It appears that at least one segment of the webcasting community – that which has largely been the most vocal throughout this process and perhaps has the most at stake from reining in runaway royalty rates – might have reached an accord with SoundExchange, the company which collects royalties from those performing copyrighted material over the Internet.
As we have described in repeated postings small webcasters have been the hardest hit by the Copyright Royalty Board’s March 2 decision to increase royalty rates for Internet radio.
While the new rates apply across the board, the large commercial webcaster population is generally made up of established radio stations simulcasting an over-the-air radio signal on the Internet. The station simply needs to make a business decision as to whether the increased royalties are worth the benefit of streaming the signal on the Internet and whether the over-the-air operation can essentially subsidize the Internet operation.
Noncommercial webcasters who exceed the aggregate tuning hour maximum in a given month will pay the new increased royalty rates — and to not have an effective means of raising the extra revenue required. However, these new rates will not affect most non-commercial webcasters, who rarely exceeded the previous maximum and thus will not exceed the new, increased, maximum.
But small webcasters — defined any an entity, including affiliates, with less than $ 1.25 million in gross annual revenues — faced the loss of their specially crafted rate structure that virtually ensured the webcaster would not go bankrupt (though it was never assured that the webcaster would make a living at this and, in fact, many do not and simply webcast for the fun of it all and the opportunity to provide new and diverse music to the public, the likes of which we don’t see on commercial radio very often anymore). Small webcasters previously paid a percentage of gross revenues as a royalty fee each month; under the new rates, small webcasters are treated the same as any other commercial webcaster and must pay the same "per performance rates" that, in many cases, exceed the small webcaster’s revenues. Several small webcasters have indicated they will stop streaming, while others have engaged in various forms of civil disobedience.
SoundExchange has made a formal offer to small webcaster. The offer does not change the definition of a small webcaster but it does combine aspects of the earlier "percentage of revenues" payment with the aggregate tuning hour maximum currently in effect for noncommercial webcasters. Any small webcaster — still defined as an entity with under $1.25 million in gross annual revenue — who does not exceed 5 million aggregate tuning hours in a given month will be able to pay royalties calculated as a percentage of monthly revenues, just as they did from 2002-2006. If the webcaster exceeds 5 million aggregate tuning hours in a given month, it will have to pay the excess according to the new higher rates that went into effect on July 15.
It sounds like this is a done deal. We understand that most commercial and noncommercial radio stations won’t be directly affected by this agreement, but it could impact whether negotiations or legislation continue to move forward in an attempt to alter the rates for those stations as well. If the small webcasters have gotten theirs, will they continue to fight on Capitol Hill for reform to a rate-setting structure that has proven on multiple occasions to simply be unworkable?
