Webcasters have received what appears to be at least a temporary reprieve from what some considered to be onerous new royalty rates that could have led some online radio stations to cease playing music. 

A recording royalty rate increase imposed by the Copyright Royalty Board (CRB) will not take effect on July 15, as scheduled.  During a hearing on Thursday before the U.S. House of Representatives’ Committee on Energy and Commerce, SoundExchange, the sole administrative entity designated by the U.S. Copyright Office to collect and distribute performance royalties that are owed artists and labels, indicated that it would hold off on enforcing the new rates as it continues to negotiate with webcasters. 

The SaveNetRadio Coalition had described the situation as “grave” just a day earlier — following the U.S. Court of Appeals for the D.C. Circuit’s denial of an emergency stay sought by the Digital Media Association, National Public Radio and a group of small commercial webcasters. 

In a July 12 news release, John L. Simson, executive director of Sound Exchange, had hailed the court’s decision.  He maintained that the court’s action “vividly demonstrates that the Copyright Royalty Judges got it right when they set royalty rates and terms for the use of music on Internet radio” and described it as “a major victory for recording artists and record labels whose hard work and creativity provides the music around which the Internet radio business is built.”  However, in a possible foreshadowing of the latest development, he continued, “Notwithstanding this victory, we continue to reach out to the webcasting community to reach business solutions… We look forward to working with our partners, the webcasters, to grow opportunities across the board for Internet radio operators and recording artists.” 

For its part, the SaveNetRadio Coalition declares in a message posted on its website: “Congress and SoundExchange have heard loud and clear the amazing outpouring of support for Internet radio from webcasters, listeners and the thousands of artists they support.  A commitment has been made to negotiate reasonable royalties, recognizing the industry’s long-term value and its still-developing revenue potential.”

Maintaining that it is “mindful of the need to nurture the growth of the Internet Radio industry,” SoundExchange, prior to Thursday, had offered to extend what it called 1998-era below-market rates to small commercial webcasters and to keep rates at 2003 levels for thousands of non-commercial webcasters – while sparing them from paying minimum per-channel-per-year fees of $6,000 (as approved by the CRB) until next year or later. 

Thursday’s deal affords SoundExchange and the webcasters an opportunity to engage in further discussions and seek to arrive at mutually agreeable, longer-term solutions.  It also keeps alive the possibility of Congressional action on the Internet Radio Equality Act (H.R. 2060, S.1353).  The proposed legislation would nullify the CRB decision that would significantly raise the rates that webcasters pay to copyright holders for streaming songs, establishing a percentage-based royalty system similar to that of satellite and cable radio broadcasters – a system under which webcasters with negligible revenues might not have to make any payments. 

SoundExchange has decried the proposed legislation as “a blatant attempt to strip artists and record labels of their hard-won royalties for the use of their sound recordings on Internet radio.”  Simson, its executive director, contends that the Internet Radio Equality Act will give more money and power to the big operators in the webcasting industry rather than helping small webcasters and artists. 

Clearly, if the two sides are to reach a permanent accord, it will not likely be based on either a straight percentage fee, nor on the rates that were slated to go into effect next week — under which fees paid by webcasters would rise by 300-1,200 percent retroactive to last year.

In an apparent effort to codify Simson’s assurances that SoundExchange would not enforce the CRB royalty rates beginning next week, while prodding the two sides in the dispute to negotiate and reach an acceptable accord, U.S. Reps. Nydia Velazquez (D-NY) and Steve Chabot (R-OH), chairwoman and ranking member, respectively, of the House Small Business Committee, have introduced a bill (H.R. 3060) that would officially extend the date on which initial royalty payments are due by 60 days.

As previously reported on AcousticMusicScene.com [The Future of Internet Radio May Hinge on Royalty Rates Issue, May 9 – posted in News-U.S. National, Acoustic Radio Waves and on the Home Page], many independent artists have come to rely on online radio as a key way of gaining exposure for their music that they would not otherwise get via commercial broadcast radio.  But just how many webcasters (primarily nonprofits or small organizations) will be playing music in the near future — and the diversity of styles that will be heard —  may well depend on the outcome of the current royalty rates dispute.