Webcasting Royalty rates: Deal or No Deal?

Back in September 2008, we told you about the passing of the Webcaster Settlement Act, which allowed for the implementation of an agreement between copyright owners, performers and online broadcasters on webcasting royalty rates — provided they arrive at mutually-agreed-upon rates by February 15, 2009.

To better understand the situation, a little history is in order. In May of 2007, the Copyright Royalty Board set royalty rates for online broadcasts that many webcasters said would mean lights out for their services. In the wake of this decision, webcasters and SoundExchange (the designated organization that collects and distributes payments to performers and labels for digital broadcasts) have been negotiating rate compromises, to varying levels of success.

SoundExchange seeks equitable payments for its members, which include performing artists and labels, while the webcasters want to broadcast without going bust. So it’s a bit more complicated than “these guys are awesome, and these guys are jerks” (although some may be inclined to see it that way.)

In FMC’s statement on the original CRB rate setting, we called on parties “to adopt reasonable rates and reporting requirements for clearly-defined categories of small, noncommercial and hobbyist webcasters that will ensure the future development of this medium.” We also stressed the importance of properly compensating artists, performers and labels for uses of their work, without which there’d be nothing much to play. We remain hopeful that any final agreement will satisfy these concerns and ultimately lead to the discovery of more music. The latter is something webcasting can play a huge role in, provided there’s a way forward.

Some individual deals have already been made. The National Association of Broadcasters and SoundExchange reached an accord on February 16 that sets a per-song rate for simulcast programming online or stand-alone internet stations through 2010. (The next rate-setting period would cover 2011-2016.) The Corporation for Public Broadcasting came to a February 15 agreement with SoundExchange that sets a one-time payment of $1.85 million together with consolidated usage and playlist reporting from CPB on behalf of the entire public radio system. This settlement covers streaming services from January 1, 2005 through December 31, 2010. Earlier this year, some smaller webcasters accepted a deal with SoundExchange that bases royalty rates on revenues and site traffic; others are still negotiating.

So what happens next? Well, the Digital Media Association (which represents large webcasters like Pandora and RealNetworks as well as tech companies like Apple and Nokia) is free to continue negotiations with SoundExchange. But unlike under the Webcaster Settlement Act, any agreement would only apply to copyright holders that are signed up with SoundExchange — it wouldn’t cover everyone. Meanwhile, the original CRB decision is on appeal. Congress could extend the deadline for a negotiated solution that will apply to all parties, but new legislation would have to be introduced and passed in both houses. So for the moment at least, the future of webcasting is anything but certain. We'll keep you posted.