Webasting Royalty Negotiations Derailed by Disagreement, Recession

Now, negotiations between the webcaster trade group Digital Media Association and former RIAA division SoundExchange have broken down completely. For music fans, this is bad news, because it will likely limit legal online listening options even further.

The main sticking point, according to Digital Media Association executive director Jon Potter, is the question of whether large webcasters should have to pay music royalties based on their entire operations or all music-related pages, rather than just the divisions that actually webcast music.

“At the end of the day, there were some significant differences in principle, over what's the scope of the business that's subject to the royalty," Potter told Wired.com.

“We have a lot of companies [in DiMA] that run very multifaceted businesses, and it's a lot simpler to approach this business from the perspective of pure plays, or even from a simple broadcaster view, and that became the most challenging part of the discussion, and the last part of the discussion." Backing up his assertion that negotiations were easier for broadcasters: The National Association of Broadcasters did manage to reach an agreement with SoundExchange to lower their rates by 16 percent for the next couple of years -- apparently enough to let traditional radio stations to keep webcasting their shows.

However, “pure play" businesses like Pandora were struggling to stay afloat even before the ad market tanked as a result of the recession. “Very few are finding that they can make a substantial business only out of internet radio," added Potter, and they have been unsuccessful in renegotiating new rates that would let them stay alive The economy also hampered large webcasters' ability to make a deal with SoundExchange that would have effectively replaced the official Copyright Royalty rates.

“Sometimes the pieces on the chessboard move, and sometimes the chessboard moves," said Potter. “A deal that might have been agreeable a year ago, based on ad revenue projections a year ago, might not have been obtainable two weeks ago, and that's what I mean by 'the chessboard moves.' AOL and Yahoo got out of the business. SoundExchange did not respond to our query in time for publication.