SoundExchange reaches agreement with some large webcasters

The Cold War between SoundExchange and webcasters over the new royalty rates is thawing -- at least in part. SoundExchange announced yesterday it had reached a compromise with some large webcasters that will give them a break on the rates set by the Copyright Royalty Board back in March.

The CRB had required webcasters to pay a minimum $500 "per station per channel" fee with no cap. This would add up to a hefty chunk of change for webcasters (such as Pandora) that allow each listener to create a persona web channel. Under the terms of the compromise, each webcasters' royalty rates will be capped at $50,000 regardless of the number of stations or channels.

The compromise also calls on webcasters to report each song they play to SoundExchange, instead of a sampling as is required right now. There is also a requirement that the sides continue to discuss anti-stream ripping technology.

John Simson, executive director of SoundExchange, made the following comment about the deal:

“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."

Right now, the agreement only applies to webcasters, who have signed the compromise, but SoundExchange hopes it serves as the basis for a larger compromise with the whole industry. Billboard reports the signers are AOL, Live365, MTV, RealNetworks, Pandora and Yahoo.

Separately, SoundExchange has offered to keep small webcasters under their current royalty rates through 2010. RAIN obtained a copy of the agreement which would:

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Allow webcasters to continue operating under the terms and rates essentially equivalent to those authorized under the Small Webcasters Settlement Act of 2002.

• Establish an annual revenue cap of $1.25 million and a listener cap of each webcaster's first 5,000,000 aggregate tuning hours ("ATH") of usage each month. The offer also states that for any usage in a single month above 5,000,000 ATH, the webcaster must pay the applicable commercial webcaster rates (currently $0.0011 per performance during 2007.)

• Be valid until a webcasters' overall annual revenue exceeds $1.25 million, the terms of the offer are void. After a six-month "grace period", the webcaster is no longer eligible for the terms of the settlement and would begin paying the rates mandated by the CRB decision of March 2.

The SoundExchange offer also maintains that the settlement is "non-precedential", adhering to the organization's contention that these rates reflect a below market rate subsidy extended to small commercial webcasters.

Small webcasters have until Sept. 14 to accept the deal. Small webcasters seem less than enthused by the offer (to put it mildly). David Oxenford, the attorney representing small webcasters in the negotiations with SoundExchange, sees nothing new.

The proposal of SoundExchange simply turns their offer made in May, summarized here, into a formal proposal. It does not address the criticisms leveled against the offer when first made in May, that the monetary limits on a small webcaster do not permit small webcasters to grow their businesses – artificially condemning them to be forever small, at best minimally profitable operations, in essence little more than hobbies.

You can read his full comments here.