RAIN: Internet Webcaster Royalty Rate Agreement Reached

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Posted by madcityradio.com on July 08, 2009 at 23:13:56:

RAIN 7/7 NEWS FLASH: SoundExchange and "Pureplay" webcasters announce 2006-2015 royalty agreement

·Jul 7, 12:17 PM
Posted by: Michael Schmitt

SoundExchange and a set of “Pureplay” webcasters have just announced that they’ve reached an agreement for sound recording royalty rates for the period of 2006-2015.

The deal includes a “discount” from the rates set by the Copyright Royalty Board for large webcasters, and offers smaller webcasters percentage-based payment options (specifics are outlined below). The agreement is offered as an alternative to the CRB rates ( ) and covers royalties from 2006 to 2015 (2014 for small webcasters).

The three webcasters who participated in the negotiations and are the initial signatories to the deal are AccuRadio, Digitally Imported, and radioIO. However, other Internet-only webcasters including Pandora — whose survival was otherwise in question — should also be eligible to elect the license.

SoundExchange leaves it up to individual webcasters to elect whether they want to be covered by the new “Pureplay” license. They recommend the deal for webcasters that “[derive] an overwhelming portion of their revenue from the streaming of sound recordings.”
After the agreement is published in the Federal Register, which should happen later this month, webcasters will have 30 days to decide if they will opt into the agreement. Any webcaster doing so must elect to withdraw from the appeal process of the CRB rates. This agreement was reached under the authority of the Webcaster Settlement Act of 2009, which was passed last week.

The agreement splits pureplay webcasters into 3 categories: large, small, and those that offer “bundled, syndicated or subscription services.” A large webcaster — that is, a webcaster earning over $1.25 million annual revenues — pays the greater of 25% of total revenues or a per-performance rate. This per-performance rate increases from $0.0008 in 2006 to $0.0014 in 2015. The rate for 2009 is $0.00093. By comparison, the CRB rate for 2009 was $0.0018 — nearly double the new rate. For all large webcasters, the minimum royalty payment is $25,000 a year.

A webcaster is categorized as “small” if total annual revenues are under $1.25 million and their monthly listener-hours fall under a certain cap (depending on the year, 8 million to 10 million hours). Small webcasters who elect the license would pay the greater of a percentage of total revenues or a percentage of total expenses. For 2006 to 2008, the percentage of total revenue is 10% of the first $250,000 and 12% for revenues over that. The percentages increase for 2009 to 2014: 12% for first $250,000 and 14% after that. The percentage for expenses stays constant at 7%. The agreement for small pureplay webcasters only applies for 2006 through 2014.

Pureplay webcasters offering subscription services pay the same rates as decided in the agreement between SoundExchange and the National Association of Broadcasters ( ). Those rates are slightly lower in some cases than those set by the CRB. The 2009 rate is $0.0015, compared to the CRB’s $0.0018. By 2015, the rate is $0.0025.

The new deal also requires webcasters to keep more robust records of airplay. Webcasters must provide SoundExchange with census reports (“actual recordings played and total listenership”) and retain server logs for at least 4 years. Small webcasters can opt for less stringent reporting in exchange for a “proxy fee.”

The lead negotiator for the webcasters was RAIN publisher (and AccuRadio CEO) Kurt Hanson. ( .) The other webcasters who participated in the negotiations — and are the initial signatories — were Digitally Imported’s Ari Shohat and radioIO’s Michael Roe. The attorney representing webcasters was Davis Wright Tremaine’s David Oxenford. The lead attorney representing SoundExchange was general counsel Michael Huppe.

SoundExchange explains that artists and copyright holders are offering this “discount” to webcasters “in return for a share of the revenue generated by an industry whose growth is based on the use of their music. The discounted rates help pureplay webcasters grow their businesses and develop business models while allowing artists and labels to share in the upside potential of webcasting.” SoundExchange’s executive director John Simson ( ) commented, “Time will tell if revenue sharing is the right move for both the recording community and webcasters, but we’re willing to take the risk in the hope that artists, rights holders and webcasters can all benefit.”

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