Web radio expected to keep playing

Small Webcasters expect to keep streaming their music, with US Congress giving them a break on the royalty rates imposed on online radio stations.

Congress on Friday approved a bill that lets SoundExchange, the agency that collects the royalty payments, individually negotiate royalty rates with small Webcasters. Many of the small businesses said the initial fee scale charged royalties greater than their annual revenues.

The bill, written by Senators Patrick Leahy (D-Vermont) and Jesse Helms (R-North Carolina), now goes to the White House, and Leahy predicts the president will sign it.

Volatile Battle

The settlement comes after many long negotiations and some unexpected bumps in the road.

In June, the librarian of Congress set a royalty rate of .07 cents per song per listener. The rate--which was supposed to take effect on October 20--was retroactive to the date the Webcaster started business. Many small Webcasters said that rate would force them out of business.

Members of Congress sought to extend the royalty deadline by six months to give some time to consider the rates. That approach was dropped on October 1 when small commercial Webcasters and the recording industry said they could reach a deal on their own.

House Judiciary Committee Chairman James Sensenbrenner (R-Wisconsin) gave them a week, and by October 6 the groups compromised, but Congress had to seal the deal. Sensenbrenner introduced a bill that created a sliding fee scale for the next two years based on revenue.

Music Stopped

The House unanimously passed Sensenbrenner's bill and most expected the Senate to approve, but retiring Senator Helms halted it at the request of small noncommercial broadcasters in North Carolina who felt the arrangement did not meet their needs.

St. Louis-based 3WK Underground supported the bill because it addressed their interests, but co-owner Wanda Atkinson acknowledges that a lot of other Webcasters needed help too.

"We appreciate what they tried to do," says Atkinson, "but it really is an agreement between the copyright holder and the people who are playing the music."

Legislative staff from Helms's and Leahy's offices worked with representatives from the recording industry and Webcasters to find a solution in time for passage in the post-election session.

The Helms-Leahy bill puts the negotiating power in the hands of the Webcasters and recording industry, basically overriding the authority of librarian of Congress to set the rates. The plan keeps small commercial and noncommercial Webcasters in business, and guarantees artists and record labels are compensated for their music, says Leahy, who chairs the Judiciary Committee, which oversees copyright law.

"It provides Webcasters a newfound opportunity to reach out to the copyright holders and record industry to develop a real sense of partnership," says Kevin Shively, director of interactive media for Webcaster Beethoven.com.

Deal Still Pending

The original legislation offers a model for royalty rates, but the amended bill allows flexibility in setting royalties and postpones their collection from the small Webcasters during negotiations.

However, the clock is ticking. Small commercial Webcasters and the recording industry must make a deal by December 15.

"We're back to square one," Atkinson says. "It's going to be a very busy month."

In addition, the Helms-Leahy amendment imposes a six-month moratorium on fee collections from noncommercial entities to allow more negotiations. This group includes online radio stations at colleges and universities.

"This provides all parties time to address the unique circumstances of noncommercial Webcasters and reach an appropriate arrangement," says John L. Simson, executive director of SoundExchange LLC. But, he notes, "it doesn't resolve the issue." If deals can't be struck, listeners still risk losing the diversity offered online.

Web-based radio continues to gain popularity, says MeasureCast Inc., a company that measures Internet radio audiences. Since January, the total time spent listening to online radio stations is up 159 percent.

"We're a part of the music business," says Beethoven.com's Shively. "We are members in that fraternity, and we need to ensure we are working with members to develop a relationship that is truly beneficial to the music industry as a whole."

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