Music Group Offers Some Web Radio Sites a Break

By Mike Musgrove
Washington Post Staff Writer
Wednesday, May 23, 2007

Small Internet radio stations were offered a break yesterday, when a recording industry group offered to reduce the royalties it collects for music played online.

Web radio stations are facing new and higher royalty fees starting in July, but many have protested that the higher fees -- triple current rates -- would put them out of business. Fans of online music stations are concerned that the fee increase would wipe out a nascent Web broadcasting industry that is exposing listeners to a wide range of music that is not often heard on terrestrial radio.

The fees were instituted by a panel of judges appointed by the librarian of Congress, at a rate recommended by SoundExchange, which collects online royalties for the music industry. Yesterday, SoundExchange offered to let broadcasters with less than $1.2 million in annual revenue pay a reduced rate.

"There's a sense in the music community and in Congress that small webcasters need more time to develop their businesses," John L. Simson, executive director of SoundExchange, said in a written statement. "We look at it as artists and labels doing their part to help small operators get a stronger foothold."

Under the SoundExchange offer, small webcasters would pay 10 percent of all gross revenue up to $250,000 and 12 percent of all gross revenue above that amount.

Michael Huppe, SoundExchange's general counsel, said the organization was influenced by a letter it received on Friday, co-signed by Reps. Howard L. Berman (D-Calif.) and Howard Coble (R-N.C.), urging SoundExchange to "initiate good faith private negotiations." Berman is chairman of the House Judiciary subcommittee on courts, the Internet and intellectual property.

Pandora and Live365, two Web radio companies that have been lobbying Congress to get the new fees overturned, would be excluded, because their revenues exceed $1.2 million .

Jonathan Potter, executive director of the Digital Media Association, a trade group, said yesterday that he did not see how SoundExchange's offer would help build a thriving Web radio industry.

"Pandora has under a hundred employees, Live365 has 35. Under any definition of the word, they're small businesses, and yet they don't qualify," Potter said. "I don't see why SoundExchange sees this as having a positive impact on the industry."

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