Broadcasters, Webcasters Split on Royalties

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The brouhaha over royalties owed to artists and content providers for streaming music and audio programming via the Internet is changing…but is filled with as much drama as ever. The National Association of Broadcasters (NAB) has reached a new royalty agreement with SoundExchange, a non-profit performance rights organization tasks with collecting royalties for so-called “non-interactive” digital transmissions. The agreement sets royalty rates for radio broadcasters who also run online streams; rates for 2009 and 2010 are reduced by about 16 percent from the rates set by the Copyright Royalty Board in the Webcaster Settlement Act of 2008, then will climb to about a quarter-cent per streamed sound recording by the year 2015.

The agreement follows a separate deal National Public Radio cut with SoundExchange earlier this year. NPR’s agreement doesn’t specify the rate NPR will be paying in royalties, but implies it’s below the mandated Copyright Royalty Board rate; NPR also agreed to pay $1.85 million to cover licensing dating back to 2005—and NPR’s negotiated rates are only good through 2010.

So while broadcasters have been able to cut deals with SoundExchange, pure Webcasters like RealNetworks, Pandora, Yahoo, and Microsoft, have still been left out in the cold. Part of the disagreement stems from what portion of a business is subject to a royalty: should webcasters like Yahoo pay a royalty based on the scope of their entire operations or only on the business units that stream music? Similarly, so-called “pure play” operations like Pandora—which have been struggling to stay in business—are balking at royalty definitions that would require payments on a per-track basis or as a percentage of overall revenue.

The deadline for webcasters to make a deal with SoundExchange was February 15, 2009.

Options for webcasters seem limited. Some webcasters have considered about going back to Congress for a deadline extension that would enable negotiations to continue; others are apparently mulling cutting their own deals with SoundExchange in order to put the matter behind them.

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