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SoundExchange offers royalty compromise to Net radio stations

$2,500 limit on multi-stream stations

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Music industry taxman SoundExchange is offering a new deal to internet radio broadcasters who say upcoming royalty hikes will kill online broadcasting.

The proposed compromise puts a ceiling on the new set of hefty royalty rate hikes that takes effect July 15. Previously, the fee increase called for webcasters to be charged $500 per station per month in royalties. That would spell certain doom for stations such as Pandora and Live364 which offer thousands of streams over the internet.

Under SoundExchange's latest olive branch, royalties would be capped at $2,500 per service, regardless of the overall number of stations or channels they are streaming.

"The idea that the per-channel minimum might have a disproportionate impact on certain internet radio stations was never presented to the Copyright Royalty Judges," SoundExchange general counsel Michael Huppe said in a statement. "Nevertheless, at the request of Congress, we are trying to work with the small subset of affected webcasters, and are offering this proposal in the hopes of addressing those concerns."

The Digital Media Association, the trade group representing internet broadcasters, said it will accept the proposal if the cap was extended to the entire term of the CRB's ruling, which would terminate in 2010. Currently the rate cap proposal ends in 2008.

"Any offer that doesn't cover the full term is simply a stay of execution for Internet radio," DiMA said in a release. "The looming 2009 billion-dollar threat is destabilizing and inhibits investment and growth. DiMA, like thousands of artists and millions of consumers, wants a solution that promotes long-term industry growth. A billion-dollar 'minimum fee' is equally absurd in 2006, 2007, 2008, 2009 or 2010. It should be eliminated – period."

SoundExchange sniped back to El Reg that it would honor an earlier complaint by DiMA about negotiating terms in public - but confirmed talks are taking place regarding the compromise.

In an earlier compromise, SoundExchange offered to allow small commercial and nonprofit internet radio broadcasters provisions to pay lower royalty rates based on a percentage of their revenues. Such operators would pay a royalty of 10 per cent of their first $250,000 gross revenue and 12 per cent on all revenue above that. To compare, satellite radio broadcasters pay 7.5 per cent of revenue.

Web radio broadcasters have been fighting the royalty hike tooth-and-nail since it was first revealed. Two weeks ago, more than 10,000 US web radio broadcasters canceled their usual programming in a "day of silence" protest. Participants ranged from Yahoo! to WebRadioPugetSound - which canceled their programming or aired public-service announcements urging listeners to support the repeal of the royalty rates. ®

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