Web Royalty Deal Near Completion

A long-running dispute between the music industry and small webcasters may have come to an amicable conclusion. Over the weekend of October 5-6, representatives from both sides agreed on a system of royalties to be paid to record labels and artists based on a percentage of webcaster revenue or expenses, rather than on a per song basis. Last summer, Librarian of Congress James Billington decreed that all webcasters should pay a royalty rate of 0.07¢ per song per 1000 listeners. Many small webcasters, including many college radio stations, chose to go offline rather than face fees they couldn't afford.

The new deal would reach back to 1998, with a retroactive rate around 8% on a revenue basis, and forward through 2004, with future fees to range from about 10% to 12% on a revenue basis. Royalties figured on an expense basis would be about 5% retroactively and 7% going forward. David Landis, founder of Discombobulated, LLC., which operates LA-based Ultimate-80s.com, told the Hollywood Reporter that the deal is one "we can live with."

The US House of Representatives approved the deal on Monday, October 7, voting unanimously to institute legislation sponsored by House Judiciary Committee chairman F. James Sensenbrenner, Jr. (R-Wisconsin), whose bill codified the terms agreed to by the music industry and webcasters. The bill sets minimum and maximum amounts of royalties due, including a minimum of $5000 and 7% of expenses or 10% of revenue on the first $250,000 made or expended. In 2003, webcasters who reach a $250,000 revenue threshold would pay 12% of revenue up to a maximum of $500,000, with the maximum revenue rising to $1.25 million in 2004. Retroactive to 1999, webcasters will pay a minimum of $2000 per year and 5% of expenses or 8% of revenue. Webcasters will pay $500 for 1998, the first year the royalty law applied.

"We are pleased with the unanimous vote in the House of Representatives in support of this legislation," read a joint statement from the Recording Industry Association of America (RIAA) and the Voice of the Webcasters organization. "We both want fans to have the best musical experience possible, and this legislation helps us move forward together toward that goal. We would like to thank congressional leaders for their interest in this matter, and we look forward to working with the Senate to move this process along."

Senate approval will finalize the deal; reports from Washington say chances for passage are excellent. Large commercial webcasters are still negotiating with the music industry over royalties.

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