More money for mega-corporations, and musicians writing checks to pay back royalties they have already received: That’s the picture SoundExchange, the RIAA’s royalty collection arm, is painting of proposed legislation to regulate Internet radio royalty payments. The bill was introduced into the U.S. House of Representatives on Thursday, April 26, in an effort to protect Internet radio stations from the Copyright Royalty Board’s new rates that include annual royalties that could potentially be more than the stations make.

John Simson, Executive Director of SoundExchange, commented "The true beneficiaries are the mega-multiplex services like AOL, Yahoo!, Microsoft and Clear Channel, which will benefit from rates substantially lower than those set by the Librarian of Congress in 2002."

The bill was sponsored by Jay Inslee (D-WA), and it proposed that Internet radio stations should pay royalties in-line with Satellite radio stations. In that model, stations are given the option of paying US$0.33 per listener hour, or 7.5 percent of their annual revenues. Like the CRB’s new royalty scheme, Rep. Inslee’s bill would make the new royalty payment plan retroactive to 2006.

In contrast, the CRB’s new payment plan is based on pay-per-performance that exceeds the hourly revenue most Internet radio stations can generate.

SoundExchange claimed in a statement that big corporations in the Internet radio business would receive a US$50 million windfall from Rep. Inslee’s bill - A number presumably pulled from the amount that SoundExchange planned to collect from Internet stations. The statement also claimed that musicians would be forced to repay royalties they have already received for 2006, although there is no wording in the bill that would require repayment. There is, however, the possibility that the contract SoundExchange has with artists requires repayment if the royalty terms are altered.

Mr. Simson added "The idea that this bill would help small webcasters or artists is ludicrous since less than 2 percent of all royalty payments in 2006 came from small webcasters."

He also contended that SaveNetRadio, a Web site dedicated to preserving Internet radio, may actually be a front for big companies trying to manipulate royalty payments in their favor. "Because the bill is so heavily favored to enrich the big webcasters, it raises questions as to who is really behind the SaveNetRadio Coalition," Mr. Simson said.

Despite Mr. Simson’s arguments, it appears that without some type of intervention the future of Internet radio in the U.S. is in question. Many small stations are facing the prospect of shutting down to avoid cost prohibitive royalty payments - which translates to fewer opportunities for artists to be heard, and smaller Internet radio playlists in iTunes.