Webcaster Royalty Deal Gets House OK

The House of Representatives on Monday rushed through a bill to let small Internet radio stations pay discounted royalties to record labels and artists, but its prospects in the Senate were clouded by hints of opposition from other broadcasters.

The bill by House Judiciary Committee Chairman F. James Sensenbrenner Jr. (R-Wis.) would implement a deal hammered out by small Webcasters, record labels and artists’ representatives after more than a week of intense negotiations. Instead of requiring them to pay about $92 per listener per year, the bill would let small Webcasters pay a percentage of their revenue or expenses, whichever were greater.

Several small Webcasters welcomed the legislation, although neither they nor the labels were declaring victory.

“It’s obviously very difficult to negotiate when the option is going out of business,” said Kevin Shively of Beethoven.com, an Internet broadcaster that specializes in classical music. “The rates are considerably higher than we had hoped.”

Added David Landis of Ultimate-80s, a Los Angeles-based Webcaster, “It is expensive, but we did get what we, in a sense, needed to survive.”

Nevertheless, some small Webcasters shut down Monday after learning the terms of the deal. For example, Internet Radio Hawai’i turned off its Hawaiian music Webcasts, saying it couldn’t afford to pay even the discounted royalties provided by the bill.

The measure would apply only to Webcasters with less than $1 million in accumulated revenue since November 1998 and whose revenue remained below $500,000 in 2003 and $1.25 million in 2004. Royalties would be 7% of expenses or 10% to 12% of revenue, with the higher amount kicking in as a Webcaster’s revenue increased.

The bill would give small Webcasters a greater discount on the three years of back royalties they owe, as well as pushing back the due date.

The legislation almost foundered in the House on Monday morning in the face of opposition from some artists’ representatives. But the labels ultimately agreed to clarify a provision requiring performing artists to receive half of the royalty payments directly, rather than have them pass through the labels.

Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) said he wanted the Senate to act on the bill in the waning days of the legislative session. But some large Webcasters and the powerful National Assn. of Broadcasters voiced concerns about the bill, saying they wanted more assurance that the deal for small Webcasters wouldn’t affect the royalties they pay to labels, artists or songwriters.