Congress Gives Net Radio Chance For New Lease On Life

Congress passes bill that gives small webcasters more time to work out new royalty rate.

Small webcasters caught a break last week when Congress passed a bill that gave them more time to work out a new royalty rate. The previously established one, many broadcasters said, would have driven them to bankruptcy.

The Small Webcaster Settlement Act (H.R. 5469) sets a deadline of December 15 for webcasters and SoundExchange, the group responsible for collecting and distributing the fees to artists and labels, to negotiate a new rate. The bill, approved by both the House of Representatives and Senate early Friday morning, was introduced nearly a month after the deadline that payments of .07 cents per song per listener were scheduled to begin.

All those affected — from the recording industry to the bedroom-station hobbyist — seemed to agree on the bill, which should preserve some of the few remaining outlets for free-form radio.

"This is NOT a victory of webcasters over record companies (or, for that matter, vice versa)," wrote Kurt Hanson in his RAIN (Radio and Internet Newsletter). "It is a victory for common sense, as parties involved will benefit from a healthy webcasting space."

Although the act doesn't cite any hard figures, a new, negotiated rate is expected to be in line with a proposal introduced last month that leaned toward what the small webcasters had wanted all along — a royalty rate based on a percentage of revenue (between eight and 12 percent) and not set on a per-song/per-listener basis. After passing in the House, that bill was stalled by Senator Jesse Helms (R-North Carolina), who reportedly acted on behalf of religious webcasters, which also considered the proposed rate based on revenue too high (see "Net Radio Suffers Setback By Senate").

As a result, the Recording Industry Association of America (RIAA) and the religious broadcasters found middle ground, and parts of that agreement were used in drafting the new bill.

Small webcasters are defined as those that will gross less than $500,000 in 2003, among other designations.

Non-profit online broadcasters, including college and religious stations and others officially registered with the federal government as such, benefit even more from the act. Their payments have been stayed for six months, while they reach their own negotiated rate.

The Small Webcaster Settlement Act doesn't affect the larger webcasters, such as those owned and operated by corporations like AOL, Microsoft and Viacom. They must still abide by the rate of .07 cents per song per listener the Library of Congress set in June.