The bill specifies

We received a link to a not-quite-final copy of the bill that incorporates the deal between small webcasters and the RIAA. It's on SomaFM.com here.

From RAIN's mid-morning edition:

BY KURT HANSON
A new wrinkle has appeared that apparently threatens the compromise agreed to last night between small commercial webcasters and record industry represenatives, coming largely out of left field from the AFTRA, representing background musicans.

According to various sources, the RIAA apparently got last-minute language added to the bill — i.e., after the compromise had supposedly been agreed to by all parties — to clarify that legal and adminstrative costs could be deducted from royalty collections before royalty proceeds are split with recording artists.

But while the new agreement states that legal fees will be taken out of royalties, it makes no guarantee that musicians will then be paid directly, Ann Chaitovitz, national director of sound recordings for the American Federation of Television and Radio Artists told Reuters. "They knew we would object to it," Chaitovitz said." (Read the entire Reuters article in the San Jose Mercury News here.)

The passage of the original version of the billl, HR 5469, was threatened largely by an appeal from the AFL-CIO that "artists would suffer" if royalty collections were delayed. (See RAIN story here.) At that point, AFTRA seemed to be acting as the "mouthpiece" for the RIAA. Today, they've flipped their position and are calling the RIAA their adversary!

... Oh, for heaven's sake. This is lunacy! It is only rational that legal and administrative costs should be deducted from royalty collections before the balance is disbursed. And it doesn't sound like AFTRA is objecting to this last-minute addition to the bill. It sounds as if AFTRA's Ms. Chaitovitz is upset that the bill does not REITERATE the fact that the net receipts are distributed directly to the artists as opposed to the labels for subsequent distribution to the artists. But that's already established in the DMCA! Bills in Congress aren't supposed to reiterate policies that have already been set in law! What's more, Ms. Chaitovitz is fighting for an amount of money that's absurdly trivial. Background musicians are, under the law, to receive 5% of net royalties. Based on our recent analysis in RAIN, the gross retroactive royalties due background artists would be about $350,000. Assuming there are at least 20,000 such musicians, we're talking about royalty checks averaging $17 each — for the four-year period — if there were no legal and administrative costs. And after SoundExchange administrative and legal costs which are rumored to be higher than total royalties expected to be collected in this round, are deducted from the receipts, the actual distribution to musicians is more likely to be much closer to $0 each. ...

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From the Wall Street Journal Online: "When should a new technology change the rules of the game? If there's a more important question facing lawmakers amid the fits and starts of the digital age, we haven't found it. But answering it calls for more care than we've seen from lawmakers so far...

"Rep. James Sensenbrenner, a Wisconsin Republican [right], has been pressuring the two camps [labels and webcasters] to reach a deal...

"While we applaud Mr. Sensenbrenner's recent efforts, we still shake our heads about some of the basic premises of the laws governing Net radio. At the root of the problem, in our view, is technological fetishism. The Digital Millennium Copyright Act is a product of 1998, and is like many a business plan from that starry-eyed year. It vastly overestimates the effect technology will have on an established business model, and in doing so it loses sight of the many ways the digital world is the same as the one it claimed to replace...

"Net-radio stations pay royalties to labels, but 'terrestrial' radio stations don't. Why is that? Well, the decades-old rationale for radio stations not paying royalties to labels is that labels benefit from the promotional value of songs being played on the radio...

We're holding our applause that Webcasters and record labels appear near a deal. Frankly, we've yet to be convinced by any claim that Net radio and 'terrestrial' radio are substantially different, and until we are, we can't help but think radio should be treated like radio, regardless of the machinery used to broadcast it, and as such neither needs nor deserves new protections. Back in 1998, it was easy to let technological fetishism blind us to such a simple fact. But it's not 1998 anymore."

This entire article is available to subscribers online here.

From today's early edition...

BY KURT HANSON
After seven days of virtually around-the-clock negotiations conducted at the behest of House Judiciary committee chairman James Sensenbrenner (R-WI), the parties involved reached a compromise on Sunday night that could keep small commercial webcasters from being bankrupted on October 20th by offering them a percentage-of-revenues royalty option.

Sensenbrenner plans to bring their compromise to a floor vote today as the revised version of H.R. 5469. The version he originally proposed would have simply pushed back the royalty payment due date by six months while parties debated their arguments in various judicial appeals.

The compromise agreement reportedly gives webcasters who have had less than $1 million in revenues to date the option of paying retroactive royalties for the past four years on a percentage-of-revenues basis — specifically, either 8% of revenues or 5% of expenses, whichever is higher, with a minimum payment of $2,000 per year for each year they've been webcasting. The compromise agreement would also allow the smallest webcasters to pay the bill in three installments over the next year.

Going forward, the parties agreed to a percentage-of-revenues deal option, to be made available at the option of the small webcaster, for two more years, with the rates increasing to 10% of the webcaster's first $250,000 in revenues and 12% of all revenues beyond that level, with the minimum payment for webcasters with revenues over $50,000 increasing to $5,000/year.

Other key points of the bill, according to RAIN's sources:

(1) Sensenbrenner's bill will specify that the rate cannot be claimed to be a "willing buyer/willing seller" by participants in any future CARP arbitration. (This should satisfy the NAB's primary concern last week that had them intending to not support the bill because it might be seen as establishing a new "marketplace" rate.)

(2) Because the compromise royalty rate has a higher minimum than the revised CARP rate, webcasters with an average AQH audience size (i.e., simultaneous streams) of fewer than 20 listeners may find it advantageous to pay the CARP rate of $.0007/performance rather than the $2,000 minimum.

(3) This bill does not address any of the questions relating to broadcasters streaming on the web, including the concerns of noncommercial broadcasters. Those issues are left to be resolved in court, where several appeals have already been filed.

Labels, webcasters reportedly reach deal "Sources say the long-awaited pact calls for lower royalty payments by small online radio stations..." (Free registration required)

... This seems to be a compromise that keeps the most at-risk segment of webcasters alive without hurting other other segments. Large webcasters (e.g., Radio@AOL) have implied they can probably live with the revised CARP-based rates. Broadcasters can continue their argument in the U.S. District Court of Appeals that the DMCA did not intend for the sound recordings performance royalty to apply to their simulcasts at all. Hobbyists will have various options: With an AQH of less than 10 listeners, they can pay the CARP-mandated minimum of $10/week. With an AQH of 11 to 40 listeners, they can pay the CARP-mandated per-performance rate, which would be between $11/week and $40/week. Beyond that, they could elect this new negotiated rate, paying the minimum of $40/week. Unfortunately, for the midsized webcasters (Live365, Radio Free Virgin, etc.), it remains to be seen whether there is a solution here that works for them. ...