Web Radio Seeks Resolution

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By Catherine Rampell
Washington Post Staff Writer
Wednesday, October 24, 2007

Internet radio webcasters are hoping a Senate hearing today will renew legislators' interest in their negotiations with the recording industry over royalty fees.

The hearing, held by the Senate Commerce Committee, will focus on the future of radio, the number of women and minorities who own radio stations, expansion and protection of community radio, and other aspects of a medium that is rapidly changing through technological advances and the recording industry's crumbling business model. The most contentious of these issues, though, involves what online radio stations will pay in order to sustain both innovations in radio and the artists whose music they feature.

Webcasters have argued that a royalty fee schedule set by the Copyright Royalty Board last spring would put online radio stations, and the independent musicians whose work they often play, out of business. This spring, legislators from the House and Senate proposed legislation to set Internet radio royalty rates at the lower levels used for satellite radio and jukeboxes, but then asked webcasters and copyright holders to try to negotiate a compromise.

Webcasters have been negotiating since July with SoundExchange, the organization that collects royalties on behalf of music copyright owners, over a new fee schedule. Webcasters say they are growing impatient with delays in the discussions.

"We made a royalty rate proposal on Aug. 23, and we have not heard a reply back," said Jonathan Potter, executive director of the Digital Media Association, which is negotiating on behalf of a group of 27 large Internet radio providers. "With this hearing we're now working to gather support for the Internet Radio Equality Act." The House version of the bill has 143 sponsors; its Senate counterpart has five.

SoundExchange said that discussions are continuing and that the organization has been meeting with individual webcasters to better understand their finances.

"We're moving as fast as we can considering there are so many parties involved," said Richard Ades, a spokesman for SoundExchange.

SoundExchange has already proposed a fee schedule that is lower than the Copyright Royalty Board's rates for commercial webcasters whose annual revenue is less than $1.25 million, and Ades said about 30 companies have accepted it. SoundExchange and the Digital Media Association also agreed in August to cap the total amount of per-channel fees that a Web service would have to pay, an issue that was of particular concern for webcasters such as Pandora that have millions of channels set up by individual users.

Still, webcasters say that even if there are favorable results to the negotiations, they are hoping for long-term legislation that will force all radio platforms -- including traditional AM/FM radio, which does not currently pay any royalties to SoundExchange -- to pay the same rates.

"We are in a strange situation of offering services that compete directly with terrestrial and satellite radio but have a different rate structure," said Tim Westergren, chief strategy officer and founder of Pandora. "There needs to be parity if we are going to survive."


© 2007 The Washington Post Company

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