FAQ: Net radio's mixed signals

This Sunday, Webcasters are expected to hand over higher royalty fees to the recording industry. What does that mean for their devotees?

The saga surrounding recording industry-backed fee increases for Internet radio DJs has been raging for years, and the latest chapter surely won't end this Sunday, when contentious new rules are scheduled to take effect.

On one hand, Webcasters large and small, commercial and noncommercial, have been fighting a decision earlier this year by the U.S. Copyright Royalty Board that they argue, if left untouched, could put them out of business. They've also landed support from thousands of independent musicians who say they rely on their services to pick up listeners they wouldn't otherwise reach.

On the other hand, commercial artists and record labels allied with a recording industry royalty collection body called SoundExchange argue the changes are necessary to ensure fair compensation for their work. So far, both the CRB and federal courts haven't disagreed.

Private negotiations have been ratcheting up as the deadline for the new payments approaches, and discussions about a number of alternative offers to the CRB decision appear likely to continue into next week. Encouraged in part by a closed-door Capitol Hill meeting on Thursday, the negotiators have been expressing increasing confidence that a resolution can be reached, although it's unclear whether that will happen before Sunday.

CNET News.com has compiled a list of answers to the pertinent questions listeners may be asking.

What's this I've been hearing in the blogosphere about Webcasters being saved from complying with the July 15 deadline? Didn't a federal court just deny that request?
It's true that on Thursday, the U.S. Court of Appeals for the District of Columbia rejected a petition by large, small and noncommercial Webcasters to delay the onset of the new fees. From there, it gets more complicated.

Later that day, Webcaster, SoundExchange and recording industry representatives met with about half a dozen members of Congress on the Hill. At that meeting, SoundExchange Executive Director John Simson outlined a number of offers that his group has made to Webcasters. One of them was characterized by published reports as a pledge to delay enforcing collection of the new fees until all of the negotiations had ended, which prompted much rejoicing among the blogosphere.

The trouble is, Simson's statement was misinterpreted, SoundExchange spokesman Richard Ades told CNET News.com on Friday. What Simson really meant was that SoundExchange has already offered to freeze "small" Webcasters' required payments at historic levels through 2010.

"Assuming that those negotiations conclude successfully, then the small Webcasters would be paying the old rates, so it would not make sense for them to start paying the new rate," Ades said. But if the negotiations break down, then the new rate prevails, he added.

In short, nothing is set in stone yet, and SoundExchange is urging all Internet radio operators to "follow the law"--and perhaps to consult an attorney as well.

Then what does all of this mean for Internet radio listeners? Will I have fewer choices for music come July 15?
It's still not entirely clear.

Some who frequent smaller stations may have already noticed disruptions. According to the advocacy group SaveNetRadio, which has been lobbying for changes to the new rules, hundreds of stations have already shuttered their operations out of fear that they couldn't keep up with the new rates. Various published reports have named a year-round Christmas song station and a couple of jazz channels among the casualties.

Nothing is set in stone yet, and SoundExchange is urging all Internet radio operators to "follow the law."

Others have said they're encouraged by reports about the perceived progress being made in negotiations with SoundExchange and may rethink shutting down. But as we've already noted, small Webcasters haven't yet secured any formal immunity to the higher fees.

Representatives from some of the larger services--Yahoo's Launch, Live365 and Pandora--told CNET News.com that listeners probably will not notice any changes, at least at first. Others, like AOL Radio, still weren't exactly sure what's going to happen. National Public Radio said there won't be any immediate changes to the way its stations stream online music to their listeners, thanks to a last-minute agreement with SoundExchange. But the deal is only temporary, and negotiations are expected to continue over the next few months, NPR said.

Opponents of the new rates have warned that if they don't manage to broker a timely compromise with SoundExchange, the variety of independent Internet radio stations that consumers see today will diminish.

Back up for a second. How much are these rates going up, anyway?
The breakdown is as follows: The decision set rates for 2006 at 0.08 cents per song, per listener, which means Webcasters will have to cough up the difference between what they've already paid and what they owe under the CRB ruling. Then the rates climb to 0.11 cents in 2007, 0.14 cents in 2008, 0.18 cents in 2009 and 0.19 cents in 2010. There's also a $500 per "channel" minimum payment for each service.

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