Major Webcasters to face billions in new fees?

New letter to Congress from Yahoo, RealNetworks, Pandora and Live365 execs urges politicos to reconsider new rules they argue would require not only higher royalty rates on songs, but more than $1 billion in annual "administrative" fees.

We already know that Webcasters small and large are outraged at the prospect of having to pay higher royalty fees to the music industry, particularly when compared with what is required of their satellite and terrestrial radio counterparts.

But the heightened royalty rates enacted by the U.S. Copyright Royalty Board earlier this year and scheduled to take effect July 15 are not the only thing that's firing up leading Internet radio industry companies like RealNetworks, Yahoo, Pandora and Live365.

In letters distributed to various Capitol Hill offices on Thursday morning, the four companies' CEOs argue that the music industry will also be forcing collection of more than $1 billion per year from three services alone--Yahoo, RealNetworks and Pandora--in the name of covering so-called administrative costs.

Here's how they say they derived that figure: When the CRB decided earlier this year to change the rules for Internet broadcasters, it also decided to levy a $500 minimum annual fee per Internet radio "channel." SoundExchange, the non-profit music industry entity that collects the royalty and other fees on behalf of record labels, says that minimum payment is supposed to cover administrative costs.

But since some of the larger Internet radio services potentially offer their listeners hundreds of thousands of unique "channels" (RealNetworks' Rhapsody offered more than 400,000 in 2006 alone, according to a company spokesman), the companies view the ruling as forcing them to multiply that mandatory minimum payment accordingly (for Real, that would amount to $200 million).

Such an amount would far outpace the $20 million in total royalty fees collected by SoundExchange from the Internet radio industry last year, the CEOs note in their letter. And besides, it's not even clear that those payments would go to artists, as royalty payments do, the companies argue.

"While we don't imagine SoundExchange would keep this $1 billion all to itself, this lack of clarity is absurd," RealNetworks spokesman Matt Graves told CNET News.com.

SoundExchange did not respond to requests for comment.

Thursday's letter is just the latest step by the Internet radio industry to combat the CRB ruling. An alliance of commercial Webcasters and National Public Radio has already asked a federal appeals court for an emergency halt to the CRB's decision , which is currently scheduled to take effect July 15. They're hoping politicians will move quickly to enact legislation that would overturn the new requirements and level Internet radio royalty rates with those required of satellite radio providers.

 

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