
105Summer, supra note 59, at 39, quoting Doug Reece, Industry Grapples with MP3 Dilemma, BILLBOARD, July 18, 1998, at 5.
106Fontenay, supra n. 43.
107Bob Bellin, "Internet 10" Study's Perceptions Don't Equal "Reality" For Radio, http://www.kurthanson.com/archive/news/032403/index.asp (March 24, 2003).