WASHINGTON – Some small Internet radio broadcasters are rejecting a new offer from a music industry group to pay discounted royalty rates for streaming music online through 2010.
SoundExchange, the music industry group that collects royalties from webcasters and distributes them to artists and record labels, said its offer was aimed at resolving a dispute over higher fees due July 15.
Smaller providers said the higher royalties would be too big a financial burden.
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Under the latest SoundExchange offer, qualified webcasters — those earning $1.25 million or less in annual gross revenue and with a certain size audience — could pay royalty fees of 10 or 12 percent of annual revenue.
Bill Goldsmith, who operates a small commercial Internet radio station called RadioParadise.com in Paradise, Calif., said Wednesday the proposal is not viable.
He and five other webcasters have been in negotiations with SoundExchange the past two months working on the terms of an agreement.
Goldsmith characterized what SoundExchange offered as an attempt to "divide and conquer" the community of smaller webcasters and reduce his group's clout.
"This would be a huge step backward for us," Goldsmith said.
Rusty Hodge, who operates a small Internet radio station called SomaFM in San Francisco, said he also won't take the offer because the revenue and audience criteria are too small "by any type of radio standards."
Instead, he said SoundExchange should follow the U.S. Small Business Administration's standard for a small broadcasting company, defined as earning $6 million or less in annual revenue.
SoundExchange's offer also only covers recordings of its members, which represents more than 20,000 recording artists and 3,500 record labels, including all the major recording companies.
Hodge said his station and many others play mostly independent artists, who are not represented by the group and would still be owed royalties at the new higher rates.
Goldsmith said other smaller stations might be willing to sign anything to get out from under the burden of higher royalty rates.
The radio stations have until Sept. 14 to accept the offer, SoundExchange said. Those who do not accept the SoundExchange offer would pay higher royalty rates mandated by a panel of three copyright judges earlier this year or stop streaming music.
The judges ruled in May after the music industry and webcasters were unable to agree on a royalty system to replace a previous set of agreements that expired Dec. 31, 2005.
In a statement, John Simson, SoundExchange's executive director, said the proposal "takes the uncertainty out of the air as to most of their programming and lets them continue streaming."
Larger players, such as major commercial radio stations owned by Clear Channel Communications Inc. (CCU) and online companies like Yahoo Inc. (YHOO) and Time Warner Inc.'s (TWX) AOL, have also argued that the new higher rates could cripple the emerging business of streaming music online.
SoundExchange, which said House lawmakers encouraged it to offer the new agreement to small webcasters, said it is still working on an industrywide resolution to the conflict.
Richard Ades, a SoundExchange spokesman, said a lot of small webcasters want to move forward with some kind of agreement.
"We can't let a few small webcasters hold up the many," he said Wednesday.