But is SoundExchange really worried about the future of netcasting? Or is it just trying to keep Congress from tossing the rate structure set forth earlier this year by the Copyright Royalty Board?

Netcasters claim the new rates represent a 300 percent to 1,200 percent increase in royalties, mainly because the new fees are based on individual song plays, in contrast to previous rates based on income. Since the new rates were announced in March, Netcasters have screamed that the increased fees will bankrupt small Internet broadcasters. Meanwhile, SoundExchange has claimed any reversal of the CRB’s decision would result in a “windfall” for big operators like AOL, Yahoo and Microsoft.

But now Congress has gotten into the act. Current bills in the House and Senate call for Internet radio stations to be charged fees similar to those of satellite radio. Evidently, the prospect of politicians mucking around with music royalties was enough to inspire SoundExchange to sing a slightly different royalty tune.

Saying its new offer for small webcasters comes as a “direct response” to a request from the House Judiciary Subcommittee on Courts to “initiate good faith private negotiations with small commercial and noncommercial webcasters with the shared goal of ensuring their continued operations and viability,” SoundExchange is now offering to charge small webcasters royalty fees based on revenue.

But don’t think this means SoundExchange is changing its ‘tude when it comes to small outfits like Pandora or Live365. In announcing its offer, SoundExchange made it clear the lower, revenue-based rates for small webcasters are a “continued subsidy” so that small webcasters could grow into big ones.

“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. “Artists and labels are offering a below-market rate to subsidize small webcasters because Congress has made it clear that this is a policy it desires to advance, at least for the next few years. We look at it as artists and labels doing their part to help small operators get a stronger foothold.”

The “below-market rate” Simson refers to is the rate set by the 2002 Small Webcaster Settlement Act (SWSA), which set rates for small webcasters and expired in 2005.

SoundExchange is offering to extend SWSA’s lower rates, with adjustments, to small webcasters through 2010. Under this plan, small webcasters would pay royalty fees of 10 percent of all gross revenue up to $250,000, and 12 percent for all gross revenue above that, with revenue and usage caps in place to make sure the rate will only apply to the smallest of the netcasting small.

But it’s SoundExchanges’s definition of “small” that’s making Netcasters leery that the latest proposal will lump small webcasters with the big boys.

Responding to SoundExchange’s proposal, SaveNetRadio spokesman Jake Ward wrote:

“Labeling webcasters small or large is a distinction without a difference. Two of the most prominent webcasters, Pandora.com and Live365 are models of industry success but would be bankrupted by the CRB and by the SoundExchange proposals. Pandora employs 100 people in an enterprise zone in Oakland, Calif., but its popularity would put it out of business. Similarly, Live365, an aggregate webcaster that provides a platform for more than 10,000 individual webcasters, has a staff of fewer than 40. Though clearly small as a business, Live365’s enormous importance and scope among webcasters would force them to shut down.”

Ward goes on to say that when compared to terrestrial broadcasting companies, even the largest webcasters, including Yahoo and AOL, are small broadcasters. Ward also says SoundExchange’s proposed revenue caps will force small webcasters to remain small, thus hindering the Internet radio industry.

If you’re looking for a bright side to all this bickering, you can take heart in the fact that at least one side has made an effort to negotiate a successful conclusion to the copyright debate. Webcasters may not buy what SoundExchange is selling, but that doesn’t mean some kind of compromise is dead in the water. And that in itself is hardly a “small” matter.