CARP bombshell:
LIBRARIAN OF CONGRESS SET WEBCAST ROYALTY RATES
BASED ON YAHOO! DEAL THAT WAS DESIGNED
TO REDUCE COMPETITION AND HURT SMALL WEBCASTERS

Broadcast.com founder Mark Cuban tells "RAIN: Radio And Internet Newsletter"
about the strategy behind the RIAA license that Billington used as template
for the industry


CHICAGO (6/24/02): The voluntary royalty deal between Yahoo! and the RIAA
that the Librarian of Congress announced as his template for the entire
industry last week was a deal crafted by Yahoo! to shut out small webcasters
and decrease competition, Broadcast.com founder and Dallas Mavericks owner
Mark Cuban revealed to "RAIN: Radio And Internet Newsletter" in an article
published today.

Although he had left the company by the time the deal was signed, Cuban
explained that the deal he originally helped put together conceded a high
royalty price to avoid a "percentage-of-revenue" royalty rate. By doing
this, Cuban explains, he hoped that low-revenue webcasters would be unable
to compete against the well-funded Yahoo!

Cuban also explains that he wanted a "per-stream" deal because he intended
to use "multicasting" technology to serve multiple listeners with a single
stream, thus paying royalties to the RIAA on only the initial streams.

The thinking behind the deal structure, Cuban explains below, was that
smaller webcasters, who would be unable to afford to webcast on their own
under such terms (because of the fixed rates), would be compelled to use the
services of well-funded aggregators like the Yahoo! Broadcast service.

Cuban sold his network of streaming broadcasters, Broadcast.com, to Yahoo!
in August 1999, for a reported $5.7 billion.

BOTH THE CARP AND BILLINGTON
USED THE YAHOO! DEAL AS THEIR TEMPLATE
FOR THE ENTIRE INDUSTRY

On Thursday (6/20), Librarian of Congress James Billington set royalty rates
for webcasters, retroactively to October 1998 and continuing through
year-end, based primarily on the terms of that Yahoo!/RIAA deal. The
royalty rate of $.0007 (7/100th of a cent) per song per listener is
currently greater than 100% of industry advertising revenues and thus will
bankrupt most of the smaller webcasters and drive broadcasters' streams off
the Internet, many observers believe.

Most webcasters had expected a royalty rate expressed as a percentage of
their revenues, as this is the case for the royalty that broadcasters and
webcasters pay composers and as is the precedent in almost all other
countries.

The final deal between Yahoo! and the RIAA was the sole "marketplace deal"
upon which the webcast royalty rate was based, both in the CARP (Copyright
Arbitration Royalty Panel) recommendation last February and the Librarian of
Congress's final decision on Thursday.

RAIN PUBLISHER HANSON:
"IF I WERE A CONGRESSMAN, I'D BE FURIOUS
AT THE ARBITRATORS AND THE LIBRARIAN"

In an accompanying analysis piece, RAIN publisher Kurt Hanson, a radio
industry veteran, noted, "Whereas Congress instructed the Librarian and the
CARP to set a rate based on what a willing buyer and willing seller WOULD
pay, taking into account several different criteria, both the CARP and
Billington set a rate based almost exclusively on what one grudging seller
and one atypical buyer DID pay, taking almost none of the other criteria
into account."

Hanson continued, "If I were a Congressman, I'd be FURIOUS right now: In
setting a statutory license designed to encourage the growth and diversity
of a new industry, the arbitrators and the Librarian ignored Congress's
instructions and used the terms of a deal that was specifically constructed
to have the opposite effect!"