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Lawmakers attack webcasting royalties

With less than three weeks remaining before new webcasting royalties are due to take effect, two members of Congress introduced a bill today (Download Internet radio bill.pdf) to wipe out the looming increase. The proposal by Rep. Jay Inslee (D-WA) and Don Manzullo (R-IL) would give a new lease on life to small and non-commercial webcasters, as well as a potentially huge discount to large webcasters. But it would also force performing artists and their record companies to accept smaller amounts per song played than they received under the previous royalty regime, something they're not likely to do without a fight.

The rates approved by the Copyright Royalty Board last month amount to about 1.7 cents per listener per hour of music, which webcasting guru Kurt Hanson contends is more than most webcasters can make on advertising. The rates are scheduled to rise to about 3 cents per listener per hour in 2010, which is two and a half times the previous rate for large commercial stations. The board also eliminated the discounts for small commercial and non-commercial webcasters, and imposed a minimum annual fee of $500 per station that threatens to crush companies offering the kind of personalization that makes online radio more appealing than its over-the-air predecessor.

Inslee and Manzullo's bill would call on copyright royalty judges to use the same criteria for webcasters' rates as they do for satellite radio and other services with statutory licenses. In the meantime, it would set a minimum fee of $500 per webcaster -- a huge relief to services from Pandora and RealNetworks (whose headquarters in Seattle is just outside Inslee's district) -- and give commercial stations two choices for royalty rates: 7.5% of revenue (a sharp reduction from the 12% paid previously by small webcasters), or .33 cents per hour. Non-commercial broadcasters would have no annual minimum, and would pay discounted rates pegged to what they pay ASCAP, BMI and SESAC.

The proposal comes a week after SoundExchange, an agency that collects webcasting royalties for labels and performers, issued a press release touting its desire to strike deals with webcasters  upset about the new rates. “Our continued outreach reflects our long-standing position that these are two businesses – webcasting and creating music – that are joined at the hip and that need each other,” SoundExchange's executive director, John Simson, was quoted saying. Many webcasters would rather see Congress step in and quash the new rates, as it did five years ago on behalf of small commercial stations on the Net. To rally support, there's talk of a lobbying blitz on Capitol Hill next month, along with a one-day shutdown of online stations.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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