Web royalty deals sought

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WASHINGTON -- SoundExchange, the first performing rights organization collecting royalties for digital audio transmissions, is trying to cut deals with webcasters following recent decisions mandating increased royalties for Internet-delivered music.

SoundExchange executives contacted some services several weeks ago in order to seek information and schedule possible discussions and said Thursday that they are willing to meet with additional webcasters as well.

"Our continued outreach reflects our long-standing position that these are two businesses -- webcasting and creating music -- that are joined at the hip and need each other," SoundExchange executive director John Simson said. "We recognize that there may be certain needs and expectations, as expressed by webcasters in recent days, that might possibly be addressed through direct discussions."

On March 2, a panel of copyright judges, the Copyright Royalty Board, ruled that Web broadcasters must pay each time a listener hears a song at a rate that begins at 0.08 cents in 2006 and rises to 0.19 cents in 2010. Besides increasing the charge for each song, the ruling established a $500 minimum payment for each Web channel.

Internet radio royalties have become a thorny issue in part because conventional over-the-air stations pay nothing to use recordings. Online and regular stations pay royalties to songwriters, but under a 1995 law, companies transmitting music using the Internet, cable or satellite must pay the songwriter as well as the owner of the recording for the performance. The money is split between the owner, usually the label, and the performers.

Until the end of 2005, Internet stations could pay royalties based on either the number of songs they played or the number of hours listeners tuned in, and small companies had the option of giving SoundExchange about 12% of their revenue. That changed with the CRB's ruling.

This week, the CRB rejected webcasters' appeal to rehear the case, saying their arguments amounted to little more than a "rehash" of the arguments the judges already had rejected.

While SoundExchange maintains that the CRB's decision reflects the fair value for music in the market, the organization is willing to see what webcasters have to offer.

"We sought a dialogue with these services in order to determine if there is an appropriate business solution that addresses their concerns while still ensuring fair compensation for artists," SoundExchange general counsel Michael Huppe said.

Jonathan Potter, executive director of the Digital Media Assn. -- the webcasters trade group -- declined comment Thursday on SoundExchange's offer.
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