In tomorrow’s Federal Register, the Copyright Royalty Board will announce the commencement of three new proceedings to set music royalties for the 2018-2022 five-year period – each involving a different music right. The Board will begin a proceeding dealing with the digital public performances of sound recordings by satellite radio and “pre-existing subscription services” – the royalty that Sirius XM pays to record labels and performing artists for its performance of their songs on their satellite service, and the rates that cable radio pays for those same uses (see the draft notice here). Our summary of the last proceeding for satellite radio and pre-existing subscription services can be found here. Sirius XM was also a participant in the recent webcasting case, but only for its streaming service. The statutory royalties at issue here are set by Sections 112 and 114 of the Copyright Act, the same sections that govern the webcasting royalty.
The second proceeding deals with the “mechanical royalty” or the making and distribution of “phonorecords.” That is the proceeding to establish what publishers and songwriters receive when there is a reproduction of their song. Traditionally, that was the royalty paid by a record company to the publisher or songwriter when a “cover version” of a song was made – a flat fee per copy of the song (whether a physical record or CD or a digital download). In recent years, the proceeding has expanded to include royalties paid by on-demand streaming services for their use of music. This is the royalty that has recently been much in the news in connection with the David Lowry lawsuit against Spotify. The CRB pre-publication version of that order is here (and our articles discussing the last decision on that royalty are here and here). This is one proceeding where the record labels and the digital music services are actually more or less on the same side – litigating against the publishing companies and songwriters over how much is paid for the use of the words and music of a particular song. This proceeding is under Section 115 of the Copyright Act. The final proceeding involves the public performance of musical compositions by “Public Broadcasting” which includes not just NPR and PBS affiliates, but also other noncommercial broadcasters. ASCAP and BMI royalty rates are not set by a Rate Court in New York City, as are rates for commercial users of music. Instead, the CRB sets those rates, along with rates for SESAC – though in the last several cases, the rates have been arrived at via settlement. NPR, PBS and other noncommercial broadcasting groups are typically involved in these cases along with the Performing Rights Organizations (“PROs”). The CRB’s draft notice is here. This statutory royalty is under Section 118 of the Copyright Act.
If published tomorrow as expected, interested parties will need to file a petition to participate in the appropriate proceeding by February 4. This involves a filing with the CRB, setting out the party and their interest in the proceeding, along with the appropriate fee. After the filing, there is period for the negotiation of settlements, with the filing of written direct case exhibits setting out each party’s case due later this year if no settlement is reached. Hearings in the proceedings would likely be held in 2017, with decisions due before the end of that year, before the new royalties are to become effective.
Just as the CRB finishes its recent webcasting royalty proceeding (see our articles here and here), it is about to embark on three new proceedings that have important ramifications for both the creators and the users of music. Watch as these proceedings develop over the next two years.