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New tentative deal between RIAA and webcasting reps (Digital Media Association) on webcasting royalties:

    SUMMARY OF DiMA-SOUNDEXCHANGE PROPOSAL
    FOR INTERNET RADIO ROYALTY RATES & TERMS

    Scope: Covers digital audio transmissions of sound recordings by commercial
    webcasters (“eligible nonsubscription transmission services”) and subscription services (“new subscription services”), subject to the statutory licenses in Sections 112 and 114.
    Term: 2003 & 2004
    Exclusions: The following services or transmissions are not covered by the proposal:
    * Noncommercial entities (e.g., college radio stations, state-owned entities, nonprofits).

    * Simultaneous retransmissions of AM or FM broadcasts, whether made by the owner or operator of the AM or FM radio station or by a third party.

    * Services that have elected to pay royalties under the Small Webcaster Settlement Act of 2002.

    License Fees:
    Eligible Nonsubscription Transmission Services

    Option of paying royalties as follows:

    * Per Performance Option – .0762 cents ($0.000762) per performance 3 , except that 4% of performances shall bear no royalty.

    * Aggregate Tuning Hour Option – 1.17 cents ($0.0117) per aggregate tuning hour.

    New Subscription Services
    Option of paying royalties as follows:

    * Per Performance Option – .0762 cents ($0.000762) per performance, except that 4% of performances shall bear no royalty.

    * Aggregate Tuning Hour Option – 1.17 cents ($0.0117) per aggregate tuning hour.

    * Percentage of Subscription Revenues Option – 10.9% of “Subscription Service Revenues”, but in no event less than 27 cents per month for each person who subscribes to the subscription

DiMA’s statement to the public:

    For Internet radio services “the agreement is a temporary band-aid that avoids millions of dollars of legal fees associated with a broken arbitration process, and thereby enables resources to be focused on high-quality programming that is enjoyed by millions of listeners,” said Jonathan Potter, Executive Director of DiMA.

    Although the proposed rates would, if approved, provide some stability to the nascent Internet radio industry, “they should not distract attention from two essential points,” said Potter.

    “First, webcasters remain at a competitive disadvantage to terrestrial radio by having to pay huge royalties for sound recordings that broadcasters get for free; and second, that the arbitration process that determines these royalties is sorely in need of reform.”

    DiMA agrees with Members of Congress that the flawed CARP process requires major surgery, and DiMA support the efforts of Chairman Lamar Smith and Representative Howard Berman to lead this effort. Additionally, however, Congress should address underlying substantive issues that create a competitive environment biased against Internet radio and digital media generally, and which hinder the development of consumer-friendly, artist-friendly opportunities.

Royalty rates for webcasting should be exactly that of broadcast radio: nothing – otherwise there is no hope for webcasting as a commercial enterprise. I’m not sure where this leaves nonprofit (in reality virtually all) webcasters.

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About Eric Olsen