I say "likely" because they still need to dot i's and cross t's on the royalty deal itself, but here, Congress approved their ability to do that, and just in the nick of time.

Pandora chief Tim Westergren told us today: "We’re just hugely grateful to our listeners and everyone who moved so quickly to mobilize support. This last weekend was just extraordinary." There you go, the world itself may be collapsing, but at least you know our legislators listened to your pleas to keep your favorite web radio broadcasters in business.

DiMA Thanks Congress for Passing Webcaster Settlement Act

Washington, D.C., September 30, 2008 – The U.S. Senate today approved the Webcaster Settlement Act, and sent to the President this bill that authorizes Internet radio services and agents for copyright owners and performers to negotiate new royalty agreements retroactive to 2006, and that could resolve future disputes through 2015.

The House of Representatives passed the bill September 28.

Jonathan Potter, Executive Director of the Digital Media Association, offered this statement:

“On behalf of DiMA and our Internet radio members, I want to thank Congress for acting quickly to pass the Webcaster Settlement Act. This legislation will enable DiMA and our member companies, and all Internet radio services, to continue negotiating royalty rates with SoundExchange for the years 2006-2015. We are very hopeful of reaching agreement soon, and thereby creating long-term stability that will re-energize the Internet radio business.

"We express great thanks to Senators Wyden and Brownback, and Representatives Inslee and Manzullo for sponsoring the Webcaster Settlement Act and also being great leaders of the Internet Radio Equality Act.

“We are also grateful to Chairman Berman, Chairman Conyers and Chairman Leahy, and Ranking Members Smith and Specter for their leadership on the Webcaster Settlement Act and their ongoing support for Internet radio."

[Digital Media Association]

Though we had previously feared the worst, Pandora honcho Tim Westergren told us today that he and other web broadcasters were about to reach a settlement with SoundExchange, the RIAA and the Copyright Royalty Board. They needed a bit more time, which would be granted by a new bill, HR 7084. Though the bill, introduced by Congressman Jay Inslee and others, only extends the negotiation period, Westergren told us that it's the clincher. "We've negotiating for over a year, but people on both sides are now feeling optimistic about getting a deal done," he says. "This bill is a signal of that. We need more time, but we're getting there."

Enter the NAB, who issued the following statement to us and others from Executive VP Dennis Wharton:

NAB has concerns related to Congress attempting to fast-track a bill introduced less than 24 hours ago that could have serious implications for broadcasters, webcasters, and consumers of music. NAB spent more than a year trying to work out an equitable agreement on webcasting rates, only to be stonewalled by SoundExchange and the record labels. We will continue to work with policymakers on a solution that is fair to all parties.

The funny part about this, at least to Westergren, is that this bill and subsequent settlement would actually grant broadcasters lower fees on the internet, too. "If this falls apart, [NAB members] pay more for their webcasts, too," he says. "So there's only one interpretation, that they are trying to kill us."

Man, Pandora, why is everyone out to get you? If you readers feel like forming up in Pandora's defense, tell your congressperson that you support HR 7084, aka the Webcaster Settlement Act of 2008. Congressional switchboard is (202) 225-3121, and you know your congressperson has a website, right? Since Capitol Hill is abuzz nights and weekends trying to stem the financial crisis, you can pretty much call at any hour and someone will answer. [Pandora]

Under Section 114(g)(3) of the Copyright Act, it's only allowed to use the money for

(A) the administration of the collection, distribution, and calculation of the royalties;

(B) the settlement of disputes relating to the collection and calculation of the royalties; and

(C) the licensing and enforcement of rights with respect to the making of ephemeral recordings and performances subject to licensing under section 112 and this section, including those incurred in participating in negotiations or arbitration proceedings under section 112 and this section, except that all costs incurred relating to the section 112 ephemeral recordings right may only be deducted from the royalties received pursuant to section 112.

Despite my lack of a law degree, I'm pretty sure none of musicFIRST's activities are listed in those provisions. But organizations connected to the music industry specialize in creative legal interpretations (they represent artists after all), so I'm sure there's a perfectly good explanation for that. [Listening Post]

"The recent U.S. Copyright Office ruling regarding webcasting designated SoundExchange to collect and distribute to all nonmembers as well as its members. The Librarian of Congress issued his decision with rates and terms to govern the compulsory license for webcasters (Internet-only radio) and simulcastors (retransmissions)."

Simply put, according to DailyKos: "If any artist records a song, SoundExchange has the right to collect royalties for its performance on Internet radio. Artists can offer to download their music for free, but they cannot offer their songs to Internet radio for free."

Of course, if an artist wants the money from their royalties, they have to join SoundExchange—naturally, membership takes a small "administrative fee" out of your royalty check.

So let's recap: If you're an artist whose work is played on an internet radio station, even if you're not a member of SoundExchange, they're still going to collect royalties for you. And if you don't join, you won't see a dime—it simply goes straight into their pocket. And this is legally prescribed. Awesome.– Matt Buchanan

Is the RIAA Pulling a Scam on the Music Industry? [DailyKos via Slashdot]
Image via Flickr

Two misperceptions about Internet radio, according to Pandora co-founder Tim Westergren:

First:

...higher rates mean more money for artists. The reality is that the few Internet radio companies that opt to continue (and it will be VERY FEW) will be forced to license directly from labels. In this scenario, the artist share of the revenue will shrink to almost nothing as the monies will go directly to the label and be subject to the usual artist royalty rate (post-recoupment) of single digit percentages. So not only will this eliminate the vast majority of online stations that are the ONLY source of indie music exposure, it will take what little revenue is left from the artists.

...contrary to any statements by SoundExchange or RIAA representatives, Internet radio is not a highly profitable business nor will it be. For most (including Pandora), it's still a money-loser at the old rates that we are working as hard as we can (15 full time sales people are on the job) to turn profitable in a year or two. The growth figures put out by JP Morgan (recently revised downward from $500M to $150M) don't mean profitability—they mean more revenue which comes with greater costs. It's a thin margin business at best. No one's profiteering here.

For more about this situation, you can visit SaveNetRadio.org. – Wilson Rothman

Copyright Royalty Board [Gizmodo]

Apparently, arguing that the new fees will drive many stations out of business is tired old drivel according to the panel, who said that "most of the parties' arguments in support of a rehearing or reconsideration merely restate arguments that were made or evidence that was presented during the proceeding." No, there's no "manifest injustice" there.

The ruling takes effect May 15, so listen hard to your favorite Internet radio stations, since you may not be able to listen long. – Matt Buchanan

Internet radio dealt severe blow as Copyright Board rejects appeal [Ars Technica]
Image via Flickr

We imagine if anyone has the pull to effect a reversal of the new royalty scheme, it's NPR, since it's partially funded by taxpayers. Then again, funneling tax dollars to RIAA fat cats toward obscene royalty payments probably isn't all that unconscionable to some of the government officials who've been receiving massive lobbying largesse for years on end. Even though we rarely tune in, public radio is a worthy cause, so we're totally with NPR on this. – Matt Buchanan

Update: It should be noted that Sound Exchange split off from the RIAA after being created by it, and now represents indie labels as well as ones under the RIAA banner. We still think the rate hike is a bad idea, though. Thanks, Idolator for the clarification.

NPR may lead fight against Internet radio royalty rate hike [Chicago Tribune via Consumerist]

"Per performance" rates are charged per stream per listener. The example the Radio and Internet Newsletter gives is that an "audience of 500 listeners racks up 500 'performances' for each song" played. There is also a minimum fee of 500 bucks per station, even for tiny or noncommercial ones.

Why is this a big deal? "That math suggests that the royalty rate decision — for the performance alone, not even including composers' royalties! — is in the in the ballpark of 100% or more of total revenues." It's never enough is it? – Matt Buchanan

Webcast royalty rate decision announced [RAIN via Slashdot]
Gizmodo's RIAA boycott [Gizmodo]