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Congress Stalls on Economy but Moves on Net Radio Royalties

By Renay San Miguel
Sep 29, 2008 2:32 PM PT

The weekend media spotlight was on the heated Congressional negotiations that produced a financial bailout bill, which promptly went nowhere. But hidden somewhere in the static of dealmaking, rhetoric and counteroffers was a strong signal of support for Internet radio.

Congress Stalls on Economy but Moves on Net Radio Royalties

The Webcaster Settlement Act of 2008 passed the House on Saturday and was scheduled for a vote in the Senate on Monday. Although it doesn't rank on the priority scale with keeping the U.S. economy from riding off its rails, the bill is the result of similarly tough negotiations on the part of lawmakers and lobbyists for large broadcasting companies, public radio stations and small webcasters -- all having a stake in a rapidly growing Web radio industry.

Yet the bill itself doesn't end the debate involving how much large and small media companies -- commercial and noncommercial -- should pay to air songs and other copyrighted material over the Internet. It simply gives the Congressional stamp of approval to whatever final negotiations are agreed upon between groups like SoundExchange (an arm of the Recording Industry Association of America that collects royalties for the U.S. Copyright Office), the National Association of Broadcasters, the Digital Media Association, National Public Radio and Internet radio companies like Pandora and AccuRadio.

All of those entities now have until February of next year to try to resolve key issues, including the following:

  • Should royalties paid per performance be lowered, or should the rates be expressed as percentages of station revenues?
  • Should the rate for simulcasting be the same as Internet-only streams?
  • How big a discount, if any, should be granted to noncommercial stations -- public and college radio, religious broadcasters?
  • Should a revenue cap for small webcasters be extended over the next five years as those webcasters grow?

Negotiations Continue, Music Keeps Playing

None of the representatives contacted by the E-Commerce Times would go into detail about the content of the negotiations but almost all characterized the ongoing talks as constructive. "There has been progress in the talks, which is why they wanted this legislation," Richard Ades, SoundExchange spokesperson, told the E-Commerce Times. "They're moving in a positive direction and they're feeling good about where things are headed."

Issues still need to be finalized, but "we have reached agreements on some very fundamentally important areas, important to SoundExchange and to its members, and to public radio stations and the manner in which we operate," Michael Riksen, NPR vice president for government relations, told the E-Commerce Times.

The agreement that resulted in House passage nearly was derailed by objections from the NAB, which represents radio corporations. Many of their affiliates are simulcasting on the Web. Its members were afraid that a Congressionally set Dec. 15 deadline was not enough time for them to address their own issues, so the timeframe was extended to Feb. 15.

Although the parties involved have been debating the issue of royalties for Web radio for the past five years, the current round of negotiations was sparked by the controversy that resulted in March 2007, when the Copyright Royalty Board raised rates high enough to stir an outcry from webcasters claiming they'd be forced out of business.

One Webcaster's Perspective

AccuRadio CEO Kurt Hanson is one of those webcasters who says he'd be in financial jeopardy, but he's used his digitally powered microphone to raise awareness about the issues. "The Day of Silence was our idea back then," Hanson told the E-Commerce Times, referring to a protest activity involving all webcasters stopping transmissions for 24 hours when the Copyright Royalty Board first raised rates in 2003.

A partnership approach is helpful, said Hanson, who also publishes the online Radio and Internet Newsletter. "Hopefully, SoundExchange and its members will realize that it's radio that helps them expose music. Consumers discover and buy stuff they hear on the radio. Internet radio is one of the best things -- one of the few good things -- that's been happening for them over the last decade. It needs their support and should not be milked dry."

Ades echoes that sentiment, but with qualifications. "We love the eclectic stations and all the innovative ways they're getting the music out. Some business issues are being raised with SoundExchange but at the end of the day we can't be the savior for all business models that are out there. You can't just look at the cost side. What about the revenue side? How do the artists get paid for that?"

The Digital Side of NPR

"The future of webcasting and the future of public radio stations are pretty closely connected," NPR's Riksen said. For those who only know the news side of NPR-member stations, he points to groundbreaking music efforts from stations like KEXP in Seattle and KCRW in Santa Monica and its "Morning Becomes Eclectic" show.

NPR.org also has plans to stream the new Bob Dylan album, "Tell Tale Signs," a week before it is available in music stores. "We look at the Internet as an extension of our public service, and clearly that's true in the whole arena of music," Riksen said.


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