Last-Minute Reprieve for Web Radio

Things looked grim for Internet radio late last week. On July 11, the DC Circuit Court of Appeals declined to delay the increase in digital performance royalties the Copyright Royalty Board imposed last March. The new fees were scheduled to go into effect on July 15, retroactive to the beginning of 2006.

On July 12, SoundExchange, the RIAA's non-profit royalty collecting agency, published a press release celebrating its legal victory. "We are pleased by this decision, which vividly demonstrates that the Copyright Royalty Judges got it right when they set royalty rates and terms for the use of music on Internet radio," said John Simson, executive director of SoundExchange. "This is a major victory for recording artists and record labels whose hard work and creativity provide the music around which the Internet radio business is built."

The really telling sentence in the release was, "Notwithstanding this victory, we continue to reach out to the webcasting community to reach business solutions."

Apparently Simson meant it. The next day, SoundExchange posted a new press release, offering "to cap the $500 per channel minimum fee at $50,000 per year for webcasters who agree to provide more detailed reporting of the music that they play and work to stop users from engaging in 'streamripping'—turning Internet radio performances into a digital music library."

The compromise came about as the result of a request by Representative Ed Markey (D, MA) of the House Commerce Committee's Telecommunications and Internet Subcommittee, who has expressed concerns about the CRB's rate increase. As the Hollywood Reporter wryly commented, "The Commerce Committee is usually seen as a less hospitable venue than the Judiciary Committee. While the Judiciary Committee usually handles copyright matters, the Commerce Committee has jurisdiction over the Internet."

SoundExchange made the offer to the Digital Media Association (DiMA), which represents large webcasters, and David Oxenford, who represents small Internet streamers, at a House Commerce Committee roundtable.

The deal, which is subject to approval by the Copyright Royalty Judges (CRJs), seems to benefit small commercial webcasters by retaining their 1998-era rates and non-commercial webcasters by allowing them to pay 2003 levels. The $50,000 cap will affect large commercial webcasters like Yahoo! and Pandora, which are expected to pay the higher rates imposed in March, starting on the July 15 deadline.

SoundExchange, which has been playing hardball until now, made another interesting concession, according to Pandora founder Tim Westergren: "SoundExchange has committed to not putting webcasters out of business while negotiations are ongoing."

Simson assured Radio and Internet Newsletter that SoundExchange was more interested in getting a deal than in busting sites. "Look, Monday's not that magical a day. It's going to be business as usual at SoundExchange—[we'll be] trying to process data, trying to get deals done. We're not gonna be filing lawsuits."

There are still many issues to be resolved before we can declare that Internet radio is "saved," but it sounds like the various parties are at least behaving like adults now. Surely that's a start.