US Internet Radio Royalty Deals Announced; Webcasters Seek Lower Rates

By Dugie Standeford for Intellectual Property Watch
Despite recently trumpeted deals with SoundExchange, which collects fees for record labels and artists, large and small US webcasters say royalty rates for Internet music performances are still too high and should be lowered by the US Congress. The fee caps are the latest development in the dispute surrounding the 2 March decision by the US Copyright Royalty Board (CRB) setting new music streaming fees (IPW, Copyright Policy, 15 July 2007).

SoundExchange announced on 23 August that it had reached agreement with several major webcasters on Net radio royalties. The CRB decision requires each webcasting service to pay a $500 minimum fee “per station or channel” regardless of the overall number of stations or channels it streams, but SoundExchange agreed instead to a cap of $50,000 per service on the $500-per-station advance against royalties, the organisation said.

The agreement also requires webcasters, beginning within six months, to report all tracks played by each service as opposed to sampling performances, and to investigate anti-stream-ripping technologies to stop Internet radio listeners from converting performances into digital music libraries, SoundExchange said.

The accord only applies to signatory services and only on behalf of SoundExchange members, but “it is the intention of all parties to present this agreement to the Copyright Royalty Judges and seek its adoption industry-wide,” SoundExchange said.

The agreement shows that SoundExchange can address specific industry concerns through private negotiations while upholding the integrity of the CRB process and protecting the interests of SoundExchange members, said Executive Director John Simson.

The deal is merely an “important first step” in the negotiation process, Digital Media Association (DiMA) Executive Director Jonathan Potter said at the time. Large webcasters are encouraged by the agreement and the knowledge that good-faith talks have started, he said. However, he later said that DiMA companies want royalties aligned with the “economic reality of the webcasting business and with other competitors in cable and satellite radio.” They intend to continue seeking “substantially lower” rates and to lobby for the Internet Radio Equality Act, a measure pending in the House of Representatives and Senate to reverse the CRB ruling.

SoundExchange also reached out to smaller webcasters, announcing on 21 August that it would allow qualified services, defined as those earning $1.25 million or less in total revenues, to continue paying fees of 10 or 12 percent of revenue through 2010. The proposal includes a usage cap to ensure that only webcasters of a certain size who are forming or building their businesses benefit from the rate subsidy, SoundExchange said.

Small webcasters have until 14 September to accept the deal, and those that reject it will be bound by the rates set out by the CRB. SoundExchange has extended the same agreement individually to several webcasters not party to the ongoing negotiations because it “seems only fair,” said General Counsel Michael Huppe. However, any industry-wide solution requires approval by the copyright judges, he said.

Some small web radio services say the offer leaves them cold because the definition of a small webcaster does not match that used by the US Small Business Administration for small broadcasters (earnings of $6 million or less per year), the Associated Press reported. Another concern is said to be the fact that the accords only cover recordings of SoundExchange members, leaving webcasters to pay the CRB rate for music owned by non-members.

Noncommercial webcasters are also pressing for changes to the rate set by the CRB. Under the ruling, they must pay $500 per channel or station per year for digital audio transmission of not more than 159,140 aggregate tuning hours, and commercial fees for anything over that cap.

The Corporation for Public Broadcasting (CPB) has had several “productive” meetings with SoundExchange regarding a licensing agreement and payment of royalties for online music streaming, a spokeswoman said. Because talks were ongoing, she would not elaborate on what issues are under consideration.

The SoundExchange spokesman characterised negotiations with noncommercial webcasters as progressing “nicely” and said CPB and National Public Radio are in the process of gathering field data. “We should have some resolution by the end of September,” he said.

Dugie Standeford may be reached at info@ip-watch.ch.