Webcasting Royalty Rate Legislation Moves Through The House

Last week, Rep. James Sensenbrenner (R-WI) declined to bring H.R. 5469 up for a vote, for fear it would be defeated and small Webcasters would never get relief from the Webcasting royalty fees. Yesterday, he brought a new version of the bill to the floor and it passed by voice vote, with no actual vote needed. Now it goes to the Senate, where passage of the Small Webcaster Amendments Act of 2002 will once and for all set Webcasting royalty rates, providing recording artists with their first ever radio royalties while allowing Webcasters to stay in business with moderate fees they can afford to pay.

Yesterday's action in Congress followed Sunday's agreement by Webcasters and the Recording Industry Association of America on royalty rates. A percent of revenue deal was worked out, requiring small Webcasters to pay 8% of gross revenue for the retroactive period from Oct. 28, 1998 to Dec. 31, 2002, with rates of 10% and 12% based on the amount of revenue for 2003 and 2004. New negotiations will be required to set rates beyond 2004.



The legislation says the fees "shall be paid within 30 days after the date of the enactment" of the bill.

Many Webcasters feel the rates are too high, but they are relieved they will be able to pay a percent of revenue instead of the per performance fees that had been set by the Librarian of Congress. Indeed, the lawyer working for the Webcasters, who requests anonymity, says this is the major victory the Webcasters achieved. "It averts the bankruptcy of the Internet pioneers and is a positive step," he says.

What happened in Congress yesterday was the result of the agreement on both sides. Last week, Sensenbrenner planned to introduce legislation that would have suspended the fees for six months, but it was opposed by Democratic legislators who support the artists and demanded Webcasters pay for the use of their music. Sunday's agreement between the two sides eliminated the opposition and the bill passed quickly, without opposition. A spokesman for the House Judiciary Committee says the bill has strong support in the Senate, but he is unsure how fast it will pass.

It was reported yesterday that groups supporting artists may oppose the legislation because of riders that would allow the revenue to initially be used to pay RIAA's legal fees. But now there are direct payment provisions in the legislation that will guarantee the fees go directly to artists, according to Ann Chaitovitz, national director of sound recordings for the American Federation of Television and Radio Artists. She now says the agreement is good for artists because it preserves Internet radio and "as radio gets consolidated, the Web provides an important way for artists to reach an audience."

Her comments are indicative of the widespread support the bill now has. Webcasters are generally supportive, feeling their business has been saved. "We're gonna try our best to live with them," a Webcaster who requests anonymity says. "At least we have the economic incentive to build the business going forward as opposed to shutting it down two weeks from now." Two weeks from now is when the fees set by the Librarian of Congress were due to be paid.

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