Lilliputians menace Gulliver:

Small Internet radio stations, angered over what they say is the recording industry's effort to wield royalty rates as a weapon to drive them out of business, say they are preparing to file an antitrust suit against the Recording Industry Association of America.

The Las Vegas-based Webcaster Alliance will send a letter today to the RIAA, threatening to sue the group for violations of the Sherman Antitrust Act unless the RIAA agrees to reopen negotiations over the royalty rates webcasters must fork over to artists and record labels, Webcaster Alliance attorney Perry Narancic said.

"We're trying to negotiate with these people, but with a big stick," Narancic said.

The existing royalty rates structure would force as many as 90 percent of small commercial Internet radio stations to close if left unchanged, Narancic said.

The Webcaster Alliance has more than 300 members ranging from tiny hobbyists to small broadcast stations with accompanying Internet sites. The group's members include stations specializing in trance, bluegrass, classical and other genres.

....At issue is which group speaks for small commercial webcasters. To establish royalty rates for this class of Web radio stations, the RIAA negotiated with a group called Voice of Webcasters, which represented fewer than 15 Internet radio stations, according to Narancic.

The VOW members, who Narancic characterized as some of the largest "small" webcasters in the country, agreed to a comparatively high baseline royalty rate — under which all small webcasters would pay at least $2,000 a year to record labels and artists — in exchange for a break on high, per-song rates.

The $2,000 figure is four times higher than the $500 baseline established by the U.S. Copyright Office and the Librarian of Congress and is beyond the reach of the smallest players in the commercial market, Narancic said.

....Under federal law, copyright owners and Internet broadcasters can challenge established royalty rates every two years. If valid challenges are filed with the Copyright Office, the matter is handed over to federal arbitrators.

While the Copyright Office has fielded challenges to the rates this year, it's not yet clear whether the challengers have standing to force another round of arbitration Copyright Office General Counsel David Carson said. The Copyright Office will sort that out in the coming weeks. [Washington Post]