Deal struck on net radio royalties

Internet radio stations in the US have reached an agreement with the body charged with collecting copyright royalties from them. The news is a breakthrough in a long-running dispute that stations said threatened the future of internet radio.

Earlier this year the Copyright Royalties Board (CRB), a body which reports to the US Congress, raised the royalty rates to be paid by online broadcasters. The rates were higher than those paid by satellite radio services. Traditional broadcasters do not pay CRB rates at all.

Internet broadcasters said that for many of them the rates exceeded their revenue as businesses and, since they were retrospective, would instantly put them out of business.

They have been negotiating with SoundExchange, the agency charged with collecting fees, about the rates and about a minimum charge of $500 per station.

Broadcasters claim that the minimum fee, which is designed to cover administrative expenses, is too high. Some companies have hundreds or even thousands of separate online radio stations.

Webcaster organisation the Digital Media Association (DiMA) has agreed a deal with SoundExchange to cap the total fee that any company will have to pay at $50,000. Though the deal only applies to the two parties, they are recommending to the CRB that it be adopted as policy for all internet radio stations.

The deal involves less stringent demands on protection of the music being broadcast. DiMA said that a previous SoundExchange proposal was dependent on companies agreeing to "technology mandates" believed to relate to digital rights management (DRM) anti-piracy technology.

The new deal contains a requirement that stations report all played tracks to SoundExchange and co-operate in a discussion on anti-piracy technologies.

"This agreement marks an important first step in the internet radio royalty negotiation process,” said DiMA executive director Jonathan Potter. “We’re encouraged by this development and the knowledge that good faith negotiations have begun. We look forward to the next step of negotiating the royalty rates that will allow for the growth of the Internet radio industry, a platform for music discovery for consumers.”

"This agreement shows that we can address specific issues of concern to the industry through private negotiations while upholding the integrity of the CRB process and while protecting the interests of SoundExchange members," said John Simson, executive director of SoundExchange.

"We now hope to move forward together with our partners, the webcasters, in providing an enhanced listening experience through internet radio," he said.

Negotiations are ongoing on what royalty stations should pay per song played. The controversy and the claim that it threatened the very existence of internet radio had caused some political unease. Two Senators, Ron Wyden and Sam Brownback, sponsored a proposed law which would have undone the royalty rate rise, called the Internet Radio Equality Act.

"We sponsored the Internet Radio Equality Act because the Copyright Royalty Board’s decision to dramatically increase royalties and apply what we see as unfounded minimum rates threatens to devastate the internet radio industry," they said in a statement earlier this month.

The chief executive of Pandora, one of the web's biggest radio stations, previously told OUT-LAW Radio that the rate rise would be fatal for his industry.

"It's an extraordinary increase in the rates that will effectively kill internet radio as we know it today," Joe Kennedy said. "Over 90% of internet radio will simply be gone. The net result will be a huge loss of diversity, a huge loss for music artists and a loss of virtually all of the internet radio that exists."