Small webcasters get royalty break

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The performance-rights organization set up to collect digital performance royalties for artists and the record label trumpeted a deal that it made with a handful of small webcasters Tuesday.

While the deal with SoundExchange and two dozen webcasters indicates progress on the politically sensitive issue, it also shows as much resistance as acceptance.

Under the deal, qualified small commercial webcasters — those that earn less than $1.25 million a year — would pay a royalty fee of 10%-12% of revenue. Once webcasters passed the threshold and a usage cap of 5 million aggregate tuning hours a month — a measure of music usage — they would pay the full commercial rate. The deal expires in 2010. SoundExchange claims that webcasters who qualify pay the same rate they did in 1998.

SoundExchange executive director John Simson said the deal gives small webcasters breathing space but still provides the artists and the labels something to take home.

"Giving small webcasters more time to build their businesses with below-market rates is something members of Congress wanted us to get done, and we have," Simson said. "We hope that these small webcasters will continue to provide innovative kinds of programming and a rich diversity of music."

The webcast royalty has been controversial since it was enacted by Congress, and the topic became a hot-button item after a panel of copyright royalty judges substantially increased the payment. It is split 50-50 between copyright owner — typically a label but sometimes the artist or other entity — and the performer.

SoundExchange reached a separate deal in August with the industry's big players in the hope that it would ease government scrutiny.

Making a deal with small webcasters is politically expedient. It's much easier for lawmakers to defend mom-and-pop operations and start-ups than it is to defend large, well-funded corporations.

While Tuesday's announcement could help SoundExchange in its battle on Capitol Hill, it isn't being universally embraced by the webcasting community.

David Oxenford, an attorney representing small webcasters, said his clients have yet to make a deal.

"My clients, who want to grow real businesses that are not artificially constrained by SoundExchange's arbitrarily chosen limits, are still hoping to reach an agreement with SoundExchange on something that will work for them," he wrote in an e-mail.
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