Radio Web casters get reprieve on royalties

July 17, 2007|By Jim Puzzanghera | Jim Puzzanghera,Los Angeles Times

WASHINGTON -- The songs remained the same on Internet radio yesterday, as many stations continued to stream music while their representatives negotiated to lower a controversial royalty increase that took effect over the weekend.

With talks progressing, SoundExchange, the organization that collects royalties for musicians and record companies, indicated to Web casters that it wouldn't seek immediate payment of the higher rates.

That amounted to a reprieve for Internet radio stations, some of which had warned they would have to shut down Sunday when a major increase in music royalties and fees kicked in.

"Each company has had to decide how they want to act on their own, but I think it's pretty clear that SoundExchange is not going to go after people providing they are trying to work it out," said Tim Westergren, founder of Pandora Media Inc., which operates one of the largest Internet radio sites from Oakland, Calif.

The federal Copyright Royalty Board set the higher royalties in March, retroactive to the start of 2006, when the previous rates expired. The board boosted the amount Web casters must pay per listener for each song they play, from .0762 of a cent to .19 of a cent by 2010.

It also eliminated a provision that capped the royalties of small Internet radio stations - many of them run by hobbyists - at 10 percent to 12 percent of their revenues, and set a $500 administrative fee for each Internet radio channel.

Some small stations already have shut down because the loss of the revenue-based cap meant they would owe much more in royalties than their stations earn. Web casters have organized online petitions and appealed the rate increase in court.

Fears that the new rates would squelch the musical diversity of the growing number of Internet radio stations have led some in Congress to propose halting the increases.

SoundExchange has the ability to strike separate deals on royalties. It has been negotiating with organizations representing various groups of Web casters, including small and large Web sites, religious broadcasters and National Public Radio stations.

Jim Puzzanghera writes for the Los Angeles Times.

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