News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

For Immediate Release
July 13, 2007

CONTACT: Kate Gilman/Erin Donar,  (202) 225-4038

As Clock Ticks, Velázquez and Chabot Make Last Minute Attempt to Delay Internet Radio Royalty Rate Increase for Small Webcasters
Introduce Legislation to Postpone Fee Increase to Allow For Further Negotiations

WASHINGTON – Last night, Chairwoman of the Committee on Small Business, Nydia M. Velázquez and Ranking Member Steve Chabot came together to introduce bi-partisan legislation in a final attempt to postpone the implementation of new royalty rates for webcasters and allow additional time to find a solution.  The new rates put into place by the Copyright Royalty Board (CRB), are scheduled to go into effect this Sunday, July 15 and many caution that their implementation will mean the end of the industry for Internet radio.  Efforts to reach a compromise have not yet been successful, and this legislation, HR 3015, would delay implementation of the rate increase by 60 days, allowing continued negotiation so a satisfactory arrangement can be reached.

“We are coming down to the wire on this issue, and as the royalty rates currently stand, I am concerned that webcasters and musicians alike will be harmed, perhaps even irreparably,” said Chairwoman Velázquez. “There has not yet been an agreement reached that provides fair compensation to artists while allowing broadcasters to stay on the air without excessive fees. I urge my colleagues to support this bill to allow an opportunity for that compromise to be reached.”

H.R. 3015 would postpone the implementation of the CRB decision for two months, allowing internet broadcasters and the music industry more time to come to a suitable compromise. Under the current fee structure, firms pay a percentage of their revenue, a system beneficial to small companies with lower profit margins. The new regulations would designate a flat fee that must be paid each time a song is played. For many small broadcasters, this would drastically increase their costs and some industry insiders have projected that royalty payments will more than double. The new fee system will also cover all broadcasts since January 1, 2006, leaving webcasters open to high back payments and possible legal action for unauthorized public performance. H.R. 3015 would maintain the current revenue based system for 60 days past the July 15 deadline, during which time, a more equitable system can be agreed upon.  Velázquez and Chabot sent letters to the Chair and Ranking Member of the House Judiciary Committee, urging them to adopt this legislation.  A letter was also sent to Sound Exchange and the Digital Media Association advising the groups to use the 60 days to make earnest negotiations.

“The July 15 implementation date of the CRB’s ruling is making on-going negotiations more challenging,” said Congressman Chabot. “During last month’s Small Business Committee hearing on this issue, there was a consensus among the Committee Members that it would be preferable to have this matter resolved between the parties. This legislation creates a positive environment to encourage continued dialogue and negotiation.”

The Committee held a hearing on June 28 to hear testimony on the impact the CRB decision will have on internet broadcasters, musicians and record labels. Both sides of the issue came to the table and the consensus was that fair compensation to musicians was crucial, but that the royalties as they currently stand could be prohibitively expensive for small internet broadcasters. Additionally, independent musicians voiced there support for internet radio, citing its promotional value, as most terrestrial radio stations limit their broadcasts to mainstream artists.  

“We must find a solution that will satisfy both sides of this issue, and a little more time may be all that is necessary,” Chairwoman Velázquez said. “It is critical that we take steps to ensure that small internet webcasters continue to thrive.”

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