SoundExchange Extends Offer to Small Webcasters

Move Responds to Request from Congress to Allow Small Webcasters More Time

With Below-Market Rates

    WASHINGTON, May 22 /PRNewswire-USNewswire/ -- SoundExchange today
 offered to extend to small webcasters through 2010 the terms of prior
 legislation known as the Small Webcaster Settlement Act (SWSA) with some
 minor modifications. The 2002 act that sunset in 2005 had set temporary
 below-market royalty rates for small Internet radio stations in order to
 provide them additional time to build their businesses. SoundExchange's
 offer to extend the core SWSA terms represents a continued subsidy for
 these small webcasters in the form of lower payments to artists and content
 owners.
     Today's offer comes as a direct response to a request from the House
 Judiciary Subcommittee on Courts, the Internet and Intellectual Property to
 "initiate good faith private negotiations with small commercial and
 noncommercial webcasters with the shared goal of ensuring their continued
 operations and viability." The subcommittee's request was sent to
 SoundExchange last week in a letter co-signed by Representatives Howard L.
 Berman (D-CA) and Howard Coble (R-NC). (1-seen note below)
     "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. "Artists and labels
 are offering a below-market rate to subsidize small webcasters because
 Congress has made it clear that this is a policy it desires to advance, at
 least for the next few years. We look at it as artists and labels doing
 their part to help small operators get a stronger foothold."
     This offer is only for small webcasters and defers the new rates set by
 the CRB on May 1, 2007, retroactive to January 1, 2006 and effective
 through 2010. While the subsidy is an effort by SoundExchange to address
 alleged weaknesses of the small webcasters' businesses, SoundExchange noted
 that this proposal is an adjunct to the CRB process.
     "The copyright royalty judges conducted a thorough and comprehensive
 legal proceeding. The judges determined fair rates based upon marketplace
 evidence provided by all parties. Nobody is questioning the integrity of
 the CRB process," said Michael Huppe, General Counsel of SoundExchange.
 Indeed, the subcommittee noted that, "we have not yet been provided with a
 single credible assertion by a party to the proceeding that tends to
 demonstrate the CRB deviated from the process specified in the Reform Act."
     Huppe added, "This offer is not about displacing the judges' correct
 analysis of the market, but rather about extending for a limited time the
 below-market rates that these small businesses received several years ago.
 We have heard the concerns of Congress and we are responding."
     As suggested by the subcommittee, SoundExchange is proposing that the
 subsidy be based on a percentage of revenue model and is proposing the same
 rates that prevailed under SWSA: small webcasters would pay royalty fees of
 10 percent of all gross revenue up to $250,000, and 12 percent for all
 gross revenue above that amount. The proposal includes both a revenue cap
 and a
     usage cap to ensure that this subsidy is used only by webcasters of a
 certain size who are forming or strengthening their business.
     "These modest limitations assure that the subsidy is targeted only to
 those webcasters that Congress believes need the additional financial
 flexibility to build their businesses. When a company's revenue or
 listenership reaches a certain level, our proposal appropriately provides
 that they share those full gains with the artists who helped create this
 opportunity for them," said Huppe. "The net result of this proposal is that
 small webcasters would be guaranteed no increase in royalty payments for 13
 years, from 1998-2010."
     Of particular concern to SoundExchange and the thousands of artists and
 labels it represents is the lack of compliance by most small webcasters,
 including many that have complained the loudest about the CRB decision.
 Indeed, in their letter Representatives Berman and Coble noted that, "In
 return for compelling sound recording copyright owners to make their works
 available, the qualifying services agree to meet the terms and conditions
 of the compulsory license, which, inter alia, requires the periodic filing
 of statements of account and the timely payment of statutory royalties to
 the copyright owners whose works they have elected to perform."
     In order for the process to work, small webcasters need to register
 with the copyright office, comply with all reporting requirements to
 SoundExchange and not avoid paying royalties that are lawfully owed. "The
 artists and labels are acting in good faith today, giving small webcasters
 a break. In return they expect the integrity of their music and their
 copyrights to be respected. That includes proper tracking and reporting of
 how their music is used, and that they are properly compensated," said
 Simson.
     Background
     On May 1, 2007 the Copyright Royalty Board issued a fair and reasonable
 decision that sets compensation rates to be paid artists and record labels
 for the public performance of their works by Internet radio broadcasters
 from 2006-2010. The three-judge panel heard testimony from dozens of
 witnesses and conducted a comprehensive review of tens of thousands of
 pages of evidence submitted by all interested parties over an 18-month
 period. The decision is a reflection of the need for artists to be fairly
 compensated for the use of their work by webcasters who benefit -
 financially or otherwise - from their talents. As the music industry
 evolves from CD-only sales to multiple distribution platforms it is
 critical that creators of music share in revenues from all platforms.
     SoundExchange is a non-profit organization representing more than
 20,000 artists, 2,500 independent record labels and the four major record
 companies for the collection and distribution of digital performance
 royalties for recording artists and sound recording copyright owners
 (usually a record label) when their sound recordings are performed on
 Internet radio, satellite radio and digital cable. For additional
 information please visit http://www.soundexchange.com
     Note:
     1. Chairman and Ranking Minority Member respectively of the
 Subcommittee on Courts, the Internet and Intellectual Property.
     Contact: Richard Ades or Gregg Perry, 202-640-5894,
 News@soundexchange.com
 
 

SOURCE SoundExchange