Pureplay webcasters are those whose primary business is streaming music and other sound recordings.

More Than Two Years

The issue has been the amount of royalties owed by webcasters for streaming music and other protected sound recordings, and it was propelled to a war footing following a decision by the Copyright Royalty Board in 2007 that set new rates for Internet radio. Webcasters immediately protested the new rates, saying the costs would force many of them out of business.

The agreement gives these webcasters options as to how they will pay, including what SoundExchange described as a "discount" on per-stream rates, in exchange for revenue sharing for most services and more rigorous reporting requirements.

According to the new agreement, pureplay webcasters who sign this agreement will pay rights holders through SoundExchange a minimum percentage of all their U.S. revenues, up to 25 percent, as well as a minimum royalty.

John Simson, SoundExchange's executive director, said the agreement took more than two years, and it shows "both sides can address the business concerns of the webcasters while giving artists and copyright holders the potential to share in the revenue growth of webcasters."

'Royalty Crisis is Over'

The agreement sets up three rate classes -- large pureplay webcasters, small pureplays (up to $1.25 million in total revenues), and pureplays that offer "bundled, syndicated or subscription services."

Larger pureplays will pay the greater of either a per-performance rate or 25 percent of total revenue, and will provide more extensive reporting of their use of sound recordings. Small pureplays can pay the greater of a percentage of revenue or a percentage of expenses, and can avoid the comprehensive playlist reporting in certain cases in exchange for an additional "proxy fee." The agreement for small pureplays will last through 2014, and for others through 2015.

Bundled services will pay per-performances fees, as set by an agreement earlier this year between SoundExchange and the National Association of Broadcasters. The agreement also calls for all pureplays to pay an annual minimum fee of $25,000, which can later be applied to royalties.

Sonal Ghandi, an analyst with industry research firm Forrester, called the new agreement "a good compromise on both sides." She said both the webcasters and SoundExchange seem to have arrived at a middle ground.

"This settles it," she said, at least for the next few years.

On his company's blog, pureplay webcaster and Pandora founder Tim Westergren wrote that he has been waiting for more than two years for the moment "when I could finally write these words: The royalty crisis is over!"

Over-the-air radio stations that also offer their programming on the Net are covered by an agreement that SoundExchange concluded earlier this year with the National Association of Broadcasters, the Corporation for Public Broadcasting, and others.