BY PAUL MALONEY
Virtually no small commercial webcasters accepted the terms of a SoundExchange offer that expired yesterday -- a deal that would cap revenue and listening and force the webcasters to remain very small businesses. [RAIN coverage of the offer is here.]

As expected (and reported in RAIN here), SoundExchange yesterday announced that of the hundreds of webcasting businesses not affliated with large companies like Yahoo! and AOL, just 24 small webcasters had accepted its offer. SoundExchange declined to name them in its press release.

Deal would create industry of "hobbyists" and
"big companies that subsidize their webcasting"
Attorney David Oxenford represents a group of Small Commercial Webcasters (SCW) (which includes our AccuRadio service) that soundly rejected the deal, and is continuing to negotiate with SoundExchange. Other high-profile small business webcasters, like SomaFM and RadioParadise, also dismiss the offer [see RAIN here].

Oxenford (pictured) told CNet, "If the only deal that SoundExchange offers to small webcasters is that which was just signed by the 24... they will do away with the independent webcaster who is serious about growing a business," he told the news source.

"You'll be left with an industry with essentially hobbyists and big companies that subsidize their webcasting with other lines of business -- essentially crushing the hopes of those who saw the Internet as a way to build an independent radio business."

SoundEx wants Congress to think
it's making real deals
The deal will have webcasters pay SoundExchange 10% of their gross revenue up to $250,000, and 12% of gross revenue above that. Stations are limited to $1.25 million or less in annual revenues and 5,000,000 aggregate tuning hours ("ATH") a month to remain eligible.

The fact is the vast majority of small commercial webcasters agree that the deal is not at all viable for healthy business. They argue that, under current market conditions, generating anywhere near $1.25 million in revenue would require an audience far larger than 5 million ATH per month. Yet, should a webcaster's audience grow beyond that point, the service would be liable for the full CRB rates.

What's more, the terms of this deal are only applicable for use of music of SoundExchange members (such as the major labels). Webcasters must still pay full CRB rates for use of music owned by nonaffiliated labels and artists.

The SoundExchange press release characterized the news as an "embrace" of the new terms by "significant numbers" of the small webcaster community; and again positioned SoundExchange's offer as a response to Congress's urging to reach a settlement for small business webcasters. What's more, the press release implied that small webcasters that haven't accepted the deal are either (1) satisfied with the CRB-determined rates, or (2) covered by webcast aggregators that handle royalties.

Deal works only for very small webcasters
So who would sign this deal? Though SoundExchange didn't name any business willing to accept its deal, RAIN has learned the identity of one. Michael Clark of ChristmasMusic247, a Live365 webcaster, posted a comment to Rusty Hodge's (who runs SomaFM) blog.

He explained, "I play Christmas Music all year round... My estimated [royalty] bill from January 1, 2006 through March 2007 was $11,000. I estimated running up an additional $9,000 if I stayed webcasting through this Christmas season.

"In 2006 I had $1,200 in revenue; and estimated my revenue for 2007 was $3,000... I am an individual doing my station as a hobby/very small business... The reason I signed was to save myself more than $5,000," Clark wrote.

"And yes, I'm now consigned to playing only SX-member music, or getting licenses from each independent artist I play. And that's quite difficult... People need to contact their member of Congress and ask them to support and sponsor HR 2060 or S 1353, the Internet Radio Equality Act."

RAIN is brought to you today by:

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From a report in CNNMoney.com: "A music industry group that plans to collect new higher royalty rates from online broadcasters for artists and record labels is fighting legislation that would overturn the new rates.

"SoundExchange spent $50,000 in the first half of 2007 to lobby against Senate and House bills that would nullify the new payment system set by a three-judge copyright panel in March, according to a disclosure form posted online Sept. 7 by the Senate's public records office...

"Lawmakers sympathetic to webcasters introduced legislation -- called the Internet Radio Equality Act -- that would replace the new royalty system with one that they say is fairer to Webcasters. The House measure, introduced by Reps. Jay Inslee, D-Wash., and Don Manzullo, R-Ill., has 142 co-sponsors. The Senate bill was introduced by Sens. Ron Wyden, D-Ore., and Sam Brownback, R-Kansas...

"The music industry and record labels, which have been hurt by lower sales of CDs, are seeking new revenue sources as they adapt to consumers' changing listening habits. SoundExchange distributes royalties to more than 20,000 recording artists and 3,500 record labels, including all the major recording companies.

"Under a federal law enacted in 1995, lobbyists are required to disclose activities that could influence members of the executive and legislative branches. They must register with Congress within 45 days of being hired or engaging in lobbying."

Read this entire article online here.

From MSNBC.com: "Classical music hardly seems like a growth business...

"In fact, classical music is doing a lot better than you might think. Although total sales in all music categories (on- and offline) fell 5% last year, classical sales grew by a whopping 22%.

"'When I talk to people in the industry, everyone is making money,' says Klaus Heymann, chairman of Naxos, the world's biggest independent classical-music company, based in Hong Kong.

"Why are Heymann and his peers singing such a different tune? Because classical retailers have been the best at exploiting the potential of online revenue. The biggest companies of the classical genre are now earning about 20% of sales from digital music, double or triple the average for other categories...

"Musically speaking, the classical genre has proved to be ideal for a digital era. The classical customer is technologically savvy and more likely to buy in bulk, and the viral nature of the Net has allowed the music to be heard by new audiences, fueling overall sales...

"It's a great example of how companies are putting the 'long tail' theory of cybercommerce into action...

"Indies like Naxos have been the most aggressive online, but even at Decca Label Group -- the classical division of Universal, the world's largest music company -- the digital-music business now contributes a fifth of sales...

"At the same time, some industry watchers believe digital might also help create more classical megastars. Witness the rise of Lang Lang (pictured right), a young, spiky-haired Chinese pianist who topped iTunes' charts in mid-May. The fact that he ended up on iTunes' main page helped push sales of his new album, 'Beethoven Piano Concertos Nos. 1 & 4,' even further into the top 15 of the general iTunes charts...

Read the entire article at MSNBC.

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