Reuters, July 12, 2007

A federal appeals court has denied a petition by U.S. Internet radio stations seeking to delay a royalty rate hike due July 15 they say could kill the fledgling industry.

While the July 11 ruling by the U.S. District Court of Appeals for the District of Columbia Circuit was a setback, the SaveNetRadio coalition of Webcasters vowed it would continue fighting the hikes in Congress.

Late last month, thousands of U.S. Internet radio stations, organized by SaveNetRadio, held a "Day of Silence" to protest the hikes in performance royalties paid to musicians and record companies.

Under a Copyright Royalty Board ruling in March, Webcasters will pay a performance royalty of $0.0008 for each listener of each song in 2006, rising to $0.0019 in 2010. The first payment, backdated to January 1, 2006, is due on July 15.

The new ruling means the six biggest Internet radio stations — Pandora, Yahoo, Live365, RealNetworks Inc., Time Warner Inc's AOL and Viacom Inc's MTV Online — will pay 47 percent of their anticipated 2006 combined revenue of $37.5 million in performance royalties, said SaveNetRadio.

"We are disappointed that the Court failed to acknowledge the irreparable and quite frankly, devastating effect these new royalties will have on the Internet radio industry," said Jake Ward, a spokesperson for the SaveNetRadio coalition of Webcasters, net radio listeners and artists.

SoundExchange — a non-profit group representing more than 20,000 artists, 2,500 independent record labels and four major record companies — collects the royalties from Internet and satellite radio, as well as digital cable.

Ward said the ruling by the U.S. District Court of Appeals in Washington puts the ball squarely in the hands of Congress, which has already received more than half million messages urging members to pass legislation to cut the royalty rate to 7.5 percent of a company's annual revenue, bringing Internet radio in line with the rate by satellite radio.

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