Web radio, music industry reach agreement on royalties

Internet radio got a break Tuesday when the sector reached an agreement on streaming-music royalty rates with SoundExchange, the group that collects royalties on behalf of artists and labels.

The two sides announced the deal, which comes after more than two years of negotiations, political maneuvering, and fans pleading with lawmakers to save Webcasting. It should be noted, however, that Webcasters are still at a disadvantage when competing with traditional broadcast radio. Over-the-air stations aren’t required to pay royalty rates to artists or labels.

Steve Marks, an executive vice president for the Recording Industry Association of America and one of the people who helped close the deal, said the settlement is proof that the music industry wants to partner with technology firms.

“Supporting new business models through innovative licensing agreements is critical to the future of our industry,” Marks said. “We are pleased to have found an alternative in the hope of avoiding costly litigation in favor of building partnerships.”

The agreement calls for large ad-supported radio services, such as Pandora, to either share 25 percent of revenue with the music industry or pay a per-stream rate of 0.08 cent retroactive to 2006, whichever is greater. That rate will increase until reaching 0.14 cent in 2015.

Sites that generate less than $1.25 million in revenue must pay 12 percent to 14 percent for streaming rights.

Lower rates were vital to the survival of Internet radio stations, Tim Westergren, Pandora’s founder, said in September. The Copyright Royalty Board set a performance rate at 0.19 cent but Webcasters argued that the rates would drive them out of business.

But here’s the rub: Pandora’s heaviest users will now have to pay, according to a story in the blog All Things