Wednesday, May 23, 2007

Small Webcasters Get A Break In Royalties

SoundExchange has offered a deal to small webcasters to lower the royalty rates set by the Copyright Royalty Board's decision in March. The offer would make the rates for streaming sound recordings roughly the same as those set by the Small Webcaster Settlement Act (SWSA), which expired in 2005.

Today's offer is in response to a request from a House Judiciary Subcommittee for SoundExchange to initiate good faith private negotiations with small commercial and noncommercial webcasters with the shared goal of ensuring their continued operations and viability.

SoundExchange is proposing that the royalties be based on a percentage of revenue at the rates under the SWSA: small webcasters would pay royalties equal to 10% of all gross revenue up to $250,000, and 12% for all gross revenue above that amount. But only those webcasters that generate less than a specified amount of revenue and less than a certain amount of usage will be eligible for this lower rate. This is to ensure that only those webcasters of a certain size, who are forming or strengthening their businesses, get this break, SoundExchange reports.

Rates set by the CRB require all commercial webcasters -- big and small -- to pay a penny-rate per stream plus a minimum of $500 per channel.

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

"The net result of this proposal is that small webcasters would be guaranteed no increase in royalty payments for 13 years, from 1998-2010," says Michael Huppe, general counsel for SoundExchange.

In order for the process to work, small webcasters must register with the Copyright Office, comply with all reporting requirements to SoundExchange and not avoid paying royalties that are lawfully owed, says Simson. "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."

Meanwhile, the SaveNetRadio coalition -- a group formed to solicit support against the recent CRB decision -- issued a statement rejecting what it called a "flawed offer."

"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," SaveNetRadio spokesperson Jake Ward said in the statement. "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."

Additionally, the group said that even the largest of Internet radio operators, such as Yahoo and AOL, should be considered small broadcasters when compared to today's terrestrial radio operators.

By Susan Butler, N.Y.
Additional reporting by Antony Bruno, Denver

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