House Passes Relief Bill For Small Webcasters (10-8-02)

Revenue limits to qualify as an eligible small webcaster: Less than $1 million in gross revenues between Nov. 1, 1998 and June 30, 2002; less than $500,000 in 2003; and less than $1.25 million in 2004.

For the period of Oct. 28, 1998 through Dec. 31, 2002, the bill sets a rate of 8% of gross revenues or 5% of expenses, whichever is higher; for 2003 and 2004, the rate goes up to 10% of the small webcaster's first $250,000 in revenues and 12% thereafter, or 7% of expenses, whichever is higher.

Instead of coming due all at once on Oct. 20, back royalties can be paid in three equal installments, with the first due Nov. 30. The bill also sets minimum annual fees of $2,000 for webcasters making less than $50,000 a year; those making more than $50,000 pay a minimum of $5,000. It also clarifies that the designated royalties-collection agency - in this case, SoundExchange - may deduct legal expenses before distributing any money to artists.

The bill must now be OK'd by the Senate and signed by the President before it can become law, and all that has to happen before the current session of Congress ends on Friday

Small Internet broadcasters and the music industry have agreed on a last-minute royalty-payment plan but a dispute between musicians and record labels threatens to scuttle the deal

The online broadcasters have agreed to pay a rate of between 8 percent and 12 percent of revenue rather than a previously set per-song rate that many fear could drive them out of business, sources said.

Larger Webcasters, such as America Online and Clear Channel Communications were not included in the agreement and will pay a per-song rate set by the Library of Congress in June. But the arrangement is unlikely to become law unless musicians and record labels agree on how to distribute the millions of dollars of anticipated royalties.

The House of Representatives was set to delay the payment deadline by six months last week, but the two sides said they could work out an agreement on their own.

They will likely ask Congress to codify the agreement in law this week if musicians and record labels can agree how to distribute the money. Under a previous agreement, royalty money would be distributed directly to musicians, rather than going through record companies, after lawyers' fees and other expenses were taken out.

But while the new agreement states that legal fees will be taken out of royalties, it makes no guarantee that musicians will then be paid directly, said Ann Chaitovitz, national director of sound recordings for the American Federation of Television and Radio Artists.

As a result, the deal may be threatened.

"They knew we would object to it," Chaitovitz said.

A representative for the Recording Industry Association of America said the trade group was still working on the issue.

Under the terms of the deal, smaller Webcasters would pay between 8 percent and 12 percent of their revenue or expenses, whichever was larger, sources said. The arrangement would cover performances between 1998 and 2004.

Small Webcasters had argued for years that it would be easier for them to pay a percentage of their revenue, rather than a per-song rate that could easily amount to more money than they were taking in from advertisements or other sources.

But the head of a trade group that represents many larger Webcasters said the terms of the agreement remained onerous. "This is a deal that a segment of the industry was willing to accept because they were the segment facing bankruptcy," said Jon Potter, executive director of the Digital Media Association.

Potter said that established percentage-of-revenue royalty deals, such as those paid to songwriters, typically fall in the 3.5 percent to 4 percent range.

The House of Representatives, in a "suspension" vote that bypasses the usual committee process, has just passed H.R. 5469, the bill which amends the copyright law to include the royalty rate compromise reached last night by small commercial webcasters and the record industry.

This means the bill now goes to the Senate. Then, if it passes, and is signed by the President, it will become law. It is expected to hit the Senate floor within the next week or so.

Here's another article:

Web Royalty Deal Reached - New Agreement May Spare Small Webcasters

Web royalty rate deal reached (10/7)

Two days past the soft deadline imposed by Rep. James Sensenbrenner (R-WI), in exchange for pulling his "Relief for Small-Business Webcasters" (H.R. 5469) bill (RBR e-paper 9-27), negotiators for the labels and webcasters reached a tentative deal 10/6 on a royalty payment scheme for streaming audio. The deal came after an intense week of negotiations prodded by Sensenbrenner's move.

The two-year deal allows small webcasters to pay a rate significantly lower than the one the Librarian of Congress/US Copyright Office determined on 6/20.

The agreement depends on Congress passing a law to allow it, however, and it isn't yet clear if that will happen. Sensenbrenner plans to bring the compromise to a floor vote 10/7 as the revised version of 5469. The version he originally proposed would have pushed back the royalty payment due date by six months while parties debated their arguments in various federal appeals courts.

The pact doesn't include larger webcasters like Spinner or radio broadcasters, which haven't come to terms with the music industry on the issue--the agreement nevertheless could face trouble from the NAB and musicians' unions, which might fight the deal (also read below).

The compromise gives webcasters who have had less than $1M in revenues to date the option of paying retroactive royalties for the past four years on a percentage-of-revenues basis-either 8% of revenues or 5% of expenses, whichever is higher, with a minimum payment of $2K/year for each year and rates graduate to 10% of the first $250K/year of revenues and 12% beyond that level, with the minimum payment for webcasters with revenues over $50K increasing to $5K/year. The smallest webcasters can pay the bill in three installments over the next year. The full plan, covering 1998-2004, sets rates between 8%-12% of yearly revenues--including retroactive payments to 1998.

On 10/4 (RBR e-paper 10/7), the NAB said it was troubled about the impending deal because it would become a statute that could set a precedent for possible future negotiations should its Philadelphia appeals court battle not be successful. The pending suit has the NAB fighting to have the whole notion of broadcasters having to pay streaming royalty fees to record companies be thrown out.

"We don't want there to be a deal negotiated by small webcasters and RIAA that could set a damaging precedent to the broadcast industry down the road-harmful to the whole streaming business going forward," NAB spokesperson Dennis Wharton tells RBR. "Webcasters have every legal right to try to negotiate with RIAA separately if they want to. It's just that we don't want there to be some sort of deal that gets written into legislation that could prejudice or set some sort of precedent for any future negotiations. We've urged Sensenbrenner's folks to go back to the six-month moratorium."

RAIN (www.kurthanson.com) had some analysis of the agreement:

(1) Sensenbrenner's bill will specify that the rate cannot be claimed to be a "willing buyer/willing seller" by participants in any future CARP arbitration. (This should satisfy the NAB's primary concern last week that had them intending to not support the bill because it might be seen as establishing a new "marketplace" rate.)

(2) Because the compromise royalty rate has a higher minimum than the revised CARP rate, webcasters with an average AQH audience size (i.e., simultaneous streams) of fewer than 20 listeners may find it advantageous to pay the CARP rate of $.0007/performance rather than the $2,000 minimum.

(3) This bill does not address any of the questions relating to broadcasters streaming on the web, including the concerns of non-commerical broadcasters. Those issues are left to be resolved in court, where several appeals have already been filed.

Sony replaces Betamax with DVD recorders

But it wasn't its longtime competitor VHS that killed Betamax. In fact, the main reason Betamax has hung on so long has been due to its superior video quality over VHS. Most video professionals and broadcast stations continue to use Betamax for that very reason. Many people liked VHS because it gave people six hours of tape for their shows, compared with four and a half for Betamax tapes.

The Betamax killer is the digital quality of the DVD. In fact, Betamax has only been hanging on this long primarily due to the lack of recordable DVD formats, but no longer.

Sony, the company that created Betamax, has just announced and released its new line of recordable DVD drives that literally blow away the competition.

With these drives, you can record perfect digital images and make copies without the loss of quality that is typical with any analog device such as VHS videotape. But what makes them special is that they are the first to support several different DVD recording standards.

Sony's Dual RW drives are the first combination drives to support the DVD+RW, DVD+R, DVD-RW and DVD-R formats. Support of all these formats makes these new drives compatible with the latest and most popular standards and lets you record from any video source, such as television programming and video from camcorders, directly to the recordable DVDs.

The disks created on these drives will play back on virtually any DVD computer drive as well as any standard DVD home entertainment player.

According to Sony, the drives are also the first to support the faster 4X DVD-R recording speed, making them the fastest DVD rewriteable drives on the market. The models also support 24X CD-R and 10X CD-RW recording (using high-speed CD-RW discs), making them ideal all-in-one recording devices.

Both internal and external models will be manufactured. The Internal DRU-500A DVD/CD rewriteable drive will be available this month for an estimated retail price of under $350, and the Sony external DRX-500UL will be available in November for less than $430.

For more details: http://www.sony.com

RIAA Sues Radio Stations for Giving Away Free Music

LOS ANGELES-The Recording Industry Association of America filed a $7.1 billion lawsuit against the nation's radio stations Monday, accusing them of freely distributing copyrighted music.

"It's criminal," RIAA president Hilary Rosen said. "Anyone at any time can simply turn on a radio and hear a copyrighted song. Making matters worse, these radio stations often play the best, catchiest song off the album over and over until people get sick of it. Where is the incentive for people to go out and buy the album?"

According to Rosen, the radio stations acquire copies of RIAA artists' CDs and then broadcast them using a special transmitter, making it possible for anyone with a compatible radio-wave receiver to listen to the songs.

"These radio stations are extremely popular," Rosen said. "They flagrantly string our songs together in 'uninterrupted music blocks' of up to 70 minutes in length, broadcasting nearly one CD's worth of product without a break, and they actually have the gall to allow businesses to advertise between songs. It's bad enough that they're giving away our music for free, but they're actually making a profit off this scheme."

RIAA attorney Russell Frackman said the lawsuit is intended to protect the artists.

"If this radio trend continues, it will severely damage a musician's ability to earn a living off his music," Frackman said. "[Metallica drummer] Lars Ulrich stopped in the other day wondering why his last royalty check was so small, and I didn't know what to say. How do you tell a man who's devoted his whole life to his music that someone is able to just give it away for free? That pirates are taking away his right to support himself with his craft?"

For the record companies and the RIAA, one of the most disturbing aspects of the radio-station broadcasts is that anyone with a receiver and an analog tape recorder can record the music and play it back at will.

"I've heard reports that children as young as 8 tape radio broadcasts for their own personal use," Rosen said. "They listen to a channel that has a limited rotation of only the most popular songs-commonly called 'Top 40' stations-then hit the 'record' button when they hear the opening strains of the song they want. And how much are they paying for these songs? A big fat zip."

Continued Rosen: "According to our research, there is one of these Top 40 stations in every major city in the country. This has to be stopped before the music industry's entire economic infrastructure collapses."

Especially distressing to the RIAA are radio stations' "all-request hours," when listeners call in to ask radio announcers, or "disc jockeys," to play a certain song.

"What's the point of putting out a new Ja Rule or Sum 41 album if people can just call up and hear any song off the album that they want?" Frackman asked. "In some instances, these stations actually have the nerve to let the caller 'dedicate' his act of thievery to a friend or lover. Could you imagine a bank letting somebody rob its vaults and then allowing the thief to thank his girlfriend Tricia and the whole gang down at Bumpy's?"

Defenders of radio-based music distribution insist that the relatively poor sound quality of radio broadcasts negates the record companies' charges.

"Radio doesn't have the same sound quality as a CD," said Paul "Cubby" Bryant, music director of New York radio station Z100, one of the nation's largest distributors of free music and a defendant in the suit. "Real music lovers will still buy CDs. If anything, we're exposing people to music they might not otherwise hear. These record companies should be thanking us, not suing us."

Outraged by the RIAA suit, many radio listeners are threatening to boycott the record companies.

"All these companies care about is profits," said Amy Legrand, 21, an avid Jacksonville, FL, radio user who surreptitiously records up to 10 songs a day off the radio. "Top 40 radio is taking the power out of the hands of the Ahmet Erteguns of the world and bringing it back to the people of Clear Channel and Infinity Broadcasting. It's about time somebody finally stood up to those record-company fascists."