SMALL INTERNET FIRMS SIGN WEB ROYALTY RATE DEAL
Unless Congress changes the law quickly to implement the deal, however, these Webcasters will have to pay three years of back royalties Oct. 20 at the full rate set by the librarian of Congress, the Los Angels Times reports. That rate—0.07 cent per song per listener, or $92 per listener per year for an all-music station—could drive many small Webcasters out of business.
The two-year deal also calls for Webcasters to pay back and future royalties equal to 8% to 12% of their revenue or 5% to 7% of their expenses, whichever was higher, according to the Times. The deal, which also would let back royalties be paid in installments, initially applies only to Webcasters with less than $1 million in revenue.
The agreement Sunday came in response to pressure from leaders of the House and Senate judiciary committees, who are expected to take the lead in trying to implement a compromise through legislation. Lawmakers have been heavily lobbied by small Webcasters who fear that their industry will be destroyed if they are forced to pay high royalty rates, according to the Times.
In a statement, the Recording Industry Association of America and the Voice of the Webcasters announced their support for HR 5469, the Small Webcaster Amendments Act of 2002. "This Act sets rates and terms for the period of 1998 through 2004 for the use of sound recordings on small commercial Internet webcasting stations. The act embodies compromises for everyone involved. We appreciate the assistance of Congressional leaders in helping move this process along. We look forward to building business partnerships that create the best possible music experience for fans."
The deal offers no relief to large Webcasters, such as Yahoo’s Launch, or mid-size ones such as Radio Free Virgin or Live365. Negotiations last week between the labels and large Webcasters on a long-term deal failed to bear fruit, despite signs of progress. Larger Webcasters, such as America Online and Clear Channel Communications were not included in the agreement and will pay a per-song rate set by the Library of Congress in June. But the arrangement is unlikely to become law unless musicians and record labels agree on how to distribute the millions of dollars of anticipated royalties.
One potential sticking point for the small Webcasters' deal is payments to artists. Today, the labels are bound by contract to pay about half of the Webcasting royalties directly to performing artists. Some artists' unions and trade groups are insisting that any legislation for small Webcasters should also mandate direct payments to artists, but the labels have not agreed to such a provision.
The House of Representatives was set to delay the payment deadline by six months last week, but the two sides said they could work out an agreement on their own.
They will likely ask Congress to codify the agreement in law this week if musicians and record labels can agree how to distribute the money. Under an agreement reached previously, royalty money would be distributed directly to musicians, rather than going through record companies, after lawyers' fees and other expenses were taken out.
