It's not all bailout negotiations, partisan recriminations, and White House meetings this week in Congress—our elected officials also found some time to pass the Webcaster Settlement Act of 2008. Its name might suggest that the bill "settles" something, but it does not. Instead, it gives the webcasters and the music labels still more time to hammer out a royalty compromise acceptable to all sides before a crippling new rate kicks in.

Still going...



Remember all that heat and smoke from last year's webcaster royalty inferno? Remember how even Congress got fitfully involved, threatening to pass some legislation to overturn the outrageous fees webcasters would have to pay? Remember how you thought that it was all some arcane dispute that would burn itself out soon and that couldn't possibly keep going for a year and a half? Well... it could. And it did.

The music industry and the webcasters are, in fact, still negotiating a deal that would replace the one laid down from on high by the Moses-on-the-mountain figures over at the Copyright Royalty Board. The judges—no doubt fine people who make excellent small talk and have superlative taste in wines—set a statutory rate for webcasters to pay for all that music they were streaming. It turned out to be retroactive for a few years, too, since the proceeding had taken so long. It also turned out to be really, really high.

Webcasters cried foul, especially Pandora founder Tim Westergren. The CRB rate would bankrupt many webcasters, they said. In the face of these claims (and the threat of Congressional action to overturn the CRB rate), the music labels decided to negotiate a settlement of their own with the webcasters.

Certain fee caps were agreed upon and small webcasters were given a better deal, but the big players and SoundExchange (which collects royalties for the major labels) couldn't agree on the all-important royalty rate. (A separate deal between webcasters and the songwriters was reached earlier this year.)

Congress' action this week gives the two sides more time to wrap up negotiations. The Webcaster Settlement Act of 2008 passed the House on Saturday and the Senate today, and there's no obvious reason why President Bush would refuse to sign it. The bill extends the negotiation deadline until next February; without it, the crippling CRB rates would go into effect quite soon. Pandora has already said it would go out of business when it had to make its first royalty payment under the CRB rates.

Closing Pandora's box

The bill was introduced only last week, and it came after both sides said that they were close to a deal. But, according to Pandora's Westergren, the National Association of Broadcasters tried to kill the bill when it was introduced.

"Yesterday, Congressman Jay Inslee, and several co-sponsors, introduced legislation to give us the extra time we need but the National Association of Broadcasters (NAB), which represents radio broadcasters such as Clear Channel, has begun intensively pressuring lawmakers to kill the bill," wrote Westergren on Pandora's blog. "We have just a day or two to keep this from collapsing. This is a blatant attempt by large radio companies to suffocate the webcasting industry that is just beginning to offer an alternative to their monopoly of the airwaves."

But the bill did pass both chambers of Congress and the royalty negotiations will continue for a few more months. While radio broadcasters may have some incentive to kill off competition, the recording industry has no desire to see these businesses fail; some money is better than none, after all.

The RIAA and SoundExchange actually worked with the webcasters to see the bill through, providing a serious lobbying counterpoint to the broadcasters. In a statement issued Sunday night, SoundExchange boss John Simpson said that "this bill favors all webcasters and simulcasters—large and small. It paves the way for SoundExchange to use the coming months to pursue helpful solutions that allow all services to focus on business development. And, although there are no agreements yet, I am hopeful."

The webcaster and the RIAA got their way; perhaps the goodwill generated by actually working together on something will now carry the negotiations through to the end.