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Webcasters revolt

Small streamers protest royalty rates in D.C.

A score of independent Webcasters marched up Capitol Hill on Thursday in an attempt to convince lawmakers that the proposed royalty rates for online radio are far too high and threaten to put many smaller players out of business.

The indies, which made their grievances known last Wednesday with an industrywide “day of silence” protest, claim that the recently determined rate of 14¢ per play for Internet-only broadcasters is prohibitively expensive and was set without the input of smaller online players.

“We’re trying to let Congress know leading up to potential hearings that this process has failed to adequately include voices needed to find a fair and equitable result, and so this whole process should be vacated,” said Kevin Shively, director of interactive media at indie Webcast site Beethoven.com.

To that end, Shively and his indie Webcasting colleagues were canvassing pols Wednesday and Thursday, setting meetings with nearly 80 senators and representatives or their staffs, including Sen. Joseph Lieberman (D-Conn.), Sen. Orrin Hatch (R-Utah) and Sen. Edward Kennedy (D-Mass.).

But the labels, repped by the Recording Industry Assn. of America, argue that the rates, while flawed, still represent a reasonable compromise, and that artists ought to be compensated for their work in all media, online and off.

Rates roundtable

The indie lobbying push comes on the eve of an all-day roundtable discussion at the U.S. Copyright Office tomorrow to hash out online royalty issues. And next Wednesday, the Senate Judiciary Committee will conduct a hearing to discuss whether the current rate decision should be reconsidered.

The original proceeding, called a Copyright Arbitration Royalty Panel, or Carp, made a preliminary determination of the online royalty rate earlier this year that essentially split the difference between wildly disparate proposals from Webcasters and the RIAA.

Skewed to labels

But Webcasters argue that the seeming compromise was in fact still skewed in favor of the labels, because their initial proposal was so high. They add that, while big-name online radio operators like AOL Time Warner and Yahoo! got their voices heard, indies were excluded because of the high legal costs.

As a result, the agreed-upon rate “will force a significant number of us out of business,” said Shively. “In fact, we probably won’t even survive long enough to see any appellate or congressional remedy that might come about.”

He noted that his site broadcasts roughly 2.8 million individual song “streams” per month, which, at the current rate, would put his annual royalty expenses at more than $47,000 — a figure he says is “significantly more than we took in last year in gross revenues.”

Less onerous with time

John Simson, executive director of the RIAA-run royalty clearinghouse SoundExchange, counters that the Webcasting business model is still in its infancy, and while the Carp rate may appear hefty to some, it will seem far less onerous as the businesses grow.

“We want this marketplace to thrive because it’s an important new revenue stream, but it’s also important to look at the actual numbers,” Simson said. “There’s very little revenue right now, but we’re in an immature marketplace and this is going to expand over time.”

The Copyright Office, which picked the members of the Carp, is set to take a final vote on the rates on May 21, barring any congressional moves to set a new proceeding.