Net Radio Suffers Setback By Senate

Bill delayed, putting payment reprieve in jeopardy.

Just when it seemed small Webcasters were out of hot water, a decision by the Senate may have put them back in over their heads.

On Thursday, the U.S. Senate delayed passing a bill that would have given small online radio broadcasters what they wanted in a long-fought battle over royalty payments. Two unidentified Senators — one Republican and one Democrat — opposed legislation that would have based royalty rates on a percentage of revenue and not on a per-song/per-listener basis, as was decided in June by the Librarian of Congress.

"We are surprised and disappointed that the small-Webcasters legislation was not passed as expected by the Senate," said Recording Industry Association of America Chairman and CEO Hilary Rosen in a statement. "We hope that the Senate will work this out quickly. All parties who support this legislation should contact their Senators to urge passage of this bill."

A day before the announced delay, the unnamed Democratic lawmaker put a "hold" on the bill. Akin to a filibuster, which takes advantage of the Senate's allowance of unlimited debate, a hold is a stall tactic used to delay a vote on a bill likely to pass.

The timing of the Congressional action couldn't have been worse. Webcasters are required to pay the previously approved fees, .07 cents per song per listener, beginning Sunday. With the Senate recessed until after November elections, Webcasters would have been forced to adhere to the due date had it not been for an 11th-hour payment plan by SoundExchange, the company that collects, administers and distributes the royalties.

Instead of paying on Sunday, small Webcasters, defined as those that have grossed less than $1 million from November 1998 to June 2002, may pay only the $500 annual minimum fee set by the Librarian of Congress for each year that they've been in operation since 1998. The new policy stands until Congress can make a final determination.

"Given the unfortunate fact that a lone Senator apparently held up the small-Webcasters bill, we felt it appropriate to offer this proposal," SoundExchange Executive Director John L. Simson said in a statement. "We hope that this unexpected development will be soon resolved by the Senate. From the beginning, we have wanted to work with Webcasters, and this temporary payment policy is another example of our commitment to the Webcasting industry."

On October 7, the House of Representatives approved the new, proposed rates unanimously, and only a block by the Senate or president — which, at the time, seemed highly unlikely — would have prevented the bill from becoming law (see "Small Webcasters May Escape Bankruptcy Thanks To New Deal").