Webcaster Bill Appears Dead in Senate - Page 2

Although it now appears moot, yesterday RAIN ran a pro and con analysis of the bill:

Pro: Most small webcasters who've been around for 3-1/2 years (and had limited revenues and expenses) will only have a retroactive obligation of the minimum payment of $6,500, payable in three installments, as opposed to possibly a bankruptcy-inducing tens of thousands of dollars due this Sunday if the bill doesn't pass.

Con: Some small webcasters will have to pay more — specifically, if the greater of 8% of their revenues or 5% of their expenses to date are higher than the minimums described at left. For a small webcaster that took a risk and spent a lot of money building an infrastructure, their bill (at 5% of expenses) could also be in the tens of thousands of dollars.

Pro: "Small" is defined (for 1998-2002) as less than $1 million in revenues over the past three years. In this nascent industry, that's actually pretty big!

Con: On the other hand, some webcasters you'd think should qualify may not (e.g., Live365?).

Pro: The definition of "small webcaster" for 1998-2002 apparently includes the webcast operations of certain larger broadcasters — specifically, those who set up their webcast operations as a separate company.

Con: The definition described [above] seems to exclude most broadcasters who happened to not do so, which seems arbitrary and unfair.

For 2003, the definition of "small" jumps to $500,000, including revenues of the parent company. Thus any webcasters who are subsidiaries of larger companies will lose any benefit from this bill in 2003 and 2004.

An odd clause in the bill says that any webcaster who's a "natural person" (i.e., not a corporation) has to pay royalties (of 8%) based on all of the revenues of any company he owns 5% or more of (Q: Why such a low cutoff?!?) if that company offers "audio or entertainment programming" or is an "Internet or wireless service."

Pro: Given the low revenues of most small webcasters to date in the current advertising environment, a royalty rate of $.0007/performance is greater than 100% of their revenues. Even the high end optional rate in this bill (12%) is much lower than that.

Con: The optional royalty rate offered to qualifying small webcasters for 2003-2004 is THREE TO FOUR TIMES the size of the royalty paid to composers (ASCAP/BMI) or paid as the sound recordings performance royalty in other countries.

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Article Author: Eric Olsen

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