SoundExchange, the nonprofit group that collects the fees on behalf of hundreds of major and independent record companies, said on Tuesday that it would give "small" Webcasters the option of paying "below market" royalty rates on the songs they play--that is, by keeping the required royalty rates essentially the same as they are under .
"The net result of this proposal is that small Webcasters would be guaranteed no increase in royalty payments for 13 years, from 1998 to 2010," SoundExchange general counsel Michael Huppe said in a statement.
Webcasters that fall in the "small" category 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. Those rates would hold until 2010 and be retroactive to 2006, SoundExchange said.
It was not immediately clear what the revenue cutoff would be in determining which businesses qualify as small, and SoundExchange representatives did not immediately respond to requests for clarification.
Either way, a coalition called SaveNetRadio, which is composed of Webcasters, listeners and artists, said the idea of offering privileges to companies that keep their revenue below government-set caps would stunt the growth of smaller firms and gut the Internet radio industry. The group also argued that by broadcast radio standards, even the largest Webcasters, such as the Internet radio divisions of Yahoo and AOL, would be considered small broadcasters.
"Under government-set revenue caps, Webcasters will invest less, innovate less and promote less," SaveNetRadio spokesman Jake Ward said in a statement. "Under this proposal, Internet radio would become a lousy long-term business, unable to compete effectively against big broadcast and big satellite radio--artists, Webcasters and listeners be damned."
SaveNetRadio's members include Yahoo, RealNetworks, Live365, Pandora, SomaFM, the Small Webcasters Community Initiative and 5,800 artists.
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The move comes as Internet radio operators, ranging from small commercial Webcasters to National Public Radio to Clear Channel, have been battling a
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Those increases may not sound like much, and SoundExchange maintains that the board's decision is a fair and reasonable way to ensure that artists are properly compensated. But opponents of the new rules say they would result in payment increases of 300 percent to 1,200 percent, which they argued could cripple smaller Webcasters.
SoundExchange, for its part, said its offering came at the urging of a letter on Friday from Reps. Howard Berman (D-Calif.) and Howard Coble (R-N.C.), the leaders of a key House panel that deals with intellectual-property issues.
Berman, a veteran congressman whose district includes Hollywood, has established himself as an advocate for more stringent copyright laws over the years, most recentlyof a new lobby alliance composed of groups like the Recording Industry Association of America and the Motion Picture Association of America.
SoundExchange executive director John Simson said he remained concerned that the small Webcasters that have protested the most loudly against the new royalty rates have not been complying even with the existing payment requirements.
"The artists and labels are acting in good faith today, giving small Webcasters a break," he said in a statement. "In return, they expect the integrity of their music and their copyrights to be respected."