STATEMENT
of the
Honorable Nydia M. Velázquez, Chair
Committee on Small Business
Full Committee Hearing on Assessing the Impact of the Copyright Royalty Board Decision to Increase Royalty Rates on Recording Artists and Webcasters
June 28, 2007

This morning the Committee will examine a recent decision by the Copyright Royalty Board that will increase the fees that Internet radio broadcasters pay to play music.  In advance of these new fees taking affect on July 15th, it is important to consider the challenge of providing fair compensation for artists and record labels while maintaining a business-friendly environment for webcasters.

In May of this year, the Copyright Royalty Board set new rates at which commercial and non-commercial webcasters will compensate copyright owners.  The CRB also established an annual minimum fee that these entities must pay for each “channel” provided by the service. 
In response to the CRB decision, Internet radio providers have raised concerns about whether the new rates and minimum fees will put small Internet radio broadcasters out of business.  Artists and record companies, however, have praised the CRB decision as one that fairly compensates them for their music. 

This has prompted an important debate about copyright royalties that will continue beyond July 15th, when these new rates go into effect.  As a result, today’s hearing will review the impact of this ruling on small Internet radio broadcasters, independent artists, and record labels. 

At the heart of the copyright royalties issue is the fact that the Internet is changing the way consumers access and enjoy music.  Music used to be distributed primarily via records, tapes, CDs and traditional AM/FM radio.  Now, an increasing amount of music is now distributed via audio files, network downloads, ringtones, satellite radio, HD radio and Internet radio. 

 

Data from 2006 confirms that a market shift is occurring in the music industry.  Sales of CDs continued to fall last year, while subscriptions to digital music services, digital downloads of songs, albums and ringtones all increased.  At the same time, the number of subscribers to satellite radio and the number of people listening to Internet radio has risen dramatically. 

Though Internet radio broadcasters of all sizes offer webcasts, many of the leading providers are small companies employing fewer than 50 people.  Given the consolidation of media ownership that we have seen in recent years, the growing popularity of a broad array of small and independent webcasters is a promising sign.  Listeners want greater choice with respect to music content and Internet radio services of all sizes are providing just that. 

As popular as these services are today, new technologies are expected to make them even more popular in the future.  When universal broadband access is realized, consumers will be able to access an even wider variety of entertainment that they are today. 

In order for this future to become a reality, there must be a business-environment that allows new technologies to prosper and grow, while preserving incentives for artistic creativity.  It is through this balance that we will best be able to promote innovation and ensure that America remains a leader in these emerging high-technology sectors.

The hearing today continues the Committee’s active role in addressing small business related technology issues. These issues are indicative of the critical role that technology plays in the economy and in advancing U.S. competitiveness.  I look forward to the testimony today and want to thank all of the witnesses for traveling to Washington, D.C. today.