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New bill would save small Webcasters

Federal lawmakers introduce a bill that would eliminate potentially steep royalty payments for small Net radio stations, many of which have said the fees would force them to close.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
3 min read
A trio of federal lawmakers introduced a bill Friday that would eliminate potentially steep royalty payments for small Internet radio stations, many of which have said the fees would force them to close.

The bill, which had been expected for several weeks, follows a controversial June decision on rules for Webcasting in which stations were ordered to pay about .07 cent per song, per listener for the rights to play music online. Although record labels criticized the sum as too low, small Webcasters said the fees would quickly add up to thousands of dollars, driving many out of business.

Dubbed "The Internet Radio Fairness Act," the bill would exempt from royalties any business that makes less than $6 million in annual revenue, a group that would include the vast majority of online radio stations unaffiliated with a larger Internet or broadcasting company.

"Small Web radio stations are bearing an unfair burden under the (copyright panel's) decision, and the public stands to lose access to these useful services unless the law is changed," said Rep. Jay Inslee, D-Wash., one of the bill's co-sponsors.

The Webcasting fees, put in place by a joint decision of the Librarian of Congress and the U.S. Register of Copyrights, have sent a wave of panic rippling through the small Webcasting community. Already hundreds of stations have stopped streaming or have radically changed their programming, according to one advocacy group monitoring the industry, and many more are expected to follow suit as the October deadline for initial royalty payments approaches.

For the most part, these aren't large stations with huge listener bases. But many of these, such as KPIG--one of the first stations to stream music online, or San Francisco's SomaFM, had eclectic programming mixes that had drawn thousands of dedicated fans.

"We're not seeing a dramatic change in the quantity of streaming," RealNetworks CEO Rob Glaser said in an interview with News.com earlier this week. "What we are seeing, and this is the unfortunate thing, is a winnowing of the diversity of choice."

The bill, sponsored by Inslee, Rep. Rick Boucher, D-Va., and Rep. George Nethercutt, R-Wash., would also make several other changes to the pending copyright royalty fees, including changes in the way that royalties would be determined in the next two-year cycle of royalty decisions. In that next round, payments for copies of songs made solely as a technological by-product of streaming in the future would be eliminated.

In the previous round, small businesses had complained that participants were required to pay the cost of the Copyright Office-sponsored proceedings and that the entry fees were too high for garage and hobbyist operations.

The bill was welcomed by Webcasters, which have lobbied hard for a legislative response to the royalty decisions.

The legislation "provides reprieve from bankruptcy for thousands of small Internet radio companies and...corrects significant problems with the royalty arbitration process that imposed a devastatingly high cost on the nascent Internet radio industry," said Jonathan Potter, executive director of the Digital Media Association, a group that represents Webcasters.

Passage of the bill will be difficult this year, as Congress has just five working weeks left before it is scheduled to adjourn.

"Congress should not legislate that creators forego their income so that Webcasters can maintain business models that have not proven themselves able to succeed in the free market," said John Simson, executive director of SoundExchange, a group sponsored by the Recording Industry Association of America and formed to distribute royalties to labels and artists. "These Webcasters are businesses. Why shouldn't they pay fair market value for the music which is the very core of that business?"