Net Radio Update: SoundExchange Offers Deal to Webcasters

The war being waged between internet radio stations and copyright royalty collection agency SoundExchange turned another corner over the last 48 hours, as SoundExchange offered webcasters what could be characterized as a compromise.

In response to a letter sent by ranking members of the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property, SoundExchange has proposed that-- instead of a per-play, per-listener fee-- small commercial and noncommercial stations would pay 10% of their gross income up to $250,000 and 12% of anything above that to the collection agency through 2010. The proposal is based on the similar stipulations in the Small Webcaster Settlement Act (SWSA), which defined a "small" webcaster as any station with a gross annual income of less than $1.2 million.

The vague offer failed to stipulate how much income a station has to accrue before they no longer qualify for the rate under the new proposal, leaving popular mid-sized sites such as Live365.com and Pandora.com still potentially vulnerable to the original rate hike. Internet radio advocacy sites like SaveNetRadio.org and AccuRadio head Kurt Hanson's Radio and Internet Newsletter also quickly joined the chorus of opposition to the proposal.

As Hanson stated in an e-mail to Pitchfork, "this offer does nothing for the webcasters that comprise 95% or more of Internet radio listening -- broadcast simulcasts, portals' sites (e.g., Yahoo! LAUNCHcast), midsize webcasters (e.g., Pandora and Live365), hobbyists, etc.-- and offers no long-term solution even for small webcasters."

By means of an official rebuttal to the SoundExchange offer, David Oxenford, a lawyer representing many of the small webcasters affected by the proposed rate changes, wrote a statement published yesterday afternoon:

"While there has been much in the press about SoundExchange extending the SWSA, that really is not what happened. They simply made a preliminary, conditional offer to settle the case to the group of independent commercial webcasters that I represented in the CRB proceeding [the roughly two years of hearings between webcasters and the Copyright Royalty Board that resulted in the March 2 rate adjustment]. Their offer is to extend the SWSA with some "tweaks" that are yet to be negotiated. A SWSA extension would limit small webcasters to $1.2 million in revenue, and once they earned a dollar more - all their performances back to the beginning of the year in which they exceed the cap would be subject to the CRB per performance royalties - effectively exceeding their revenues by many multiples...

While my clients are pleased that SoundExchange has finally made us a proposal after we have been requesting one for the past two years, their offer is simply an offer to extend the SWSA with some modifications that they want -- and we are studying these proposed modifications. The independent webcasters have suggested modifications of our own to the SWSA, modifications which were not addressed in the SoundExchange proposal.

We welcome this proposal as what it is -- the first step in a negotiation process which we hope to be able to conduct in a business-like fashion in the coming weeks -- rather than one negotiated through press releases."