NEW YORK (CNNMoney.com) -- Internet radio broadcasts, jeopardized by a royalty payment ruling earlier this year, would get a reprieve under bipartisan legislation introduced in Congress.
The Internet Radio Equality Act would roll back dramatic rate increases handed down earlier this year by the Copyright Royalty Board and instead charge royalty payments for Web-based radio broadcasting, or streaming, in line with those paid by satellite radio.
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Under the rules issued by the CRB, an agency charged by Congress with overseeing royalty disputes, streamers would be charged .08 cents a song retroactively to 2006 - a rate that would increase to 0.19 cents a song in 2010. For public broadcasters, the CRB set fees at a flat $500 a month but only for a set level of listening hours per month, one that many station owners said they would easily exceed and thus have to pay much higher fees.
Internet streamers said the increases amounted to 30 to 300 percent increases over what they are paying now.
The new legislation, proposed by Reps. Jay Inslee (D-Wash.) and Don Manzullo (R-Ill.), would instead charge streamers a flat fee of 7.5 percent of their revenue through 2010. A companion piece is expected to be introduced in the Senate this week.
Advocates championed the bill as more in line with reality and a proper response to the public outcry from critics who said the ruling could kill Internet radio streaming. Inslee spokeswoman Christine Hanson said the congressman's office alone received about 1,000 complaints about the CRB fees, and members of Congress had received more than 400,000 e-mails demanding the fees be changed, so the sponsors are hoping quick action can be taken on the legislation
"You can't put an economic chokehold on this emerging form of democracy," Inslee said in a statement. "There has to be a business model that allows creative Webcasters to thrive, and the existing rule removes all the oxygen from this space."
Radio stations large and small as well as Internet-only broadcasters who have gotten into the streaming business were united in their opposition to the new royalty fees and had been preparing a court challenge.
A National Public Radio official praised the Internet Radio Equality Act. Congress "has recognized that public radio has a very different mission from commercial media and cannot pay commercial-level royalty rates," said NPR spokeswoman Andi Sporkin. "This bill will provide a long-term resolution that is fair for all sides."
The CRB rejected an appeal brought by broadcasters as well as NPR and others that sought to delay the May 15 deadline for the introduction of the new fees.
Tim Westergren, president and CEO of popular Internet radio station Pandora, attended a briefing Monday in Washington, D.C., on the legislation and said there was only a glimmer of hope that the new fees would be stayed pending the outcome of the legislation. A court order would be needed to stay the increases.
"Nobody has any idea, but the presumption is it will go into effect on or before the 15th," Westergren said. "On that day, on paper just about every Webcaster becomes officially bankrupt because they'll owe way more money than they have because the fees are retroactive."
Savings would vary among stations because of differing royalty structures. Stations now pay .07 cents a performance for AM or FM signals that simultaneously air online and 0.14 cents a performance for Internet-only broadcasts. Pandora, for instance, would pay less under the structure set up under the legislation than it does now, Westergren said.
SoundExchange, a performance rights organization that collects royalty payments for entertainers, supports the rate structure proposed by the royalty board. In a statement on its Web site, the company said the proposed legislation would result in a windfall of $50 million to large Webcasters like Clear Channel (Charts, Fortune 500), Microsoft (Charts, Fortune 500), AOL and Yahoo! (Charts, Fortune 500) while depriving artists of payments to which they are entitled.
Internet radio broadcasters may find a savior in a recent proposition in the US Congress. The recently proposed Internet Radio Equality Act, introduced by representatives Jay Inslee (D-WA) and Donald Manzullo (R-IL), would strive to revert the drastic changes applied to Internet radio royalties by the Copyright Royalty Board (CRB) that will go into effect on May 15, 2007, and retroactive since January 1, 2006. The proposition aligns Internet broadcasting fees to be more inline with those of satellite radio, for a flat fee of 7.5% of the broadcaster's revenue, rather than the CRB rules of .08 (2006) to .19 (2010) cents per song for private broadcasters, or $500 per month for public broadcasters if below a specific number of listening hours.

According to Inslee, the fees that would go into effect on May 15 would be a chokehold on democracy, and claimed in a statement that webmasters need a functioning business model.

A common fear among Internet broadcasters is that they will have to file for bankruptcy once the fees of the CRB will go into effect. ''"Over 90% of internet radio will simply be gone. The net result will be a huge loss of diversity, a huge loss for music artists and a loss of virtually all of the internet radio that exists,"'' claimed Joe Kennedy, CEO of Pandora.

SoundExchange, supportive of the CRB rules and a major collector of artist royalties from radio stations, has claimed the new fees are necessary to pay the artists that deserve it.