Arbitron: Against Proposed Digital Rights Fees.

Arbitron Inc. provided congressional leaders with detailed reasons why they should oppose the digital rights fees recommended by the Copyright Arbitration Royalty Panel (CARP) and, instead, institute a five-year moratorium on such fees for streaming media.

“We foresee that the impact of these fees will dramatically reduce the consumer’s choice of streaming content, limit the diversity of streaming ‘voices’ on the Internet, stifle competition among content providers and impede the growth of a popular new medium,” wrote Bill Rose, vice president and general manager, Arbitron Webcast Services, in letters to members of Congress.

“Streaming media serves the interests of the public by making available thousands of signals from around the country and the world,” wrote Rose, but the proposed fees would be prohibitive and restrict the wide distribution of music entertainment on the Internet.”

To demonstrate how harmful the CARP recommendation would be, Rose calculated the royalty fees a top-rated music station in New York, a top-rated national radio network and the radio industry as a whole would have to pay if their Internet listeners equaled the size of their over-the-air audience.

He found that the digital fees for a New York music station would total nearly $15 million a year and represent more than a quarter of what the station currently derives from traditional over-the-air advertising revenue. The national network faired even worse with $358 million in royalty fees that would equal approximately 39 percent of the entire radio network advertising industry revenue.

The digital rights fees for the entire radio industry, Rose determined, would be approximately $2.4 billion dollars, an amount equal to “approximately 13 percent of radio’s total advertising revenue for 2001.”

“If the proposed fees are enacted, we foresee that very few if any companies will be able to pay the cost,” wrote Rose. The resulting business and regulatory environment, he added, will reduce consumer choices by concentrating the distribution to a handful of sources.

In pointing out how popular and valuable this new media has become, Rose cited a recent study by Arbitron and Edison Media Research that showed more than 80 million Americans have tried streaming media. “Our research shows that the public would be upset if these digital right fees caused their favorite online stations to go away,” wrote Rose.

A moratorium on digital rights fees, Rose concluded, would not only enable the fledging streaming media industry to grow, but more importantly, serve the public interest by assuring a broad distribution of programming and consumer choices.