The House of Representatives yesterday (Oct. 7) passed landmark legislation that will offer small Webcasters -- those whose gross revenues are less than $1 million a year -- significant discounts in r

The House of Representatives yesterday (Oct. 7) passed landmark legislation that will offer small Webcasters -- those whose gross revenues are less than $1 million a year -- significant discounts in royalty fees that they must pay to U.S. record companies and recording artists, Billboard Bulletin reports. The fees, for the years 1998-2004, will be based on a percentage of gross revenues and will be due in three installments.

Small webcasters had complained to Congress that the royalty rate set by the Librarian of Congress would drive them out of business. The rate amounted to 70 cents per 1,000 listeners.

Yesterday's House voice vote came only hours after the industry and artists groups cleared up two remaining sticking points: direct payment of royalties to artists and deductible expenses. The Recording Industry Association of America agreed to a provision providing for direct payment to artists of their share of the royalties, while artists' groups agreed to allow non-profit rate collection/distribution groups such as SoundExchange to deduct a small percentage of fees to pay costs.

The bill, the Small Webcaster Amendments Act of 2002, was offered by Rep. F. James Sensenbrenner Jr. (R-Wis.) as a substitute for legislation he withdrew last week that would have suspended Webcaster royalties for six months to allow challenges to the rates to be ruled on by the courts.

Facing opposition from Democrats, Sensenbrenner pulled his bill last week and gave the parties until Oct. 4 to come to an agreement. That deadline passed as the parties worked through the weekend, with agreement on the two sticking points not coming until yesterday morning.

The substitute bill presents a complicated series of adjusted rates. There is an escalating annual fee, from a retroactive $500 for 1998 to $5,000 for 2003-04. Small Webcasters then pay either 7% of gross revenues or 5% of operating expenses, whichever is greater, for the years 1998-2002. Non-profit Webcasters will pay a reduced rate of 20 cents per 1,000 listeners.