Online Radio Is Saved; SoundExchange Will Not Enforce New Royalty Rates on Sunday

From Wired Magazine:
Online Radio Is Saved; SoundExchange Will Not Enforce New Royalty Rates on Sunday
By Eliot Van Buskirk July 12, 2007 7:35:30 PMCategories: Save Net Radio

At today's Congressional hearing about the new rates for online radio that would essentially destroy it (as readers of this blog already know), SoundExchange, which was scheduled to receive the new royalty payments on Monday morning (since the enforcement date falls on a Sunday), made a startling statement.

The SoundExchange executive [Jon Simson, executive director] promised -- in front of Congress -- that SoundExchange will not enforce the new royalty rates. Webcasters will stay online, as new rates are hammered out.

I just spoke with Pandora founder Tim Westergren, who expressed relief that Pandora wouldn't have to shut down on Sunday in response to the new rates. He said, "It was getting pretty close. I always had underlying optimism that sanity was going to prevail, but I was beginning to wonder."

He said everyone who called their Congress person about this should feel that they had an effect on the process: "This is a direct result of lobbying pressure, so if anyone thinks their call didn't matter, it did. That's why this is happening." The flyer DiMA distributed to Congress today probably helped a bit too, but overall, it appears Congress intervened due to pressure from web radio listeners.

Funnily enough, Westergren told me this mere hours after a representative of SoundExchange said
that the new rates are "etched in stone." Evidently not.

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Update: Another source -- close to the situation although not inside today's closed-door hearing -- confirmed the following: Pandora was there; "progress was made"; the minimum fees are indeed off the table; and SoundExchange and the webcasters that were part of the Copyright Royalty Board hearings are going to have another chat about the rates.

However, the source said the big question right now is whether webcasters not part of the CRB hearing might still have to pay the rates set by the board, minus the minimum fees.

Basically, this news qualifies as a reprieve, but internet radio won't be truly saved until negotiations result in a workable royalty rate.

Another Update: This story has been confirmed by Kurt Hanson of RAIN.

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Westergren had more to say, lending insight into a process that was largely opaque to non-participants. Apparently, the per-channel minimum fees mandated by the Copyright Royalty Board were never taken very seriously by those involved. They've now been taken off the table completely, saving Pandora, Live365, and other multicasters from their most imminent threat. Instead, per-station minimums will be capped at $50,000 per year.

"No one thought those per station fees were remotely rational. It only makes sense that they're being taken off the table."

As for the Copyright Royalty Board? They're entirely cut out of the process, having set the rates and then refused a rehearing. Going forward without the royalties being collected, SoundExchange and webcasters will negotiate a new royalty rate with Congress looking over their shoulder -- "and last but not least, the public looking over Congress's shoulder." Alternatively, Congress now has time to consider the Internet Radio Equality Act, which would set webcaster royalties at 7.5 percent of revenue and allow them to continue operating pretty much as they have been.

Either way, this is a big win for webcasters and their listeners. Again, this is a reprieve, and internet radio can't be considered saved until new rates are set that everyone can live with.