Webcasters close in on royalty settlement


WASHINGTON -- Performers and the record labels are moving closer to a settlement with webcasters about the royalty some Internet-music delivery services must pay to transmit music.

Negotiations about the royalty continued during the weekend even as webcasters began to pay the controversial royalty to SoundExchange, the nonprofit distribution service set up to give musicians the royalty.

Webcasters were required to pay the "true up," or money owed under the new royalty, by midnight Sunday.

"A broad spectrum of webcasters have begun paying," said SoundExchange spokesman Richard Ades, who refused to reveal who paid or how much.

Both SoundExchange and webcaster representatives including the Digital Media Assn., a trade group, have been attempting to reach a deal after the federal appeals court here turned back webcaster attempts to overturn a decision by a panel of copyright judges that said the original rate was too low.

During the weekend, DiMA executive director Jonathan Potter said his members, which include the industry's biggest players, accepted a SoundExchange offer to cap a $500-per-channel administrative fee DiMA members -- which include most of the industry's biggest players -- have to pay under the ruling at $50,000.

The $500 payment, which is an advance on royalties, has been a contentious issue as webcasters often build businesses using many niche channels.

As a quid pro quo, webcasters would have to agree to more accurate and extensive reporting requirements to ensure that artists get paid what they are due and implement anti-stream-ripping technology to protect copyrights.

The offer for the largest players comes after SoundExchange extended an offer to the industry's bit players that would give smaller businesses a big break on the royalty.

But Ades said the deal has yet to be signed as the parities continued to talk.

Royalty payments often are contentions, but the controversy about the webcaster royalty reached a fever pitch after a panel of copyright royalty judges substantially increased the payment. It is split 50-50 between copyright owner -- typicality a label but sometimes the artists or other entities -- and the performer.

On March 2, the Copyright Royalty Board ruled that webcasters must pay each time a listener hears a song at a rate that began at 0.08 cents in 2006. That rate 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.

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.

By some estimates, the change amounts to a 300% increase. Webcasters nationwide have decried the change.

The royalty was mandated by Congress in 1995 as part of the Digital Performance Right in Sound Recording Act, which became effective in 1996. Portions of the law were clarified in 1998 in the Digital Millennium Copyright Act, which applied the royalty to webcasts and satellite radio.