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Webcasters, Music Industry Reach Accord On Royalties

Agreement averts a shutdown of smaller Web broadcasters

by Martin H. Bosworth
ConsumerAffairs.com

August 25, 2007 

The Digital Media Association (DiMA), representing Internet radio broadcasters such as Pandora and Live365, and SoundExchange agreed to limit royalty payments for record labels to $50,000.

The music industry had originally convinced the U.S. Copyright Royalty Board to adopt a royalty structure that would have set minimum payments for royalties at $500 per station, pushing payments into the million-dollar range.

“This agreement is a clear sign of progress in the ongoing negotiations between webcasters and SoundExchange and a very good first step toward a viable solution, but it is just the beginning," said Jake Ward, spokesperson for the SaveNetRadio coalition in a statement. "As the negotiation of recording royalty rates and terms continues, SaveNetRadio urges everyone involved to work in good faith toward a resolution.”

Under the terms of the agreement, Internet radio broadcasters would have to maintain a detailed census of the songs they play on all stations at all times.

Both sides agreed to continue discussions regarding the implementation of digital rights management (DRM) technology into radio streams, to prevent listeners from downloading songs or streams to their computers for later use.

The factions also did not reach an agreement on the actual royalty rate structure itself. Under the new rate structure approved by the CRB, Webcasters would have to pay a small percentage of royalties per song, while other broadcasters such as satellite radio pay fixed percentages of the revenues they earn.

The new rate structure, written almost entirely by SoundExchange, inspired a massive wave of grassroots protests, forcing the CRB to delay implementation of the new rates. In the intervening time, members of Congress in both houses proposed legislation to overturn the new rates and restore the old royalty payment system, or offer payment structures similar to satellite radio.

The threat of Congressional involvment moved the music industry to offer a stay of execution after the royalty deadline passed on July 15, so that both sides could sit down and negotiate better terms.

Senator Ron Wyden (D-OR), a co-sponsor of the "Internet Radio Equality Act" in the Senate offered cautious praise for the compromise.

“We are encouraged by the good faith efforts represented by this initial agreement," Wyden said in a statement. "It is a promising first step in the negotiation process which we are hoping will make our legislation unnecessary."

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