Bill would give small Webcasters royalty relief

By Andy Sullivan WASHINGTON, July 26 (Reuters) - One day before Congress adjourned for its summer break, several lawmakers introduced a bill that would
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By Andy Sullivan

WASHINGTON, July 26 (Reuters) - One day before Congressadjourned for its summer break, several lawmakers introduced abill that would let small Internet broadcasters defer royaltypayments that could drive them out of business.

The measure would give small "Webcasters" a new lease onlife by allowing them to defer royalty payments to musiciansand recording companies until a new round of negotiationsbegins next year.

But the bill must advance quickly as Congress has only onemore month of activity scheduled before the fall elections.

Conventional radio stations have long been exempt frompaying royalties to recording artists and anyone else who ownsthe rights to the "sound recording" of a song, but Congresssaid sound-recording owners should get paid for Internettransmission when it updated copyright laws for the digital erain 1995 and 1998.

The Library of Congress established a rate of 0.07 centsper listener per song in June, which means that smallWebcasters like Beethoven.com and broadcast giants like ClearChannel Communications Inc . that "stream" onlinebroadcasts would be on the hook for 70 cents for each songplayed to an audience of 1,000 listeners.

Webcasters say the rate is too high, and several havealready announced that they will shut their doors because theirroyalty bill will exceed their income.

Virginia Democratic Rep. Rick Boucher, the bill's primarysponsor, said his legislation would allow Webcasters withannual revenues of less than $6 million to keep broadcastinguntil royalty negotiations start up again next year.

"The goal is simply to give them life support until theyget to the next round," Boucher said.

Larger Webcasters would still be obligated to pay theestablished royalty rate as well as royalties for pastbroadcasts dating back to 1998, he said.

The bill would also allow small Webcasters to participatein royalty negotiations without paying arbitrators' fees, andwould exempt them from royalty payments on "ephemeral" buffercopies of songs that are stored on Internet servers but neverheard by the public.

It would also free U.S. Copyright Office arbitrators toconsider what effect any royalty-rate decision would have onthe industry, rather than modeling their decision only on otheragreements reached between Webcasters and content owners.

Boucher acknowledged that Congress has little time toconsider the bill, but maintained that it could pass if enoughInternet users spoke up.

"Congress can act with tremendous dispatch when there is awill to do so," he said.

The Digital Media Association, which includes Webcasters,said the bill "provides reprieve from bankruptcy for thousandsof small Internet radio companies, and that correctssignificant problems with the royalty arbitration process thatimposed a devastatingly high cost on the nascent Internet radioindustry."

A spokesman for some copyright owners said the bill wouldprevent musicians from getting fair pay for their work.

"These Webcasters are businesses. ... Why shouldn't they payfair market value for the music which is the very core of thatbusiness?" said John Simson, executive director ofSoundExchange.

The bill, which has 10 co-sponsors, will be referred to theSmall Business and the Judiciary committees.