Record Labels Offer Small Webcasters "A Break"

If you've been following Net Radio's copyright royalty rate hike saga you know that webcasters will begin paying dramatically higher rates starting July 15. Unless something pretty major happens, like an act of Congress.

The labels have been hardnosed about the new rates, even though the increases might kill off some Net radio stations. Criticism of the new rates has been growing, and a couple of new bills have indeed been introduced in Congress to stop them.

Now the labels want to deal. Yesterday, the labels' royalties collecting arm, SoundExchange, made an offer to a group of small radio stations that would allow them to stick with the old, lower royalty rates. No D-day on July 15.

Here's SoundExchange executive director John Simson in a news release yesterday: "The artists and labels are acting in good faith today, giving small webcasters a break."

Under SoundExchange's proposed deal, Net radio stations that take in less than $1.25 million in yearly revenue would pay a flat 10 percent of their revenues up to $250,000, and 12 percent on revenues above that.

A SoundExchange spokesman says the new proposal has been sent to the attorney representing the small webcasters. A response is expected shortly.

The labels aren't acting in good faith here, as they claim. They're simply making an easy concession in response to direct pressure from Congress. They can afford to waive the added fees from the small labels; what they're really after is the higher per-channel fees they'll be receiving from larger webcasters like Pandora, Last.fm, AOL and Yahoo.

SaveNetRadio, the webcasters' industry group, almost immediately came out against the offer, saying that some of the webcasters that stand to be hurt worst by the new rates (like Pandora and Last.fm) can't qualify as "small" stations.

Starting July 15, medium-sized and large net radio stations will pay not only a higher royalty rate (retroactive to January 2006), but will pay $500 for each channel they operate, with no limit. This will hurt interactive stations like Pandora that have helped users set up thousands of mini stations based on music tastes. It might also cause large operators like Clear Channel to narrow down the diverse array of stations they operate to a few boring, low-risk, mainstream ones.

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