Congress gives Web radio some breathing room

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It hasn’t saved the economy yet, but Congress came a bit closer today to saving Internet radio.

The Senate passed the Webcaster Settlement Act — approved by the House over the weekend — to give webcasters more time to negotiate royalty rates that won’t put them out of business. The bill sped through Congress after being introduced last week, and it now awaits President Bush’s signature.

Webcasters — from major broadcast radio outlets like NPR to online-only operations like Pandora — have been searching for alternatives since the Copyright Royalty Board created a new royalty rate scheme last March. The board eliminated the option that small webcasters once had of paying a percentage of their revenue rather than a per-play rate, and instituted a minimum charge of $500 per channel. The board also raised the .08-cent-per-play rate so that it would more than double by 2010, amounting to a few cents per listener per hour, which advertising would be hard pressed to sustain. For some webcasters, the royalties they would owe total more than their revenues, notes BRS Media analyst George Bundy.

Since last year, webcasters have lobbied Congress, gone to court, and asked listeners to call their representatives to try to roll back the ruling. Some were sympathetic. Rep. Jay Inslee (D-Wash.), whose district includes Redmond, where Microsoft is based, and who introduced the bill that passed this weekend, offered a proposal that would have reversed the board’s ruling and decreased existing royalty rates, but it didn’t stick.

The bill isn’t quite the reversal some webcasters might have wanted, but it does give them a couple of extra months to negotiate a deal with SoundExchange, the nonprofit organization in charge of collecting fees for artists and record labels. SoundExchange joined with the Digital Media Association, NPR, and the Recording Industry Association of America to support the bill.

“We are very hopeful of reaching agreement soon, and thereby creating long-term stability that will re-energize the Internet radio business,” said DiMA Executive Director Jonathan Potter in a statement.

But Bundy wasn’t entirely optimistic about the talks.

“It’s really difficult to tell whether the extension will allow enough time for both parties to realistically come to a deal,” Bundy says. “What we’ve seen in the past is that there isn’t much hope of getting something together without mediation.”

--Swati Pandey