The Copyright Royalty Board has announced the royalties that will be paid for the public performance of sound recordings by Sirius XM for the period 2013-2017. The decision also covers the "Preexisting Subscription Services", i.e. Music Choice in connection with its cable radio service delivered with listener’s cable television packages. The full text of the decision is not released yet, as the parties have an opportunity to request that certain portions be redacted to protect private business and competitive information. The parties can request such redactions through December 19, so the decision may be Christmas reading for many. However, the Board did announce the rates as follows:
Section 112 Rates: The Judges adopted the Parties’ Stipulation regarding the rates and terms for the Section 112 rates, which will require a minimum fee advance payment of $100,000 per year, with royalties accruing during the year recoupable against the advance. The parties agreed that the value of the royalties allocated to the Section 112 license holders is 5% of the total royalty obligation, with the remaining 95% going to the Section 114 license holders.
Section 114 Rates: The Judges determined that the appropriate Section 114(f)(1) rates for Preexisting Subscription Services for 2013-2017 are 8% of Gross Revenues for 2013 and 8.5% for 2014 through 2017.
The Judges determined that the appropriate Section 114(f)(1) rates for Preexisting Satellite Digital Audio Radio Services for 2013-2017 are 9% of Gross Revenues for 2013, 9.5% for 2014, 10.0% for 2015, 10.5% for 2016 and 11.0% for 2017.
Both decisions represent modest, incremental raises in the current rates (see the description of the last CRB decisions on satellite radio rates here, and on cable radio here). These decisions are made under the 801(b) factors, from Section 801(b) of the Copyright Act, that Internet radio currently is seeking, through the Internet Radio Fairness Act ("IRFA"), to have applied to the decisions as to the royalties paid by webcasters (see our summary here). We will not know how the standard was applied in reaching the decision to raise rates, and what guidance this decision provides for webcasters and their rates, until the full decision is released (see our summary of the arguments of the parties in this case, here).
The decision mentions both Section 112 and Section 114 royalties. In a digital world, as digital copies are made in the transmission process, it has been presumed that parties need both royalties to operate – the "ephemeral copy" licensed under Section 112 (see our discussion here) and the public performance right licensed under Section 114. As both are needed, both are covered by the royalty rate set by the Board. Why bother setting a specific amount for the ephemeral right? That is a question asked many times – but as that right is paid directly to the copyright holder (usually the record label), not shared with the artists as is the Section 114 royalty, it is one with economic impact.
These services are entitled to a decision under 801(b) as Congress made a determination, at the time that the Digital Millennium Copyright Act was passed in 1998, that these services were either already in existence (cable audio) or were sufficiently advanced in deployment (satellite radio) that the traditional standard for deciding statutory royalties, used in other contexts under the Copyright Act, would be applied. 801(b), for instance, is used to decide the royalties paid by the record companies to the publishers for the use of their compositions when making a sound recording, and are also used in the determination of rates paid by noncommercial broadcasters in the public performance of musical compositions (a rate recently set by the Board). Internet radio, on the other hand, was given a new "willing buyer, willing seller" standard that has led to much controversy, as is evident from the current IRFA debate. The application of the standard apparently makes a difference, as other music services similar to Music Choice, that were not in existence at the time of the adoption of the DMCA, pay approximately twice what Music Choice will pay under this decision (see our article here).
We will write more about the decision once the full text is released.