SoundExchange offer to small webcasters

SoundExchangeIn the ongoing debate over the new CRB royalty rates, small webcasters were granted a reprieve yesterday when SoundExchange announced an offer for small webcasters. This offer extends the previous agreement, Small Webcaster Settlement Act, under which the small webcasters have operated since 2002, through 2010.

The recent changes that were enacted changed the royalty rate from a percentage of revenue, as it was under the SWSA, to a flat rate per song. Many webcasters protested this change saying it would result in such a large increase in royalties as to render them unable to continue in business. SoundExchange has now extended the SWSA terms, allowing small webcasters to pay 10% of revenue up to $250K and 12% above that. I believe the cap on revenue for being classed as a small webcaster is placed at $1.2M. I believe there is also a cap in place on listenership (usage), but I’m not sure what that limit is.

This should allow most bluegrass music webcasters to breath a sigh of relief.

The text of SoundExchange’s press release does suggest that SE is not thrilled with making this offer. They describe the new CRB rates as fair and correct, and then say this offer is a “subsidy” for small webcasters for the “alleged weaknesses” of their business models. They go to say that this extension of the SWSA is time limited and extends the “below market” rates small webcasters have enjoyed since 2002.

It is also made clear that SoundExchange was moved to offer this deal at the request of Congress, and probably wouldn’t have otherwise.

The fear that some have expressed is that this extension will serve to discourage small webcasters from growing their business because staying below the revenue and usage caps is much cheaper. My suggestion to bluegrass webcasters would be to take a good look at your business model, because this extension only gives you four more years (including 2007) before they are likely to insist on a per play rate structure. Don’t sit by and let this four years lapse without planning ahead.

Here’s a link to the pdf of SoundExchange’s press release concerning this extended offer.