Small webcasters offered royalty break

Stephen Withers
Wednesday, 23 May 2007 11:49

IT Policy - Regulation

Small webcasters have been given an olive branch by SoundExchange, the non-profit organisation that collects royalties in respect of US Internet radio, satellite radio and digital cable services.

SoundExchange has offered to extend a previous concession under the Small Webcaster Settlement Act that expired in 2005. If accepted, small webcasters will pay royalty fees of 10 percent of all gross revenue up to $US250,000 and 12 percent for all gross revenue above that amount until 2010. SoundExchange's announcement did not specify the revenue ceiling that would define a small webcaster. According to news agency Reuters, the limit is $US1.25 million.

John Simson, executive director of SoundExchange, said "Artists and labels are offering a below-market rate to subsidise small webcasters because Congress has made it clear that this is a policy it desires to advance, at least for the next few years. We look at it as artists and labels doing their part to help small operators get a stronger foothold."

"The artists and labels are acting in good faith today, giving small webcasters a break. In return they expect the integrity of their music and their copyrights to be respected.  That includes proper tracking and reporting of how their music is used, and that they are properly compensated," he added.

SoundExchange, general counsel Michael Huppe put a curious spin on the announcement: "The net result of this proposal is that small webcasters would be guaranteed no increase in royalty payments for 13 years, from 1998-2010." Since we're already well into 2007, it sounds more like a four year guarantee, even though the US Copyright Royalty Board (CRB) had determined an increase in royalties that takes retrospective effect from the beginning of 2006.

The offer was rejected by SaveNetRadio, a coalition of webcasters, artists, listeners and music labels that support Internet radio.

"The proposal made by SoundExchange today would throw 'large webcasters' under the bus and end any 'small' webcaster's hopes of one day becoming big," said spokesperson Jake Ward. "Under government-set revenue caps, webcasters will invest less, innovate less and promote less.  Under this proposal, Internet radio would become a lousy long-term business, unable to compete effectively against big broadcast and big satellite radio – artists, webcasters, and listeners be damned."

Ward said that even the largest webcasters are small in comparison with conventional broadcasters, and successes such as Pandora.com and Live365 would be forced to close as they have too much revenue to qualify for the concession but not enough to pay the full rate.

According to SaveNetRadio, the Internet Radio Equality Act being considered by Congress would put all webcasters on the same royalty footing as satellite broadcasters, currently 7.5 percent of revenue - well below the SoundExchange proposal. The CRB decision to set 'per performance' rates means some webcasters would face royalty bills of more than three times their revenue, it claims.