Net Radio Deadline Looms (Again)

The Copyright Royalties Board decision, handed down earlier this year and then postponed for several months, is set to take effect on July 15. While some progress has been made in discussions regarding a potential compromise, both sides have dug in and begun taking legal and legislative actions against each other.

At the heart of the debate is the impact the royalties—retroactive to the beginning of the year—will have on small webcasters. Despite the best efforts of SoundExchange—a spinoff of the Recording Industry Association of America headed by RIAA veteran John Simson—to shift the battle to a discussion of large internet radio stations needing to pay more, the math on the royalties show the small webcasters will pay amounts that will put many of them out of business.

Simson describes the changing face of the music industry as a move away from just the CD and into what he dubs "the listen" or the whole user experience. And internet radio webcasters are a front and center target because they provide rich media and not just music.

"When you have services that are feature-rich like Pandora or Rhapsody, Yahoo or SomaFM," says Simson, "[these are] places where people spend a lot of time listening, that time that cuts into listening to CDs—that time's moved to listens instead of purchasing CDs."

According to the current formula, each webcaster will pay royalties at roughly double their current rate, as well as a $500-per-year administrative fee per channel (or per internet radio station). The administrative fee alone nets well over a billion dollars for SoundExchange, and results in sizeable bills for the small webcasters.

Faced with an onslaught of public protest, SoundExchange has offered a cap of $2,500-per-year on the administrative fee for the next two years, but the small webcasters have rejected that for three reasons: the double royalty rates, retroactivity, and the belief that they would only be postponing their ultimate demise.

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