Webcasters Closer to Royalties Deal

Under pressure from an influential lawmaker, record labels and Internet broadcasters moved closer Tuesday to a compromise on royalties that could help small online radio stations stay in business.

The record labels’ proposals, however, struck some Webcasters as presenting a painful choice: They could stay small and qualify for reduced royalties, or grow and be hit with fees that only the largest companies could afford to pay.

House Judiciary Committee Chairman F. James Sensenbrenner Jr. (R-Wis.) gave negotiators until Friday to strike a deal. Otherwise, he will try to push a bill through the House that would suspend royalties for six months. The bill’s prospects are uncertain because of stiff opposition from performing artists’ unions, the AFL-CIO and some top Democrats.

Many small Webcasters say they will go out of business if they don’t get relief from the royalties approved by the librarian of Congress, which amount to $92 per listener per year for all-music stations. The day of reckoning is Oct. 20, when about three years’ worth of royalties are due to be paid to record labels and performing artists.

One proposed deal would let small Webcasters pay labels and artists a sliding percentage of their operating expenses or gross Web site revenue, whichever is greater. The record labels and large Webcasters, meanwhile, are discussing a reduced per-song rate over a longer term to avoid the expense of the current rate-setting process of biennial arbitrations.

The large Webcasters also are eager to prevent the terms of the small Webcasters’ deal, which they view as a sign of desperation, from setting a precedent that could be applied to them.

The Recording Industry Assn. of America and artists’ representatives, on the other hand, are determined not to subsidize the growth of Webcasting--particularly not when the beneficiary is as big as Yahoo Inc., AOL Time Warner Inc. or RealNetworks Inc.

Artists’ representatives say that even though they appreciate the exposure Webcasters give them at a time of shrinking playlists on over-the-air stations, they are resisting cuts in royalties because these are direct payments that can’t be confiscated by the labels.