SoundExchange offers temporary reprieve to small webcasters

[SoundExchange statement]

SoundExchange today 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 that sunset in 2005 had set temporary below-market royalty rates for small Internet radio stations in order to provide them additional time to build their businesses. SoundExchange's offer to extend the core SWSA terms represents a continued subsidy for these small webcasters in the form of lower payments to artists and content owners.

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 Representatives Howard L. Berman (D-CA) and Howard Coble (R-NC).

"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 John Simson, executive director of SoundExchange. "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. While the subsidy is an effort by SoundExchange to address alleged weaknesses of the small webcasters' businesses, SoundExchange noted that this proposal is an adjunct to the CRB process.

"The copyright royalty judges conducted a thorough and comprehensive legal proceeding. The judges determined fair rates based upon marketplace evidence provided by all parties. Nobody is questioning the integrity of the CRB process," said Michael Huppe, General Counsel of SoundExchange. Indeed, the subcommittee noted that, "we have not yet been provided with a single credible assertion by a party to the proceeding that tends to demonstrate the CRB deviated from the process specified in the Reform Act."

Huppe added, "This offer is not about displacing the judges' correct analysis of the market, but rather about extending for a limited time the below-market rates that these small businesses received several years ago. We have heard the concerns of Congress and we are responding."

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 percent of all gross revenue up to $250,000, and 12 percent 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.

"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," said Huppe. "The net result of this proposal is that small webcasters would be guaranteed no increase in royalty payments for 13 years, from 1998-2010."

Of particular concern to SoundExchange and the thousands of artists and labels it represents is the lack of compliance by most small webcasters, including many that have complained the loudest about the CRB decision. Indeed, in their letter Representatives Berman and Coble noted that, "In return for compelling sound recording copyright owners to make their works available, the qualifying services agree to meet the terms and conditions of the compulsory license, which, inter alia, requires the periodic filing of statements of account and the timely payment of statutory royalties to the copyright owners whose works they have elected to perform."

In order for the process to work, small webcasters need to register with the copyright office, comply with all reporting requirements to SoundExchange and not avoid paying royalties that are lawfully owed. "The artists and labels are acting in good faith today, giving small webcasters a break. In return they expect the integrity of their music and their copyrights to be respected. That includes proper tracking and reporting of how their music is used, and that they are properly compensated," said Simson.

Background

On May 1, 2007 the Copyright Royalty Board issued a fair and reasonable decision that sets compensation rates to be paid artists and record labels for the public performance of their works by Internet radio broadcasters from 2006-2010. The three-judge panel heard testimony from dozens of witnesses and conducted a comprehensive review of tens of thousands of pages of evidence submitted by all interested parties over an 18-month period. The decision is a reflection of the need for artists to be fairly compensated for the use of their work by webcasters who benefit - financially or otherwise - from their talents. As the music industry evolves from CD-only sales to multiple distribution platforms it is critical that creators of music share in revenues from all platforms.

article originally published at http://www.earthtimes.org/articles/show/news_press_release,110138.shtml.

Trying to distract us from the real issue.

It seems like SoundExchange is trying to diffuse the grass roots effort to pass the Internet Radio Equality Act by trying to strike an acceptable but short-lived deal with small webcasters. The perception is that they're making a great offer to appease small webcasters. But the reality is that there are un-stated changes to the original SWSA and that this deal is only for the next 30 months, and then royalties will increase again. Most small webcasters will find their royalties going up over 10 times between 2010 and 2011 with this settlement deal. This is not a solution.

Their press release says:

``[SoundExchange] 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."
(snip)
These minor modifications include a revenue cap and a usage cap.``

The details of of these caps are not provided, nor are the other "minor modifications". What if that revenue cap is $100,000? What if the usage cap is 500,000 hours a month (or an average of 680 concurrent listeners).

Plus this does nothing to help all the small webcasters who rely on Live365 for their broadcasts.

As it currently stands, this press release seems to be all fluff, and no substance, and needs to be called out for what it is: an attempt to derail the current Internet Radio Equality Act now in congress.

The most important part of the Internet Radio Equality Act is the changing of the basis on which the CRB calculates royalties for net radio (which is completely different than how sat and cable radio services are calculated). SoundExchange is hoping that this press release will takes the attention away from the real issue- the way that the CRB sets rates for net radio, and getting rid of the willing buyer, willing seller provisions, and making the royalty setting procedures the same for internet radio, satellite radio and cable music services.

The media's job is to interest the public in the public interest. -John Dewey