Royalty increase may be delayed

A group backed by the record industry that collects Internet music royalties said Tuesday that it would defer new copyright payment rates for small webcasters who claim the higher payments would bankrupt them.

SoundExchange, which collects and distributes royalties from webcasters and satellite radio, said the offer was for webcasters with revenues of $1.25 million or less.

SoundExchange’s latest efforts follow mounting activity in Congress, where legislators have introduced bills to annul the pending royalty rate increase, which they say threatens the fledgling industry.

Saying it was seeking to address “alleged weaknesses in the small webcasters’ businesses,” SoundExchange will defer new sharply higher royalty rates for these companies set by the U.S. Copyright Royalty Board on May 1 that would be retroactive to Jan. 1, 2006, and effective through 2010.

“Although the rates revised by the CRB are fair and based on the value of music in the marketplace, there’s a sense in the music community and in Congress that small webcasters need more time to develop their businesses,” said John Simson, executive director of SoundExchange, which collects royalties on behalf of artists and music companies such as Warner Music Group Corp. and Vivendi’s Universal Music.

But an advocate for Internet radio operators Tuesday criticized the offer. “A proposal like this would doom small webcasters and kill large webcasters,” said Jake Ward of the SaveNetRadio Coalition. By deeming a webcaster large and subject to higher rates, due to its popularity, ignores the fact that many of these larger sites are still small, struggling companies, he said.

“It would also force small companies to stay small,” he said, noting that certain companies might seek to stay below the higher rate levels. “There’s no question that webcasters with government-set revenue caps would invest less, innovate less and promote less.”