Where we stand
BY KURT HANSON
Under the terms of the CRB decision, royalty payments are due on July 15th for the 17-month period from January 1, 2006 through May 31, 2007.  Most large webcasters (including broadcasters) will only see a 5% in their 2006 obligation* but will see an additional 38% increase in their 2007 obligation.** 

Depending on how the CRB decision is interpreted, webcasters with a large number of channels, such as Live365 and Pandora, could be hit by a retroactive obligation of $500 per channel per year, which would bankrupt both of those companies.  Popular noncommercial stations will also see huge increases in their retroactive obligations.*** 

Small webcasters who were paying under the terms of the SWSA will see their retroactive obligation increase by 1,500% or more****  and would also be bankrupted. 

That's if the CRB decision stands. However...

Adjudication 
Various parties are in the process of filing appeals with the U.S. Court of Appeals for the D.C. Circuit, although it should be noted that this would be a months- or even years-long process.  As such, some parties are expected to file a request for an "emergency stay" with that same U.S. Court of Appeals this week, asking that the CRB judges' decision be put in abeyance until the appeals process is completed, since the webcasters who would be bankrupted on July 15th would be irreparably harmed.

Negotiation
SoundExchange announced on Monday that two important Congressmen have asked them to negotiate with small commercial and noncommercial webcasters.  In that press release, SoundExchange said it was willing to offer an extension of the terms of the SWSA for the 2006-2010 period with some minor modifications. Negotiations between SoundExchange and the Small Commercial Webcasters group that participated in the CRB process are now in progress.  (SoundExchange indicated a desire for a usage cap and for stricter requirements for timely reporting and payments. Various small webcasters have indicated a desire for a lower annual minimum, a higher revenues cap, and a practical way for webcasters to transition from "small" to non-small status.)

NPR, on behalf of its many public radio stations, notes that even the SWSA rates penalize public broadcasters for fulfilling their statutory obligation to increase programming diversity and reach expanded audiences, and it does not provide a solution for public radio.

Legislation
Meanwhile, the "Internet Radio Equality Act" is gaining support in Congress.  For all webcasters, the Act vacates the CRB decision.  For commercial webcasters, the legislation re-sets the standard to be used by judges in future CRB hearings from "willing buyer / willing seller" to the traditional copyright law standard*****, and establishes an interim royalty rate of 7.5%, roughly matching satellite radio's royalty rate.  

For noncommercial webcasters, the legislation equalizes the royalty setting process for sound recordings by matching the process for musical works and calls for interim rates of 150% (H.R. 2060) or 105% (S. 1353) of the amount of the fee from the expired negotiated agreement. The House version of the bill now has 100 co-sponsors and has also been introduced on a bipartisan basis in the Senate by Senators Wyden and Brownback.  (Congress takes a Memorial Day recess returning on June 1.)


* from $.00762 per performance to $.0008 per performance
** from $.00762 per performance to $.0011 per performance
*** as they would be required to pay the standard commercial rate ($.0008/.0011) for all listeners above a small permitted audience size
**** from approximately 11.5% of revenues to $.0008/$.0011 per performance, which would be well more than 100% of revenues in most cases
***** which balances the needs of copyright owners, copyright users, and the general public