Last-minute deal is music to webcasters' ears

SoundExchange has agreed to compromise with small and large music webcasters

Internet radio may not be dead after all.

SoundExchange the nonprofit organization set up by the Recording Industry Association of America to collect so-called digital performance royalties for recording artists and record companies, has agreed to compromise with small and large music webcasters over new, higher royalty rates which were set to go into effect Sunday.

"SoundExchange has offered to extend 1998-era below market rates to small commercial webcasters, and to keep rates at 2003 levels for thousands of noncommercial webcasters. This would mean that the vast majority of Internet services would have no rate increase of any kind from 1998-2010," according to a statement.

In addition, Richard Ades, a spokesman for SoundExchange, said the organization has offered to cap the minimum fees to be paid by large music webcasters at US$50,000, a figure that will last through 2010 or for the life of the new, higher rates.

"We're just asking that there be better antistream ripping technology and better reporting [of how much music is streamed]," Ades said. "We made the offer to the Digital Media Association and announced it before a roundtable discussion before members of Congress last night. We've heard that we'll hear back -- the negotiations are ongoing."

Neither the DiMA, whose members include large music webcasters, nor David Oxenford, who is representing small webcasters, could be reached for comment Friday afternoon.

"For large webcasters, a couple [of] things happened last night that were significant -- a capping of per-station fee[s] at US$50,000 for the life of the rates through 2010; and a [commitment by SoundExchange] to avoid any type of enforcement while we engage in negotiations," said Tim Westergren, founder of the Internet radio station Pandora. "SoundExchange has committed to not putting webcasters out of business while negotiations are ongoing."

Before Thursday night's offer of compromise from SoundExchange, the situation looked bleak for Internet radio. On Wednesday, a U.S. federal appeals court denied a petition from music webcaster associations for an emergency stay of royalty rates that Internet radio companies must begin paying on Sunday.

The stay, if granted, would have delayed the July 15 due date of the increased royalty payments that are owed by music webcasters to SoundExchange. The new rates were set by the Copyright Royalty Board (CRB) of the Library of Congress in early March and went into effect May 1, retroactive to the start of last year. The rate increase would at least triple the amount of royalties Internet radio broadcasters must pay to copyright holders per song, and it has been challenged by webcasters, Internet radio listeners and more than 6,000 artists over the past several months.

In April, two federal lawmakers filed a bill that would reverse the CRB's decision. However, it didn't appear that there was much Congress could do about the issue before Sunday.

In addition, last night two other members of Congress, the chairwoman of the Committee on Small Business, Nydia M. Velazquez, and ranking member Steve Chabot, introduced legislation to postpone the royalty rate increase while negotiations are under way.

However, Kate Gilman, Velazquez's spokeswoman, said nothing would probably be done until early this week.

This legislation would postpone the implementation of the CRB decision for two months, allowing Internet broadcasters and the music industry more time to come to a suitable compromise.

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Linda Rosencrance

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