SoundExchange Extends Offer To Small Webcasters; SaveNetRadio Says No
May 22, 2007 at 12:33 PM (PT)
SOUNDEXCHANGE today (5/22) offered to extend to small webcasters through 2010 the terms of prior legislation known as the Small Webcaster Settlement Act (SWSA) with some minor modifications. The 2002 act had set temporary below-market royalty rates for small Internet radio stations in order to provide them additional time to build their businesses.
Today's offer comes as a direct response to a request from the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property to "initiate good faith private negotiations with small commercial and noncommercial webcasters with the shared goal of ensuring their continued operations and viability." The Subcommittee's request was sent to SOUNDEXCHANGE last week in a letter co-signed by Reps. HOWARD BERMAN (D-CA) and HOWARD COBLE (R-NC).
These modest limitations assure that the subsidy is targeted only to those webcasters that Congress believes need the additional financial flexibility to build their businesses.
As suggested by the Subcommittee, SOUNDEXCHANGE is proposing that the subsidy be based on a percentage of revenue model and is proposing the same rates that prevailed under SWSA: small webcasters would pay royalty fees of 10% of all gross revenue up to $250,000 and 12% for all gross revenue above that amount. The proposal includes both a revenue cap and a usage cap to ensure that this subsidy is used only by webcasters of a certain size who are forming or strengthening their business.
"Although the rates revised by the CRB are fair and based on the value of music in the marketplace, there's a sense in the music community and in Congress that small webcasters need more time to develop their businesses," said SOUNDEXCHANGE Exec. Dir. JOHN SIMSON. "Artists and labels are offering a below-market rate to subsidize small webcasters because Congress has made it clear that this is a policy it desires to advance, at least for the next few years. We look at it as artists and labels doing their part to help small operators get a stronger foothold."
This offer is only for small webcasters and defers the new rates set by the CRB on MAY 1, 2007, retroactive to JANUARY 1, 2006 and effective through 2010.
SOUNDEXCHANGE General Counsel MICHAEL HUPPE said, "These modest limitations assure that the subsidy is targeted only to those webcasters that Congress believes need the additional financial flexibility to build their businesses. When a company's revenue or listenership reaches a certain level, our proposal appropriately provides that they share those full gains with the artists who helped create this opportunity for them. The net result of this proposal is that small webcasters would be guaranteed no increase in royalty payments for 13 years, from 1998-2010."
SaveNetRadio Rejects Offer
In response, SAVENETRADIO spokesperson JAKE WARD said, "The proposal made by SOUNDEXCHANGE today would throw 'large webcasters' under the bus and end any 'small' webcasters' hopes of one day becoming big. Under government-set revenue caps, webcasters will invest less, innovate less and promote less. Under this proposal, Internet radio would become a lousy long-term business, unable to compete effectively against big broadcast and big satellite radio -- artists, webcasters, and listeners be damned.
"Labeling webcasters small or large is a distinction without a difference. Two of the most prominent webcasters, PANDORA.com and LIVE365, are models of industry success but would be bankrupted by the CRB and by the SOUNDEXCHANGE proposals. PANDORA employs 100 people in an enterprise zone in OAKLAND, CA, but its popularity would put it out of business. Similarly, LIVE365, an aggregate webcaster that provides a platform for more than 10,000 individual webcasters, has a staff of fewer than 40. Though clearly small as a business, Live365's enormous importance and scope among webcasters would force them to shut down."