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A step in the right direction,
but not a long-term solution
SoundExchange's proposal today may take some political pressure off of them, and it does relieve a couple of dozen small webcasters from the threat of imminent bankruptcy, but it addresses only a tiny portion of the big picture.

For example, webcasters like Live365 and Pandora are "small businesses" by most standard definitions of the term, but may not qualify for this offer. (SoundExchange's proposed revenue caps have not been publicly released yet.)

Launched 18 months ago, Pandora employs 100 people in an enterprise zone in Oakland, California, and under every reasonable definition is a “small business” trying to grow into a large business.

Similarly, Live365 employs 35 people in Foster City, California, and provides the platform for 10,000 individual webcasters to create their own micro-businesses. If this offer is not made available to them, those thousands of individual webcasters would lose their ability to stream..

By broadcast radio standards, even the largest webcasters (i.e., the Internet radio divisions of Yahoo! and AOL) are small broadcasters. (A few years ago, broadcast groups that didn't even make the list of the 40 largest radio companies — Fisher, Service Broadcasting, Arso Radio, Curtis Media, Mid-West Family, Hubbard, etc.— all had annual revenues of over $20 million, making them larger than the largest webcaster.)

Furthermore, let's not forget the streaming initiatives of terrestrial broadcasters, which are a critical segment of the world of Internet radio and are essentially ignored by this proposal.

Insurmountable barrier to growth for small webcasters
Another problem: Under the old SWSA terms, there has been an insurmountable barrier to growth for the SWSA webcasters (e.g., Digitially Imported, AccuRadio, Radioio, etc.).

Let me explain: If a webcaster's annual revenues fell just under the $1.2 million SWSA revenue cap, they would have owed $144,000 in royalties (and might have just about broken even overall). But if they were to sell an additional $100 in advertising, their royalty bill for the year would leap to $1,800,000!

It would be an impossible transition.

SWSA doesn't fix the real problem:
"Willing buyer / willing seller"
Large or small, it doesn't matter — the inclusion of the "willing buyer / willing seller" standard in the 1998 Digitial Millenium Copyright Act (DMCA), which set this whole process in motion, combined with the arbitrators' and judges' interpretation thereof, is the core problem.

It led to an unexpected consequence: A royalty rate was set by the CARP and, subsequently, the CRB that COULDN'T have been in the ballpark of what Congress had in mind— effectively 15x to 50x the composition royalty!

A special royalty deal for a certain class of small webcasters, despite being a step in the right direction, keeps the industry small, constricts competition,  curbs music diversity, hurts working musicians, and limits consumer benefit. -- KH
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Internet radio may be driven out of business within weeks by a Copyright Royalty Board decision that gives record companies a royalty rate that exceeds 100% of most webcasters' total revenues.

Visit SaveNetRadio.org for links to a petition to Congress you can sign, and to send the message directly to your Representative and Senators that you don't want to lose Internet radio!