The conflict stems from a new copyright law passed in 1998, that essentially makes the royalty structure for radio depend on what technology carries the signal. This odd state-of-affairs has generated a complex three-way battle between the trade organisations representing all players with a stake: the Recording Industry Association of America for record companies, the NAB for traditional broadcasters, and the Digital Media Association (DiMA) for Internet-only "Webcasters."
The record companies, of course, want royalties for all Internet broadcasts. The broadcasters, however, want their traditional exemption from paying royalties to the record companies, and argue that the new law still provides it.
"It's clear that Congress has exempted broadcasters who stream music over the Internet from performance rights fees - period," said Dennis Wharton, senior vice president at the NAB.
DiMA, on the other hand, has sided with the RIAA - its traditional adversary - against the NAB. Its goal is to ensure that Webcasters can fairly compete with traditional broadcasters, according to Jonathan Potter, DiMA's executive director.
"It's not really in our interests to pick a fight with the broadcasters, we're all media companies," Potter said. But "if the broadcasters choose to separate themselves from the Webcasters, we will oppose them."
There has been a decades-old battle between the NAB and the RIAA, both powerful lobbies, over whether record companies should get royalties for songs played on the radio. The NAB has consistently won that battle by arguing that the record companies benefit enormously from radio promotion of their artists, and thus, don't require additional compensation for the use of their music.
The landscape changed, however, in 1995, when Congress passed a law giving the record companies the right to collect payments for certain types of Webcasts. Then in 1998, the record companies pushed through the Digital Millennium Copyright Act, enabling them to collect royalty payments for all types of Webcasts.
Over the last two years, however, growing numbers of traditional broadcasters have started to broadcast their programs on the Internet.
The NAB then argued that the new copyright act's language only applies to Webcasters, and exempts them from the royalties and other restrictions. They lost the first round of that battle last December in a Copyright Office ruling.
Last week's lawsuit will attempt to overturn that ruling.
Tony Reese, assistant professor at the University of Texas School of Law, said the Copyright Act's language yields a plausible argument for both sides. "This statute is not a model of clarity," he said, adding that copyright law experts are "dismayed by how much the copyright statute looks increasingly like the tax code."
