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Royalty Reprieve for Small Webcasters

An eleventh hour reprieve from the recording industry's royalty collection agency has given new life to "smaller" Internet broadcasters facing an October 20 deadline for the payment of the controversial CARP rate structure.

SoundExchange, the RIAA agency mandated to recoup royalty payments from Web broadcasts, granted the last-minute reprieve to the those webcasters that qualified for the 'Small Webcaster Amendments Act of 2002,' which narrowly missed a Senate vote late last week.

SoundExchange posted a temporary payment plan on its Web site Monday which sets the rate for eligible webcasters at the $500 minimum annual fee proposed in HR 5469, the measure that was put before Congress.

The reprieve means small Webcasters would now pay a flat rate of $500 for every year they have been in business since 1998, or a maximum of $2,500. The SoundExchange reprieve does not extend to larger commercial webcasters like Yahoo! , America Online or Microsoft's MSN Network.

Executive Director of SoundExchange John Simson said the reprieve would remain in effect "until this Congress has had the opportunity to act on the pending legislation."

"Given the unfortunate fact that a lone Senator apparently held up the small webcasters' bill, we felt it appropriate to offer this proposal. 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 an another example of our commitment to the webcasting industry," Simson said.

The RIAA/SoundExchange move comes after a flurry of activity at the Congressional level to pass new laws that would have fixed the royalty rate at a percentage of revenues but the Bill never reached the Senate floor for a vote.

Paul Maloney, who has been tracking the royalty payment issue for the RAIN newsletter, applauded the SoundExchange reprieve, noting that it "allows for further negotiations for a more reasonable deal that can benefit webcasters, labels, artists, and listeners alike."

"In fact, it is very nearly what we had hoped for upon learning that the (HR 5469) bill would not pass the Senate in this session," Maloney said.

"It's not clear how long this temporary measure is to stay in effect, but SoundExchange's site refers to legislation in "this Congress," which ends on the last day of this year," Maloney added. "The SoundExchange board is made up of representatives of both camps, so perhaps the measure truly represents the desires of those who stand to collect the fees. That, in and of itself, represents a great step forward," he said.

Separately, the U.S Copyright Office has ruled against a motion from webcaster Live365.com seeking a stay on the decision by the Library of Congress on royalties. The Live365 motion had argued that the royalty fee structure was frustrating "the Congressional intent in creating the compulsory license, and infringed upon the First Amendment rights of smaller webcasters."

For extended coverage of the controversial royalty issue, see our CARP Special Report.