The Quest for 'Parity': An Examination of the Internet Radio Fairness Act

Abstract

Several members of Congress have introduced legislation aimed at reducing the royalties that non-interactive streaming radio services (webcasters) pay rights holders for performing their sound recordings over digital channels. Under U.S. copyright law, there is currently a two-tiered system for determining compulsory digital sound recording performance royalty rates. Under the two-tiered system, webcasters are subject to market-based rates set pursuant to the “willing buyer-willing seller” standard; while digital cable and digital satellite broadcasters are subject to below-market rates set pursuant to the “801(b)(1)” standard. With this new legislation, the webcasters claim to be seeking “parity” with the cable and satellite services. Specifically, they are requesting that all digital services have their rates calculated under a modified 801(b) standard designed to result in below-market determinations. This article will attempt to answer the question: “Why shouldn’t services whose business models depend almost entirely on transmitting sound recordings be required to compensate sound recording owners at a fair-market rate?” Section I introduces the Internet Radio Fairness Act; Section II provides a brief history of the digital performance right in sound recordings; Section III examines the competing rate-setting standards; and, Section IV analyzes recurring issues in the argument between webcasters and sound recording owners over which standard should govern rate-setting proceedings.