Apr 4, 8:48 AM EST
Record Industry, Webcasters OK Rates
Record Industry and Webcasters Agree on Royalty Rates for Online Music
by DAVID HO
Associated Press Writer

WASHINGTON (AP) -- The recording industry and Internet music broadcasters hope a new agreement will prevent a repeat of their recent battle over online music royalties, allowing them to focus instead on providing better music services for consumers.

The two sides agreed Thursday on how much big webcasters like Yahoo!, America Online, Microsoft and RealNetworks must pay to broadcast songs over the Internet during 2003 and 2004.

The new deal, if approved by the U.S. Copyright Office, will allow the two industries to avoid a lengthy arbitration process to set the royalty rates.

"We are delighted to have reached an agreement that will bring compensation to musicians without a costly arbitration," said Thomas Lee, president of the American Federation of Musicians. "We hope webcasting will bring more music to more fans."

Jonathan Potter, executive director of the Digital Media Association, which represents webcasters, said that by saving his industry millions of dollars in legal fees, the agreement will allow webcasters to focus on providing "high-quality programming that is enjoyed by millions of listeners."

Internet radio - either simulcasts of traditional over-the-air radio or Internet-only stations streamed over the Internet to computers - is becoming more popular as people get high-speed connections.

A 1998 law required that organizations broadcasting music and other radio content over the Internet pay fees to record companies to compensate artists and music labels for use of their songs.

After the two sides were unable agree on rates on their own, the Copyright Office ruled in June that webcasters must pay about 70 cents for every song heard by 1,000 listeners as counted by the webcasters.

The larger webcasters complained the fees, which they paid retroactively back to 1998, cost them hundreds of thousands of dollars for each year, more than some of them get from advertising or listener contributions.

The Copyright Office was to begin another arbitration between the parties next month to work out royalty payments for 2003 and 2004. The new deal, if approved, will make that process unnecessary.

The agreement proposes a per-song rate similar to that set by the government last year, but allows 4 percent of a webcasters' songs to be free from royalties. The proposal also gives webcasters the option of paying royalties as a percentage of their revenue or at an hourly rate.

Potter said those choices will allow webcasters to save money by picking the method that works best for them.

The new proposal does not apply to Internet simulcasts of traditional over-the-air radio or to noncommercial webcasters such as college radio stations.

Small webcasters - typically operations that are listener-supported and reach, at most, just a few thousand people - had complained the Copyright Office rates would force them out of business. Legislation passed last year allowed them to pay less.

Those small webcasters can choose to keep paying those rates or follow the new ones.