Sound Exchange and Pure Play Webcasters Reach Experimental Rate Agreement

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Sound Exchange and Pure Play Webcasters Reach Experimental Rate Agreement

Jul 10, 2009 10:00 AM

Washington, DC - Jul 7, 2009 - Sound Exchange has announced experimental new terms for pure play commercial webcasters, covering royalties for the Internet streaming of sound recordings.

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The agreement, under the Webcaster Settlement Act of 2009, gives pure play webcasters the option of electing an alternative set of rates and terms to those issued by the Copyright Royalty Board (CRB) in 2007. The experimental formula includes revenue sharing for most services, and more robust reporting requirements, in exchange for a discount on per-stream rates. Pure play webcasters that elect these new terms will agree to pay artists and rights owners (through Sound Exchange) a minimum percentage of all their U.S. revenues of up to 25 percent, and to pay a more significant annual minimum royalty.

This agreement accommodates the specific characteristics of a distinct class of webcasters whose predominant form of business and revenue generation is the streaming of sound recordings under a government license -- hence the term pure play For these webcasters, the agreement provides for three rate classes, under which webcasters can opt for an alternative rate structure.

The three rate classes are large pure play webcasters, small pure play webcasters (defined as those earning $1.25 million or less in total revenues with a cap on music streamed) and pure play webcasters that provide bundled, syndicated or subscription services. Sound Exchange views these newly negotiated rates as an experimental structure for a particular genre of webcasters and does not consider these terms indicative of fair market rates. Sound Exchange admits that it is not sure if revenue sharing is the right move for the recording community and webcasters.

Larger pure play services will pay the greater of either a per performance rate or 25 percent of total revenue, and will agree to provide more comprehensive reporting about the sound recordings used than regulations currently require. Through 2014, small pure play webcasters will have the option of paying the greater of a percentage of revenue or a percentage of expenses, and in certain circumstances have less stringent play list reporting requirements in return for payment of an additional proxy fee. Bundled, syndicated or subscription services will pay per-performance fees that are the same as those contained in an agreement concluded earlier in the year by Sound Exchange with the National Association of Broadcasters. All pure play webcasters would pay an annual minimum fee of $25,000 that can then be applied to their royalties owed.

This announcement follows agreements concluded earlier in the year by Sound Exchange with the National Association of Broadcasters for over-the-air radio stations that stream on the Internet, with the Corporation for Public Broadcasting, and with other small commercial webcasters.

The agreement will be binding on all copyright owners and performers and will be available to other eligible commercial webcasters once the agreed-upon rates and terms are published in the Federal Register by the U.S. Copyright Office.

The agreement was reached under the authority of the Webcaster Settlement Act of 2009 and applies to all commercially-released sound recordings webcast by these entities under the statutory licenses provided by Sections 112 and 114 of the Copyright Act.

In further researching the details on this agreement, Radio magazine has determined that Internet radio stations with little or no revenue and few listeners will pay $500 in royalties and $100 to waive the record-keeping requirement. This type of station accounts for most of the Internet radio stations.

Small Internet radio stations with some listeners and revenues less than $50,000 in revenue will pay a minimum $2,000 each year to stream.

FAQ: Sound Exchange Agreement with Pureplay Webcasters, Jul 2009

A list of frequently asked questions that was posted to the Sound Exchange website....