Radio group sues to escape royalty payments, using Copyright Act loophole

verstandig broadcastingWe learned from Inside Radio that Virginia radio group VerStandig Broadcasting has filed for a declarative judgment in a local district court, seeking to escape payment of performance royalties in its webcasts. Performance royalties paid to SoundExchange on behalf of labels and artists are mandated for Internet radio and AM/FM webcasts by U.S. law. But the Copyright Act has a potential loophole that VertStandig is ingeniously attempting to leverage.

copyright logo 200wThe loophole exists in radio’s exemption from paying for the recordings it broadcasts over the air. AM/FM does pay performance royalties on the Internet, but does not pay over the air.

Broadcast attorney David Oxenford explained to RAIN: “The 150 mile rule applies to retransmissions of broadcast transmissions. This issue was raised back in the early days of webcasting, but the Librarian of Congress issued a finding that, because Internet retransmissions of broadcast signals could not be geographically limited, they could not be encompassed within the 150 mile exception of 114(d)(1)(B).  There are lots of issues to be sorted through in this case, but it does raise an interesting issue.”

(See government explanation of copyright here.)

VerStandig is cleverly attempting to apply the 150-mile rule as the law’s guiding principle, and use it to define an exempted radius for its stations’ webcasts. Creating an online 150-mile zone can be done using geo-fencing, a technology which locates listeners and serves content specific to their locations. Geo-fencing did not exist when the 150-mile rule for broadcasts was written into the Copyright Act.

VerStandig is a small broadcaster with five stations, three of which play music, so the case might seem hyper-local. But if VerStandig wins a judgement for geo-fenced exemption from performance royalties, other radio stations could quickly plead for the right to discontinue their webcast royalties to performers.

The case also intersects a larger issue, as Congress is repeatedly asked to reconsider radio’s favored non-paying status. SoundExchange collected $590-million dollars for labels and artists in 2013, and over-the-air radio did not participate in that value exchange. The rationale that radio provides unique promotional value has weakened, in the view of detractors, due to falling music sales and the rise of music streaming, which provides promotional value and also pays royalties.

Congress is not rushing to change the status quo — a House majority recently endorsed a resolution to keep things the same.

Brad Hill