Much has been made in the press in the last day about SoundExchange "extending" the Small Webcasters Settlement Act and allowing small webcasters to pay their royalties on a percentage of revenue basis.  However, these reports overstate what happened yesterday. SoundExchange simply made a preliminary, conditional offer to settle the case to the group of independent commercial webcasters that I represented in the Copyright Royalty Board proceeding . The offer is to extend the SWSA with some "tweaks" that are yet to be negotiated. Unless and until a full agreement is reached regarding these "tweaks," and as to other issues that have been raised by the independent webcasters, the rates set out by the Copyright Royalty Board remain unchanged and will go into effect on July 15.

A simple extension of the SWSA through 2010 does raise some issues that have been reported elsewhere, including in the Radio and Internet Newsletter.  An SWSA extension would retain the caps on revenues of small webcasters – limiting their revenues to $1.2 million.  Up to that point, they would be paying 12% of their gross revenues.  But once they earned a dollar more than that cap – the percentage of revenue rate would disappear retroactively for the entire year in which they exceeded the cap and all of  their performances back to the beginning of the year would be subject to the CRB per performance royalties – effectively exceeding the total revenues of the independent webcaster by many multiples. While the $1.2 million cap was fine in 2002 when it was used in the agreement reached pursuant to the SWSA , that was when webcasting was a nascent industry and was simply looking for a way to survive.  It doesn’t work in 2007. This cap on revenue would effectively limit the independent webcaster’s growth and investment opportunities – as who would invest in an entity with an absolute cap on their financial growth?

My clients are pleased that SoundExchange has finally made a proposal – which had been requested for the past two years. But this "offer" is simply an offer to extend the SWSA with some modifications that SoundExchange wants – modifications which the independent webcasters are studying. The independent webcasters have suggested modifications of their own to the SWSA, modifications which were not addressed in the SoundExchange proposal.

The independent webcasters welcome this proposal as what it is – the first step in a negotiation process which we hope to be able to conduct in a business-like fashion in the coming weeks – rather than one negotiated through press releases.

Other webcasters – including broadcasters who simulcast their stations on the Internet, larger webcasters and even noncommercial webcasters – are not covered by this proposal.  Thus, even were this proposal to result in an agreement,  many other webcasters would still be subject to the royalty rates which the CRB adopted.