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Music Webcaster Group Hails Royalty Agreement

Washington – Home audio products equipped
with Internet radio will continue to access a broad variety of pure-play
music-streaming sites following a music-industry agreement.

A webcaster group
said the deal “will provide some
relief from the crushing royalties that were imposed by the Copyright Royalty
Board [in March 2007].”

Many online
webcasters contended the Royalty Board rates would have put them out of

Jonathan Potter, executive director of
the Digital Media Association (DiMA),
said the agreement with SoundExchange,
which collects digital-music royalties, is a step in the direction of leveling
“the competitive playing field for Internet radio companies as compared
to competing radio services.”

called the rate agreement
“experimental” because it allows non-subscription webcasters to pay royalties
based on a percentage of their revenue. The Copyright Royalty Board, in
contrast, set payments at a rate based on the number of times a song is played
and the number of people listening to a song, regardless of the income of a

For subscription
streaming services, the new royalty rate is based on a per-performance formula
forged earlier this year with the National Association of Broadcasters for
broadcast stations that stream over the Internet. All pure-play webcasters
would pay an annual minimum fee of $25,000 that can then be applied to
royalties owed under the new formula.

called revenue sharing “an experimental structure intended to provide an
innovative approach for a particular genre of webcasters,” and said it “does
not consider these terms indicative of fair market rates.” Executive director
John Simson said: “Time will tell if revenue sharing is the right move for both
the recording community and webcasters, but we’re willing to take the risk in
the hope that artists, rights holders and webcasters can all benefit.”

The agreement is
retroactive to 2006 and extends through 2015 (and to 2014 for small
webcasters). Pure-play webcasters who choose not to opt into the agreement must
pay royalties based on the Royalty Board’s March 2007 rates. Webcasters could
also opt to negotiate royalties with individual music labels and artists.

The agreement sets
three rate classes: Larger non-subscription webcasters that generate more than
$1.25 million will pay based on one of two formulas, which generates more
royalties. One is a minimum percentage of all of their U.S. revenues
up to 25 percent. The other is a per-stream rate that is significantly lower
than what the Copyright Board set.

non-subscription webcasters pay based on a percentage of revenue up to 14
percent or 7 percent of their expenses. Subscription services pay
per-performance rates of $0.0008 for 2006 rising to $0.0025 in 2015.