Another Reprieve for Small Webcasters?

Small webcasters have won another reprieve from royalty payments.

On Friday, October 25, SoundExchange, an organization established by the music industry to collect and distribute royalty payments, announced that it would hold off collecting royalties from webcasters until the US Senate reconvenes to consider legislation that would codify a rate approved by the music industry, a webcasters' organization, and the US House of Representatives.

A reduced rate agreed to by the Recording Industry Association of America (RIAA) and the Voice of Webcasters (VOW) was unanimously approved by a House vote in September, but was stalled before the pre-election recess by North Carolina Senator Jesse Helms, who put a "hold" on it, reportedly at the behest of religious broadcasters, who feel that even the reduced rates are exorbitant.

"Given the unfortunate fact that a lone Senator apparently held up the small webcasters' bill, we felt it appropriate to offer this proposal," said SoundExchange executive director John Simson. "We hope that this unexpected development will be soon resolved by the Senate. From the beginning, we have wanted to work with webcasters, and this temporary payment policy is another example of our commitment to the webcasting industry."

The original rate established this past June by Librarian of Congress James Billington would have charged webcasters 70¢ per song per 1000 listeners, retroactive to 1998, when the Digital Millennium Copyright Act was enacted. By Sunday, October 27, webcasters would have been required by law to begin paying royalties at a discount rate recently agreed to by the RIAA and VOW, if SoundExchange had not relented.

In other music industry news, radio giants Clear Channel Communications and Cox Radio are restructuring their deals with independent record promoters. "Indies," as they are known in the business, are middlemen who encourage radio stations to play new releases from record companies, offering broadcasters "promotional support" and receiving hefty payments from the music industry in return. The system arose to create a false wall between the music industry and broadcasters after the "payola" scandal of the early 1960s, in which it was revealed that record labels paid stations for airplay. Over the past two years, lawmakers have again been examining the too-cozy relationship between record labels, promoters, and broadcasters.

Atlanta-based Cox Radio, which operates 79 stations, announced in mid-October that it would completely severe its ties with independent record promoters. Clear Channel has directed its 1200 stations to put any money received from promoters into general corporate revenue, hoping to eliminate the opportunity to bribe program directors, according to Clear Channel spokeswoman Pam Taylor.

Merrill Lynch analysts estimate that the music industry's "Big Five" music conglomerates spend approximately $100 million annually on indirect payments to the radio industry. For decades, it has been an article of faith in the music business that airplay ("spins") has tremendous promotional value, despite the number of acts (Metallica, Kate Bush, Ani DiFranco among them) that have succeeded with virtually no radio exposure. Curiously, free spins on the Internet are seen as having no value—or worse, as piracy to be suppressed.