October 18, 2002 4:23 PM PDT

Small Webcasters get fee reprieve

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Small Webcasters won't immediately have to pay new, potentially steep royalty fees due next week, the group responsible for collecting payments said Friday.

The new rules for Webcasters, under which Internet radio stations will be required to pay about a 14th of a cent for each song they stream to each listener, are scheduled to go into effect on Sunday.

Small companies, which had complained the fees would put them out of business, were close to winning separate rules in a compromise Congressional bill. The measure was blocked before the Senate adjourned Thursday night.

However, the record industry-backed SoundExchange--the group tasked with overseeing and distributing the new song royalty fees to labels and artists--said late Friday it would not collect the full fees from small companies as long as Congress is still considering the legislation.

"Given the unfortunate fact that a lone Senator apparently held up the small Webcasters' bill, we felt it appropriate to offer this proposal," John Simson, SoundExchange's executive director, said in a statement. "We hope that this unexpected development will be soon resolved by the Senate."

Under the SoundExchange proposal, any Webcaster that would have qualified for help under the pending bill will only have to pay the $500 minimum annual fee contained in the measure. The fee would still be retroactive to 1998 for as many years as the Net radio service had been in operation, up to a total of $2,500.

The pending bill would see small businesses pay between 8 percent and 12 percent of their revenue as royalties, instead of a flat per-song fee. Under the SoundExchange offer, that revenue percentage would not be due until after the bill is taken up in Congress.

Large companies, such as America Online or Microsoft, will still have to pay the per-song fees and retroactive payments due Oct. 20, as laid out by the Copyright Office and the Librarian of Congress.

The small Webcasting bill, drawn up in a compromise between the Recording Industry Association of America (RIAA) and a group of small Internet radio stations earlier this month, had passed the House without significant opposition.

Shepherded in large part by Senator Patrick Leahy, D-Vt., the bill was expected to pass without serious problem in the Senate on Thursday. However, a single legislator put an anonymous hold on the bill at the last minute, preventing a vote before the Senate's adjournment.

Sources close to the issue say the hold was placed by Sen. Jesse Helms, R-N.C., responding in part to traditional broadcasters' and radio stations' concerns about the bill.

The Senate can vote on the bill after reconvening on Nov. 12.

 

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