Music Webcaster Group Hails Royalty Agreement

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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 business.

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."

SoundExchange 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 webcaster.

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.

SoundExchange 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.

Smaller 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.


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