Web Fee Agreement

Webcasters will pay a new royalty rate to the recording industry, as of April 3.

Representatives for webcasters, musicians, and music publishers have agreed to a deal that will allow nonsubscription webcasters their choice of payment schedules—0.0762¢ ($0.000762) per performance, on a per-performance, 1.17¢ per aggregate tuning hour, or 10.9% of gross revenues. These rates are for commercial Internet broadcasters, and don't apply to noncommercial enterprises, to radio stations that offer Internet simulcasts, or to small webcasters, who last year agreed to a separate rate schedule under the Small Webcasters Settlement Act.

The rates are "below market value," according to one music industry spokesman. Higher rates might have been reached through arbitration, but the costs incurred would have offset any gains. The agreement enables an immediate revenue stream from webcasters to the Recording Industry Association of America (RIAA). Last year, webcasters stopped paying royalties during arbitration, a possibility the new deal avoids. SoundExchange, a performance tracking organization, will collect the royalty payments.

The April 3 agreement runs through 2004, when negotiations about rates will begin anew. The rate agreed to last year was appealed by both webcasters and the music industry in a process that SoundExchange executive director John L. Simson characterized as "protracted and extraordinarily expensive arbitration." Digital Media Association executive director Jonathan Potter called the deal "a temporary Band-Aid that avoids millions of dollars of legal fees . . . and enables resources to be focused on high-quality programming that is enjoyed by millions of listeners."