In an effort to appease Internet radio broadcasters rebelling against new royalty payment rates scheduled to go into effect in July, SoundExchange has offered a conditional settlement to the stations in hopes of getting the new payment plan back on track. Station owners aren't pleased with the offer, but do see it as a starting point for negotiations.

The rate hikes that Internet broadcasters are upset about were approved by the Copyright Royalty Board after being pushed through by SoundExchange - the RIAA's royalty collection arm. In many cases, the new payment rates will account for more money that the stations bring in, leaving them with the prospect of shuttering their businesses to avoid the costs.

Facing the possibility that U.S.-based Internet radio stations would likely shut down, bills to change the Copyright Royalty Board's new rate ruling found their way into both the House and Senate. Broadcasters also banded together to take their battle into the court room.

SoundExchange has stepped forward with a proposal, but webcasters don't think it goes far enough. SoundExchange is offering broadcasters that make less than US$1.2 million a year an extension of the previous deal until 2010. Once a broadcaster breaks through the $1.2 million ceiling, however, it will be retroactively liable for the CRB's new pay per performance scheme and subject to payment terms that likely exceed its income.

"Although the rates revised by the CRB are fair and based on the value of music in the marketplace, there's a sense in the music community and in Congress that small webcasters need more time to develop their businesses," said SoundExchange Executive Director John Simson.

David Oxenford, an attorney representing small commercial webcasters in the battle, told the Radio and Internet Newsletter "While the $1.2 million cap was fine in 2002 when it was used in the [Small Webcaster Settlement Act of 2002] negotiations, it doesn't work in 2007. This would effectively limit the independent webcaster's growth and investment opportunities, as who would invest in an entity with an absolute cap on their financial growth?"

One point of contention for SoundExchange is that it feels Internet radio stations are paying below-market rates for the music they play. The stations, however, were already paying between 10 and 12 percent of their annual gross income, and feel they were paying enough.

Since broadcasters and SoundExchange are on a fast track to the July deadline, and an in-court settlement would likely come after the date as well, it may be up to Congress to decide how this battle plays out - and whether or not Internet radio stations can afford to stay in business.