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Small Webcaster deals: Bad for Net DJ biz?

A music industry group has announced a deal with two dozen "small" Net radio outfits that freezes the fees they owe through 2010, but some say the terms are too restrictive to support.

There appears to be relief ahead for at least some small Webcasters that balked at a new requirement to pay higher royalty rates to musicians and record labels.

SoundExchange, the nonprofit record industry spin-off charged with collecting the mandatory royalty payments, said in a Tuesday press release 24 "small" Internet radio outfits have signed agreements guaranteeing they will owe through 2010 the same rates they have paid since 1998. Others are in the process of signing on, SoundExchange said. It was not immediately clear which radio stations had already reached agreements.

Under the deal first offered in May, that means Webcasters that earn $1.25 million or less in annual revenues would be required to pay 10 percent of all gross revenue up to $250,000 and 12 percent for all gross revenue above that amount. SoundExchange says those are "below-market" rates.

"It's a sacrifice our members are willing to make at the request of members of Congress and in order to give the smallest Webcasters below-market rates for an additional limited time," John Simson, SoundExchange's executive director, said in a statement.

The announcement arrives a few weeks after SoundExchange and the Digital Media Association, which represents large Webcasters like Pandora, Live365, Yahoo and AOL, said they had reached an agreement on a few thorny aspects of the royalty payments required of those companies. They're still attempting to reach an accord on the level of the royalty rates themselves, which opponents say can raise the costs of large Net radio operators by up to 300 percent and smaller ones by up to 1,200 percent.

The rates established under the agreements outlined Tuesday are essentially the same as those that resulted from a 2002 law called the Small Webcaster Settlement Act.

But some smaller Webcasters remain unimpressed by the royalty collectors' proposal. SoundExchange said some opted not to sign the agreements, which the organization began sending out in late August, because "their business models benefit more from the regular commercial rates." Others didn't sign on because they operate via Webcast "aggregators" who take care of the payments on their behalf, SoundExchange said.

David Oxenford, an attorney for a group of small Webcasters including Accuradio, Radio Paradise, Radioio, Digitally Imported Radio, and 3wk Radio, was quick to say his clients have not reached a deal with SoundExchange and continue to oppose the terms of the agreements in Tuesday's announcement.

"If the only deal that SoundExchange offers to small Webcasters is that which was just signed by the 24...they will do away with the independent Webcaster who is serious about growing a business, but to whom a per-performance royalty creates real issues," he said in an e-mail.

Because of the agreement's dependence on annual revenue levels, he went on, "you'll be left with an industry with essentially hobbyists and big companies that subsidize their Webcasting with other lines of business--essentially crushing the hopes of those who saw the Internet as a way to build an independent radio business."