News & Reviews

BASS: Internet music reactions mixed to SoundExchange offer; kill date of Sept. 14

It looks like many websites that stream Electronic music will survive the Draconian new royalty fees that the Copyright Royalty Board tried to push through earlier this year. Internet Webcasters have until this Friday (Sept. 14) to accept a new deal from SoundExchange, the group responsible for collecting royalty fees and distributing them to various music industry companies.

Under the SoundExchange offer, webcasters that earn $1.25 million or less in yearly gross revenue could pay royalty fees of 10 or 12 percent of annual revenue. If the webcasters decline the new offer, they’ll have to pay the royalty increases proposed by the Copyright Royalty Board earlier this year, SoundExchange said in a press release.

The Copyright Royalty Board created the ruckus early this spring when it proposed to sharply escalate royalty fees for webcasters. Depending on the size of the website, those increases would have been as high as 300 to 1,200 percent.

However, two US Senators, Ron Wyden (D-OR) and Sam Brownback (R-KS), pushed to vacate the decision, and the two groups -- CRB and SoundExchange on the left, the senators and hundreds of Internet broadcasters on the right -- appeared at a stalemate for months. Two deadlines for the new rates passed (on May 15, then on July 15) without any resolution.

Senators Brownback and Wyden also pushed the Internet Radio Equality Act of 2007 (H.R. 2060) to correct the enormous disparity created by the CRB by putting Internet radio on par with satellite radio. The measure prompted a bevy of letter-writing campaigns and garnered the support of legislators such as US Congresswoman Barbara Lee (D-CA).

"I believe that innovation and emerging technologies will continue to play a vital role in the 21st Century economy and that is why I am a co-sponsor of H.R. 2060," Lee said in an e-mailed statement to WORD’N’BASS.com. "I believe that this legislation will not stifle the emerging diversity in media and access to new music that internet radio represents and ensure that artists continue to benefit from a broader market and fair payment rates."

The CRB initiative could have shut down hundreds of websites that broadcast electronic music like House, Trance and Drum & Bass, most of which are popular but generate revenues well below the $1.25 million that SoundExchange considers a small webcaster. So far, reactions to the new SoundExchange offer appear mixed.

Digitally Imported, which announced that it would shut down its public (free) streams as soon as the CRB-backed rates went into effect, appears to have backed off the issue. It pulled a news section outlining the CRB dispute from the website shortly after the SoundExchange offer went public, has continued playing a bevy of Electronic music genres, and even added six new stations.

In contrast, San Francisco-based SomaFM said that it will decline the offer, adding that SoundExchange should follow the U.S. Small Business Administration's standard for a small broadcasting company: $6 million or less in annual revenue.

SomaFM said in a press release that the royalty rate increase is still too high and that while RIAA is negotiating on SoundExchange’s behalf with several different groups, these negotiations are being kept secret in a traditional divide-and-conquer plan of attack.

"The RIAA keeps saying that most webcasters are billion dollar companies, but with the exception of AOL, Yahoo and Real, most of the top-20 listened-to music webcasters are privately-held, small-scale independent operations," said Rusty Hodge, Founder and General Manager of SomaFM, in the statement. "The RIAA is willing to let independent webcasters be the collateral damage in their battle to extract more control over the large webcasters."

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