The U.S. Congress approved a deal early this morning (Nov. 15) that would allow small Internet-based radio stations to pay lower royalty rates to the musicians and record labels whose songs they use.

The U.S. Congress approved a deal early this morning (Nov. 15) that would allow small Internet-based radio stations to pay lower royalty rates to the musicians and record labels whose songs they use. The move amounts to a stay of execution for many smaller Webcasters, who had feared the established royalty rate that went into effect Oct. 20 would have forced them offline, narrowing the market to a few large players like America Online.

In a late-night session, both the House of Representatives and the Senate passed a bill that would suspend payments for small Webcasters until Dec. 15, giving them a chance to finalize a discount rate they had previously hammered out with musicians and record labels.

Industry players on all sides hailed the bill, saying it would allow hobbyists, small independent operators, and niche players to continue streaming radio-style broadcasts over the Internet. The bill, sponsored by lame-duck North Carolina Republican Sen. Jesse Helms, would allow copyright holders and Webcasters to forgo the established rate set by the Library of Congress and negotiate separate deals on their own depending on the status of the Webcaster.

Large players like AOL and Clear Channel Communications Inc. will make payments based on the established rate of roughly 1 cent per hour for each listener, while smaller operators will be able to pay a percentage of their revenues or expenses. Noncommercial operators such as college and religious stations will not have to make royalty payments for another six months as they reach a deal of their own. Hobbyists would be able to choose to be counted as a nonprofit or a small business.

A similar bill that spelled out the alternate payment options for small Webcasters -- up to 12 percent of revenues or 7 percent of expenses -- passed the House last month, but stalled in the Senate after religious broadcasters objected that the rates were still too high.

The revised bill removes any mention of specific rates, instead giving royalty-collection clearinghouse SoundExchange the authority to negotiate discounts on behalf of musicians and record labels. SoundExchange will likely stick with the rates hammered out previously, executive director John Simson said. "That's the intention," he said. "I'm glad we're moving ahead."


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