Congress passes bill to help save Internet radio

The measure, which was sponsored by Rep. Jay Inslee, D-Wash., and now heads to the president, would green-light an anticipated deal between Webcasters and SoundExchange, a nonprofit that collects royalties for recording copyright owners from Internet radio stations and other digital radio services.

The two sides have been negotiating new royalty rates following a March 2007 ruling by the federal Copyright Royalty Board that dramatically increased the rates that Internet radio stations must pay artists and record labels. Internet radio stations say the new rates--which most but not all are paying--could effectively put them out of business.

Unless something is done, copyright royalties could eventually eat up as much as 70 percent of Internet radio industry revenue, by some estimates.

After months of talks, SoundExchange has announced an agreement in principle with National Public Radio and has recently moved closer to a deal with big Webcasters, including those represented by the Digital Media Association (DiMA), a trade group made up of companies that operate online audio and video services.

Still, the negotiations with DiMA and other Webcasters are ongoing and the two sides were running out of time. Because Internet radio companies operate under a government license, any final agreement needs congressional authorization. And with Congress preparing to adjourn at least until after the elections--and possibly until next year--lawmakers probably will not be around to provide approval when an accord is reached.

So Inslee's legislation enables the two sides to continue talking through Feb. 15 and makes any deal struck while lawmakers are in recess legally binding. The bill provides congressional approval for any agreements that SoundExchange reaches with DiMA and other types of Webcasters, such as college or religious Webcasters.

Tim Westergren, founder of popular Internet radio company Pandora Media, said Wednesday that the measure removes a major hurdle to a final agreement on copyright royalty rates. "This is a substantial milestone for people who love music and musicians," he said.

Pandora, which is based in Oakland, Calif., has threatened to shut down if the rates set by the Copyright Royalty Board are not lowered.

The Digital Media Association's executive director, Jonathan Potter, said in a statement that he is optimistic Webcasters and SoundExchange will soon reach an agreement that will create "long-term stability that will re-energize the Internet radio business." DiMA members include Pandora as well as Yahoo Inc., RealNetworks Inc., Microsoft Corp. and Amazon.com Inc.