BY DANIEL MCSWAIN
SoundExchange offered a proposal  yesterday that would allow the smallest commercial webcast operators to pay a percentage-of-revenue royalty rate through 2010.

The offer is only valid for copyrighted material owned by SoundExchange-member labels. All non-SX member material would be subject to CRB rates.

The offer would :

• Allow webcasters to continue operating under the terms and rates essentially equivalent to those authorized under the Small Webcasters Settlement Act of 2002.

• Establish an annual revenue cap of $1.25 million and a listener cap of each webcaster's first 5,000,000 aggregate tuning hours ("ATH") of usage each month. The offer also states that for any usage in a single month above 5,000,000 ATH, the webcaster must pay the applicable commercial webcaster rates (currently $0.0011 per performance during 2007.)

• Be valid until a webcasters' overall annual revenue exceeds $1.25 million, the terms of the offer are void. After a six-month "grace period", the webcaster is no longer eligible for the terms of the settlement and would begin paying the rates mandated by the CRB decision of March 2.

The SoundExchange offer also maintains that the settlement is "non-precedential", adhering to the organization's contention that these rates reflect a below market rate subsidy extended to small commercial webcasters.

Webcasters have until September 14 to formally accept this offer.

Running up to the July 15 royalty deadline, Congress requested that the two parties settle terms through private negotiations. SoundExchange agreed to allow small commercial webcasters to continue operating under pre-CRB rates until a settlement was agreed upon.

"Small Commercial Webcaster" negotiations to continue As I understand it, yesterday's offer from SoundExchange is not the envisioned "Small Commercial Webcaster 2006-10" license that's in the process of being negotiated between SoundExchange and the parties called the Small Commercial Webcasters (upper case) that participated in the CRB (Digitally Imported, AccuRadio, Radioio, 3WK, Ultimate 80s, etc.) and are represented by David Oxenford. Those negotiations, which will hopefully lead to a deal with a more reasonable revenue cap, a different type of usage cap, and a transitional rate between "small" and "large," are still in progress.  David tells me that SoundExchange's Mike Huppe assured him yesterday that those negotiations will continue. (As always, the terms of that negotiated license, if we can agree on them, will be available to all webcasters who meet the criteria to elect it.) Although yesterday's offer, perhaps confusingly, uses the phrase "small commercial webcasters" — specifically, "certain small commercial webcasters" (my emphasis) — it would not satisfy those of us who have participated in the CRB process and have been negotiating with SoundExchange, or, for that matter, any webcaster who hopes to build its company into something more substantial.  (This group, by the way, would presumably include most "small" webcasters that are larger than one-person operations — SomaFM, Radio Paradise, GotRadio, Big R Radio, Loud City, and many others.) Presumably, yesterday's offer is intended to show Congress that some deal has been reached with some "small commercial webcasters" (lower case).  It may in fact satisfy some small companies who do not expect to substantially grow their businesses between now and 2010.  SoundExchange claims that many of those webcasters have been repeatedly asking SX for something they can sign so that they can be comfortable that they are in compliance with the law — that's the set of webcasters that SoundExchange claimed to us that yesterday's offer hopes to address. It should be noted, however, that yesterday's offer specifically says that the percentage of revenue payment only covers those artists who are SoundExchange members. To be in strict compliance with the law, a small webcaster who signs the deal and plays music by artists and/or labels who are not SoundExchange members would, on top of the percentage of revenue, also have to pay SoundExchange the CRB-determined rates for those tracks. -- KH X

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