Webcast royalty bill, negotiations hit impasse

Aug 07, 2007 2:56 am
From Eliot Van Buskirk in Wired:
A federal bill that would reset music royalties at a more affordable rate for thousands of internet radio stations is losing steam in the House of Representatives, raising new fears for the future of webcasting.
First-time webcasting fees proposed by recording industry royalty-administration group SoundExchange took effect last month, setting off a wave of protests and last-minute negotiations aimed at reducing the hit for smaller webcasters and capping rates for sites that support hundreds of customized stations.
Negotiations are ongoing, but chances of broad legislative relief in the form of the Internet Radio Equality Act, or IREA, are fading fast, according to several people familiar with the effort. Rather, Congress appears resolved to let SoundExchange and the various strata of webcasters negotiate individual settlements.
"We met with members of the House and Senate judiciary committees this week, and while they all were supportive of small webcasters, time after time we heard the IREA was not going to pass," said Rusty Hodge, founder of webcaster SomaFM.
A legislative setback could make it harder to dislodge the new fees, which took effect last month after a federal appeals court refused to postpone the payment deadline. With the threat of congressional backlash fading, SoundExchange could find little incentive to budge from its current position.
The importance of legislative pressure in the negotiation process was underscored late Thursday. In a joint statement, Sens. Ron Wyden (D-Oregon) and Sam Brownback (R-Kansas) said they were "troubled by the lack of negotiating progress" and promised to take action to push the IREA bill forward if agreements are not made by Sept. 3. Given the lack of support in the House, however, the chances of the bill becoming law currently look remote.
SoundExchange has already proposed changes that could relieve small and custom-streaming sites from charges they could not possibly afford to pay, at least in the short term. Many expect a small-webcaster deal to be done by early September, when Congress goes back into session. But the deal on the table hasn't changed since SoundExchange extended an offer in May to charge them 10 percent of gross revenue under $250,000, or 12 percent of gross revenues over $250,000, with a revenue cap at $1.25 million.
Webcasters say they are wary of the deal because of a provision that would shift webcasters from the percentage rate to the higher per-stream rate once they exceed certain usage caps.
"That's the sticking point," said SomaFM's Hodge. "In our optimistic projections, SomaFM won't hit the revenue cap for a couple years, (but) when we hit it, our royalties would go from $150,000 a year to over $2 million a year. "
For larger webcasters, such as custom-streaming site Pandora, coming to terms could take longer. Talks are ongoing over a proposal to cap per-station fees, but Tim Westergren, co-founder of Pandora, said there has been "no material change -- we're in a slow negotiation process now."
Reaching a settlement with SoundExchange could take even longer for the largest webcasters, which have been given no hint of a deal beyond the current Copyright Royalty Board rates. In the absence of any alternative, they will likely seek to strike deals directly with the major labels rather than accepting SoundExchange's mandatory license.