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SoundExchange offers compromise to large webcasters

But webcasters' group says there's a catch

By Linda Rosencrance
July 2, 2007 12:00 PM ET

Computerworld - There may be a compromise in the works between music webcasters and a group that represents performers and record companies over an upcoming rate increase for playing music over Internet radio.

SoundExchange, the group set up by the Recording Industry Association of America to collect royalties for performers and record companies, said it has reached out to the Digital Media Association (DiMA), whose members include large webcasters, and proposed a voluntary cap on the minimum fees for music played over the Web.

Regulations set to go into effect on July 15 require each webcaster to pay a $500 minimum fee "per station or channel." So a webcaster with 500 channels would be required to pay $250,000. However, according to a statement, SoundExchange proposed capping annual payments at $2,500 per service, no matter how many stations or channels the webcaster is streaming.

"There was a lot of misunderstanding out there about how the minimum fee would apply, and frankly some people were wrongly stating SoundExchange's policy on this matter," said John Simson, executive director of SoundExchange, in a statement. "We certainly don't want anybody to get unduly hurt by the minimum fee, but there is a value to music and a cost to administering the digital royalty program, and we wanted to ensure that everyone was treated fairly -- artists, webcasters and record labels."

DiMA, however, said not so fast. According to the association, the cap would only be in effect through 2008, not for the full term of the new royalty rates, set by the Copyright Royalty Board (CRB), which are in effect through 2010.

"DiMA would agree to a $2,500 per-service cap for the entire term of the CRB ruling (through 2010), but not the partial-offer presented to us in writing, which would terminate in 2008," said Jonathan Potter, executive director of DiMA, in a statement. "Any offer that doesn't cover the full term is simply a stay of execution for Internet radio."

Richard Ades, spokesman for SoundExchange, declined to comment.

SoundExchange has already offered a compromise to small webcasters, which was turned down by SaveNetRadio, a group that represents online radio stations.

Earlier this year, the federal CRB set rates that would at least triple the amount of royalties Internet radio broadcasters must pay to copyright holders to play a song. Under the board ruling, royalty rates will be changed from a percentage of revenue to a per-song, per-listener fee. The entities affected include pure-play Internet radio stations, digital music stations and traditional broadcast stations that also stream their programs.

The new rates, which would be retroactive to 2006, would increase until 2010. The increase angered small and large webcasters who said they can't afford the increased fees.

Federal lawmakers have filed legislation that would reverse the board's decision.

Last Tuesday, thousands of large and small U.S. webcasters turned off the music to protest the planned royalty rate increase. On Thursday, the U.S. House Committee on Small Business held a hearing in an effort to work out a compromise between the two groups.

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