Small webcasters reject new SoundExchange offer

After much lobbying and media coverage about an ongoing dispute over a drastic increase on royalty rates imposed to Internet radio broadcasters, SoundExchange has pitched a new offer to “small” webcasters (according to them, those who earn $1.25 million or less in annual gross revenue) allowing them to pay a discounted rate through 2010.

The royalty collection group is offering qualifying webcasters the option to pay royalty fees of 10 to 12 percent of their annual revenue. In addition, the new offer does not require webcasters to implement DRM technology in their streams. Small webcasters have until September 14 to accept the offer, but there are some caveats: by taking the offer they are also agreeing that if they end up earning more than $1.2 million they fall back to the category of bigger webcasters, and have to abide the higher per-song royalty fees. Many broadcasters are rejecting the offer, arguing that the terms are unfair and severely limit business growth.

"[SoundExchange] basically limits the ability of the small commercial webcaster to grow its business, and you can’t bring in investors to invest in new programming or new facilities or publicity. Who's going to invest in a business that can't get bigger than $1.2 million in revenues a year?"
Webcasters claim not only that the rates are still too high, but that the revenue cap is far too low, and that SoundExchange should use the US Small Business Administration's standard instead, which dictates that small businesses earn $6 million or less in annual revenue.