The Digital Media Assn. and SoundExchange, which collects digital performance royalties for recording companies and artists, have jointly proposed to the U.S. Copyright Office that Internet radio roya

WASHINGTON, D.C. -- The Digital Media Assn. (DiMA) and SoundExchange, which collects digital performance royalties for recording companies and artists, have jointly proposed to the U.S. Copyright Office that Internet radio royalties remain the same for the next year or two. The rate would hold while Congress considers passage of a bill to revamp the arbitration process that determines royalties for all statutory copyright licenses.

Both parties, which have been at odds over the royalty rate, issued statements Aug. 30 saying the proposed settlement would help them avoid costly arbitration costs. It has been submitted to the U.S. Copyright Office for approval following publication in the Federal Register and review of public objections.

The settlement would maintain existing royalty rates through the end of 2006. However, if Congress extends the standard royalty term from two years to five years -- as called for in the House-approved Copyright Royalty Distribution and Reform Act, H.R. 1417, which still needs Senate approval -- the settlement would terminate at the end of 2005.

The current royalty is calculated in one of three ways, as selected by each Internet radio service. Webcast companies can choose to pay a set amount per song or per listener (0.0762 cents), or can pay a set amount per listener hour (1.17 cents). If it is a subscription service, it can pay 10.9% of subscriber revenue (with a minimum monthly payment of 27 cents per subscriber).

If Congress changes the current law, the parties would renegotiate rates for the new five-year period from 2006 to 2010.

"DiMA companies continue to believe that royalties paid by our industry to sound recording companies and artists are unfairly high and above market rate," DiMA executive director Jonathan Potter says in a statement. "Nevertheless, in the interests of focusing our industry's limited resources on the continuing effort to build profitable businesses and defeat piracy, DiMA has agreed to avoid arbitration and the associated costs for at least another year or two."

SoundExchange board member Ann Chaitovitz agrees that the settlement was arranged to keep down arbitration costs and expresses satisfaction that artists will continue to get paid while the reform bill is pending.