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5/23/2007
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Royalty Proposal Divides Webcasters, Musicians, And Labels

The plan includes overturning the Copyright Royalty Board to establish below-market royalty rates in an effort to "subsidize small webcasters."

A musicians' union said Wednesday that it backs below-market royalty rates to "subsidize small webcasters," but a group representing webcasters rejected the plan.

The American Federation of Musicians (AFM), which claims more than 90,000 members, said it supports SoundExchange's plan to allow some small webcasters to pay below-market rates for songs played from 2006 through 2010. It said the deal would allow the businesses time to develop and expand their audiences.

"Most recording musicians, including royalty artists and session musicians, are entrepreneurs themselves," AFM President Thomas F. Lee said in a prepared statement. "Fifty percent of the royalties paid by webcasters go to performers, and performers surely need that income stream to make it in their own careers. But they also know from experience that it can be tough to build a business, and they are willing to make some sacrifices to give small webcasters the opportunity to grow and make the world of Internet music as diverse and artist-friendly as possible."

A group representing webcasters rejected the plan.

SoundExchange represents the four major record labels, more than 20,000 artists and 2,500 independent labels. It announced the proposal soon after Representatives Howard L. Berman, (D-Calif.) and Howard Coble (R-N.C.), members of the House Judiciary Subcommittee on Courts, the Internet, and Intellectual Property, urged the group to work toward a settlement between recording artists and webcasters. The representatives and several others are considering legislation that would overturn rates set by the Copyright Royalty Board (CRB).

The CRB decided to increase royalty rates for Webcast music, setting a retroactive rate of $0.0008 per song for 2006. The rate in 2005 was $0.0007 per song. The amount is set to rise to $0.0019 per song by 2010. That -- plus a $500-per-station fee and the elimination of schedules that based fees on a percentage of revenue -- could amount to a 300% increase for large operations and up to 1,200% for smaller operations, according to digital media representatives.

SoundExchange said the rates are "fair and based on the value of music in the marketplace," but it is willing settle on 10% of all gross revenue up to $250,000 for royalty fees and 12% for gross revenue above that amount.

"There's a sense in the music community and in Congress that small webcasters need more time to develop their businesses," SoundExchange Executive Director John Simson said in a prepared statement. "Artists and labels are offering a below-market rate to subsidize small webcasters because Congress has made it clear that this is a policy it desires to advance, at least for the next few years. We look at it as artists and labels doing their part to help small operators get a stronger foothold."

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