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Deal rescues fee break for Webcasters

A last-minute political deal salvages in part a legislative bid to ease the effects of new online music fees on small and nonprofit Webcasters.

A last-minute political deal has salvaged portions of a legislative bid to ease the effects of new online music fees on small and nonprofit Webcasters.

In a late-night congressional vote Thursday, legislators approved a compromise bill that will allow small Webcasters and nonprofits such as college radio stations to pay substantially lower royalty rates for online music than will large companies such as America Online or Microsoft.

Last month, federally mandated rules went into effect requiring Webcasters to begin paying a small per-song fee to record labels and musicians. Small companies had protested, saying the new fees would put them out of business.

Spurred by broadcasters' concerns, Sen. Jesse Helms, R-N.C. stalled last month a compromise bill aimed at lessening the financial burden on small Webcasting companies. A new compromise proposal negotiated between the Recording Industry Association of America (RIAA) and religious broadcasters this week revived elements of that proposal, and was passed by both the Senate and the House of Representatives late Thursday night.

"(The) approval of the Small Webcaster Settlement Act is a victory for all consumers and all providers of Internet radio," said Jon Potter, executive director of the Digital Media Association, a group that primarily represents larger Webcasters, in a statement. "Though the legislative relief is specific to small Webcasters, it helps stabilize and promote the entire industry by promoting programming diversity and consumer adoption at this very early stage of a new medium."

Unlike the earlier bill, the new compromise measure doesn't write royalty rates into law. It simply says that small and noncommercial Webcasters are free to strike a new agreement with the group representing labels and artists.

Sources close to the situation say that group, called SoundExchange, plans to offer small and noncommercial Webcasters the same rates as were negotiated in the previous compromise bill, ranging between 8 percent and 12 percent of revenue instead of a per-song fee.

"This legislation is a positive step forward for Webcasters, artists and record labels because it brings some long-awaited certainty to the marketplace," said John Simson, executive director of SoundExchange. "We will work expeditiously toward putting those rates and terms into effect as Congress has requested."

The new measure more definitively covers nonprofit organizations such as college radio stations, which had been concerned about being left out of the last deal. It gives organizations that are officially registered as nonprofits with the federal government an extra six months to pay the royalty fees.

The new compromise was largely negotiated by the RIAA, the National Religious Broadcasters--a group representing religious broadcast stations--and Helms' staff. The broadcasters had worried that the earlier bill's explicit rates of up to 12 percent of revenue would be used as precedent in future royalty hearings.

The bill passed Thursday says explicitly that any agreements struck as a result of its passage are the result of specific political and business conditions, and cannot be used as a foundation for any future rates or as evidence in royalty-related litigation.

Response from the RIAA was muted. "The recording industry did not seek nor propose this authorization," the organization said in a statement. "In an effort to support the goal of the bill passed by the House (last month), we support the (new) language."

The group of small Webcasters that helped negotiate the original compromise, dubbed Voice of Webcasters, said they were satisfied with the new bill, as long as SoundExchange indeed allowed them to strike deals using the earlier compromise rate structure.

"Our group has been very supportive of anything that's good for small business," said Michael Roe, owner of RadioIo.com, a VOW member. "The compromise bill seems to provide for a much broader range of small business."

A different group of Webcasters--which had criticized the earlier compromise and was not involved in negotiations for the new bill--gave a more cautious assessment of the deal.

"There are some positives, but it's certainly not a significant victory for small Webcasters," said David le Grand, an attorney for the Webcaster Alliance. "It would seem to me that SoundExchange or the RIAA would now be in position to negotiate lesser rates. Whether that's a practical outcome or not, we'll have to wait and see."

The new bill will not affect large companies such as AOL Time Warner or Microsoft, which will pay the laid out by the Librarian of Congress in June.