- The Washington Times - Tuesday, October 8, 2002

The House approved a bill yesterday that would reduce the amount that small Internet radio broadcasters must pay for copyrighted music, and would be likely to allow many online radio stations to avoid bankruptcy.
The bill approved by the House of Representatives came one day after webcasters and the recording industry agreed on a plan to let Internet radio stations pay royalties based on a percentage of their revenue. That means they would pay less money to record labels and artists than they would have under a formula approved by the librarian of Congress in June.
The agreement was a victory for the young Internet radio industry, which many have said could sink under the weight of high royalties.
The 1998 Digital Millennium Copyright Act requires webcasters to pay for copyrighted music.
Webcasters insisted all summer that those rates would exceed their revenue and threaten Internet radio. Some webcasters have moved operations overseas out of concern over high copyright fees.
"It's not a fantastic deal, but it's better than the alternative. Is it expensive? Yes. But it is a rate that allows us to grow and survive," said David Landis, the founder of www.ultimate-80s.com, in Los Angeles.
Rep. F. James Sensenbrenner Jr., Wisconsin Republican and chairman of the House Judiciary Committee, had introduced legislation to delay payment of royalties, but he pulled it last week because he expected webcasters and the record labels to reach an agreement on a new formula.
The two sides finally reached a deal Sunday night.
The Senate must still approve the bill, and Sen. Patrick J. Leahy, Vermont Democrat and chairman of the Senate Judiciary Committee, said he supports Senate action on the House bill.
"Time is short in this congressional session, but I believe that final action on this solution is possible," he said.
Under the deal shepherded through the House by Mr. Sensenbrenner, small webcasters will pay royalties of 8 to 12 percent of revenue for copyrighted music played from 1998 through 2004.
The agreement covers webcasters with as much as $1.25 million in revenue in 2004.
When the copyright dispute began, small webcasters hoped they wouldn't have to pay more than 4 percent of revenue to record labels and artists. That's equivalent to the royalties they pay to music publishers. Record labels had hoped for a royalty closer to 15 percent of revenue.
But Librarian of Congress James H. Billington said Internet radio stations must pay 0.007 cents per song, per listener 70 cents for every song heard by 1,000 listeners.
The new rate approved by the House will save webcasters money, said Mike Roe, who runs www.radioIO.com, in Jacksonville, Fla.
Mr. Roe would have paid $8,221 in royalties for copyrighted music he played during September under Mr. Billington's plan. Under the terms of the new formula, he would pay $990.
One important element of the deal between webcasters and the recording industry reduces what Internet radio stations owe for music played from October 1998 through September 2002. Full payment of royalties from past years would have been due Oct. 20. The new deal delays the deadline for retroactive payments and allows webcasters to pay retroactive royalties in three installments over 11 months.
Mr. Landis said his retroactive royalties would have amounted to about $24,000 under Mr. Billington's plan. He will pay about $7,700 under the new formula.
Perhaps most important, the agreement gives webcasters peace of mind by ending a long-running dispute with the recording industry, Mr. Roe said.
"There has been this huge black cloud over our industry for four years. None of us have been able to attract investment capital. None have been able to forge relationships with the labels," he said.
The deal also helps artists, said John Simson, the executive director of SoundExchange, the group that will collect and distribute royalties.
"For four long years, artists and record labels have awaited compensation for the music that webcasters have used as the foundation for their business," he said.
Negotiations are continuing between the Digital Media Association and the Recording Industry Association of America on a contract for large webcasters, including Yahoo and AOL Time Warner.


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