Senate Bill Would Repeal ‘Net Radio Rate Hikes

With the clock ticking down to what webcasters consider a July 15th doomsday deadline for a dramatic increase in Internet radio royalty rates, two U.S. senators introduced legislation Thursday to repeal the rates.

Senators Ron Wyden (D-Ore.) and Sam Brownback (R-Kan.) said the Internet Radio Equality Act of 2007 would reverse a “massive retroactive” royalty rate that is above total revenues for most webcasters.

“I am alarmed by the recent Copyright Royalty Board (CRB) decision and the effect it will have on Internet radio, especially small webcasters with limited revenue streams,” Brownback said in a joint statement with Wyden.

Currently, terrestrial radio stations only pay royalties to songwriters. Internet radio and satellite radio pay royalties to songwriters, performing artists and record companies. Satellite radio pays royalties of 7.5 percent of their revenue but the new CRB rates establishes much higher rates for Internet radio.

For large webcasters such as AOL and Yahoo, the royalty increase could be between 40 percent and 70 percent of revenues. For smaller, non-commercial webcasters, the royalty increase could reach up to 1,200 percent of revenues. The Wyden-Brownback bill would put Internet radio royalty rates on par with satellite radio.

“Keeping Internet radio alive is part of a broader issue that is important to me — keeping the e-commerce engine running by preventing discrimination against it,” Wyden said.

The legislation is designed to be the Senate companion to H.R. 2060 in the U.S. House, introduced April 23 by Reps. Jay Enslee (D-Wash.) and Donald Manzullo (R-Ill.). The House bill has already gained more than 60 co-sponsors from both sides of the aisle.

“I think there is an expectation that this legislation will continue to run its course with a sense of urgency,” Jake Ward of the SaveNetRadio coalition told “But the wheels of public policy turn slowly and the clock is ticking.”

Ward also said his group is likely to join a wider coalition including the Digital Media Association in seeking a court-ordered stay of the rates, a move that could happen as early as next week.

“We are happy by whatever means –- either through the courts or legislation — could be used to stop these thick-headed rate increases,” a spokesman for Inslee said. “I would think the chances of moving this through the legislative process is good.”

SoundExchange, which negotiates and collects royalty rates for performing artists, sharply criticized both the House and Senate bills, noting the CRB spent 18 months in determining the new rates.

“This legislation is a money grab by big corporations like Clear Channel and AOL at the expense of artists and labels,” John Simson, executive director of SoundExchange, said in a statement. “I don’t see any other way to characterize this as anything other than naked corporate greed. It’s just not fair to artists.”

SoundExchange said it is actively engaged in seeking business solutions that could accommodate the needs of small webcasters while protecting the “hard-won, fair royalties that artists deserve.”

“This Titanic rate increase will sink many webcasters if we don’t act,” Inslee said in a statement. “We need a more balanced rate structure that allows Internet radio to thrive, promotes media diversity and rewards artists for the use of their intellectual property.”

According to Arbitron and Bridge Ratings and Research, between 50-70 million Americans a month listens to Internet radio. Bridge estimates that audience will double by 2010 and grow to nearly 200 monthly listeners by 2020.

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