Update (January 24, 2024) – The Copyright Royalty Board issued a Federal Register Notice correcting the deadline for Petitions to Participate in the WEB VI proceeding – making clear that the deadline is February 5, 2024, not February 6 as previously reported. This article has been updated with the corrected deadline. For more information, see our article here).

The Copyright Royalty Board on Friday published in the Federal Register a call for interested parties to file Petitions to Participate in the proceeding to set the royalty rates to be paid by webcasters (including broadcasters who simulcast their programming through internet-delivered channels) in the period 2026-2030.  These royalties are paid by webcasters to SoundExchange for the noninteractive streaming of sound recordings.  The CRB is required to review these rates every five years.  These proceedings are lengthy and include extensive discovery and a trial-like hearing to determine what royalty a “willing buyer and a willing seller” would agree to in a marketplace transaction.  Because of the complexity of the process, the CRB starts the proceeding early in the year before the year in which the current royalty rate expires.  So, as the current rates expire at the end of 2025, parties will need to sign up to participate in the proceeding to determine 2026-2030 rates by February 5, 2024 by filing a Petition to Participate.  The Petition must describe the party’s interest in the proceeding and be accompanied by a filing fee of $150.  The Federal Register notice provides other procedural details for filing these Petitions.

Once the Petitions to Participate are filed, the CRB will set out the rules and procedures to be followed in the proceeding.  Initially, there is a 90 day period in which the parties can try to settle the case.  While parties can settle at any time (subject to approval of the terms by the CRB), this initial 90-day period occurs before any litigation begins and offers parties the opportunity to avoid much of the cost of litigation.  Once that period ends without a settlement, the litigation begins.  Initial stages of the litigation (including the identification of witnesses, submission of the rate proposals and the evidence supporting those proposals, and the initial discovery) will likely all take place in 2024, with the hearing itself conducted in 2025, followed by final briefs summarizing the evidence and arguing about the conclusions to be drawn from that evidence. There are usually oral arguments held after the briefs are submitted.  At that point, the three Copyright Royalty Judges will consider the evidence and the arguments and release their decisions late in 2025, so that parties know the new rates as of January 1, 2026. While there may be appeals of the decision that are argued well beyond the effective date of the new rates, the rates become effective while those appeals are pending.Continue Reading Copyright Royalty Board Starts WEB VI Proceeding to Set Webcasting Royalties Paid to SoundExchange for 2026-2030: Petitions to Participate Due February 5

We are waiting on the Copyright Royalty Board to release its decision setting the royalties that webcasters (including broadcasters who simulcast their over-the-air programming on the Internet) will pay to SoundExhange for the public performance of sound recordings in the period 2021 through the end of 2025.  As we wrote here, that decision would normally have been released in December but, as the trial to establish those rates was delayed by the pandemic and held virtually over the summer, the decision on rates could come as late as this April, though once effective it will be retroactive to all streaming that has occurred since January 1 of this year.  While we await the announcement of the new rates, as I’ve recently received several questions about the rules that apply to streaming under the statutory license, I thought that I would take a quick look at the “performance complement” and other rules that apply to companies that rely on this license.

Note that the rules set out below are slightly different for certain broadcasters, as the NAB in 2016 entered into agreements with Sony and Warner Music Groups to waive certain of the statutory requirements for broadcasters who stream their over-the-air signals on the Internet.  These agreements allow broadcasters to stream their normal over-the-air programming featuring music from these labels without having to observe all of the obligations set out below.  We summarized those waivers here, and hope that they will be further extended to cover the new royalty term.  Also, some big webcasters have negotiated relief from these requirements (see our article here).  But for those not subject to a waiver, let’s look at some of the rules that webcasters relying on the statutory license are to observe.
Continue Reading Looking at the Performance Complement and Other Rules that Apply to Webcasting Companies Relying on the Sound Recording Statutory License

The Copyright Royalty Board today published a Federal Register notice announcing that SoundExchange was auditing a number of broadcasters and other webcasters to assess their compliance with the statutory music licenses provided by Sections 112 and 114 of the Copyright Act for the public performance of sound recordings and ephemeral copies made in the digital transmission process by commercial webcasters. A separate notice to audit the company Music Choice, which also provides a digital music service usually delivered with cable or satellite television services, was also issued to audit their compliance both on webcasting and on their subscription music service which is subject to separate royalty rules set out in a different part of the same section of the Copyright Act and set through a different Copyright Royalty Board proceeding. A third audit notice has gone out to a company called Rockbot, a Business Establishment Service whose royalties are exclusively paid under Section 112 of the statute (see our article here about the CRB-set royalties for these services that provide music played in various food and retail establishments and other businesses).

SoundExchange may conduct an audit of any licensee operating under the statutory licenses for which it collects royalties.  Such audits cover the prior three calendar years in order to verify that the correct royalty payments have been made. The decision to audit a company is not necessarily any indication that SoundExchange considers something amiss with that company’s royalty payments – instead they audit a cross-section of services each year (see our past articles about audits covering the spectrum of digital music companies audited by SoundExchange here, herehere and here).  Audits are conducted by outside accounting firms who, after they review the books and records of the company being audited, issue a report to SoundExchange about their findings.  The company being audited has the right to review the report before it is issued and suggest corrections or identify errors.  The reports are then provided to SoundExchange and, if they show an underpayment, it can collect any unpaid royalties, with interest.  While, by statute, the notice of the royalty must be published in the Federal Register, the results of the audit and any subsequent resolution usually are not made public.
Continue Reading Copyright Royalty Board Announces SoundExchange Audits of Royalty Payments for Webcasters (Including Broadcast Simulcasts) and Other Digital Music Services

While Copyright Royalty Board decisions on royalties for webcasters, Sirius XM and mechanical royalties get most of the attention, the CRB also sets rates paid by “business establishment services” for the “ephemeral copies” made in their music businesses. Business establishment services are the companies that provide music to businesses to play in retail stores, restaurants and other commercial establishments. These services have come a long way from the elevator music that once was so derided – and now set the mood in all sorts of businesses with formats as varied as the commercial businesses themselves.  While the rates paid by these services pay for music rights is a little off-topic for this blog, these rates are a bit unusual, so they are worth mentioning.  The Copyright Royalty Board just announced a proposed settlement between the services that were participating in the CRB case and SoundExchange which will raise the rates gradually from the current 12.5% of revenue to 13.5% over the next 5 years, with a minimum annual fee of $20,000, up from $10,000. These rates, which apply to any company that does not negotiate direct royalties with the sound recording copyright holders, go into effect in 2019 and will be in place through 2023. Comments on these proposed rates are due June 18, though CRB rules limit the consideration of comments from those who were not participants in the proceeding.

We have written about the rates paid by these services before (see for instance our articles here, here and here).  What makes them unusual is that the royalties are not paid to SoundExchange for the public performance of sound recordings, as are the royalties paid by other digital music services including webcasters (here and here) or Sirius XM.  That is because, in adopting Section 114 of the Copyright Act, Congress did not want to impose on businesses a new performance right, as there is no general public performance right in sound recordings in the United States.  Businesses and other services that do not digitally transmit performances of audio recordings have no obligation to pay copyright holders in the sound recordings (usually the record companies) or artists for the public performance of music.  Users do, however, pay fees for the public performance of the underlying composition through ASCAP, BMI and SESAC and GMR.  As we wrote here, the Register of Copyrights has suggested that a general public performance right in sound recordings be paid in the United States. But that would impose new fees on all businesses that use recorded music in the US, from stadiums playing “We Will Rock You” at the appropriate point in a big game, to DJs spinning their discs in nightclubs, to the trendy tunes playing in the hip clothing retail stores, to over-the-air radio. This proposal is therefore very controversial.  So, if they are not paying public performance fees, why do background music services have to pay SoundExchange?
Continue Reading Copyright Royalty Board Announces Proposed New SoundExchange Royalties for Business Establishment Services

Early this month, the Copyright Royalty Board announced that it will be starting a new proceeding to set the royalty rates to be paid by “business establishment services” for the rights to make ephemeral copies of sound recordings. The rates will apply for the period 2019-2023. Interested parties must file a Petition to

The NAB has announced agreements with Sony and Warner Music Groups to waive certain of the statutory requirements for broadcasters who stream their over-the-air signals on the Internet.  The NAB had entered into similar agreements with all of the major labels and major independent labels back in 2009 (see our summary here).  But those agreements expired at the end of 2015, giving rise to fears among some broadcasters that some standard broadcast programming could not be streamed on the Internet (see our article here about those concerns).  These agreements, at least as to Sony and Warner, mitigate those fears.  This article provides a summary of some of the most important aspects of the new waivers.

These waivers cover requirements set forth in the Copyright Act which broadcasters, especially those who stream, may have difficulty meeting.  Generally, the waivers provide the following:

  • Relief from the statutory requirements as to “ephemeral copies” of sound recordings that require that such recordings can be kept for no longer than 6 months.  If that rule was to be applied strictly, stations that make a copy of a sound recording in furtherance of their streaming (or for their over-the-air broadcasts), by for instance making a copy of a song so that it can be stored in their digital music storage systems, could keep those copies for only 6 months.  After that time, the station would be required to delete any copy of a song and re-record it if they wanted to keep a copy in their music library for another six months.
  • The agreements waive the performance complement, which would otherwise limit a station that is streaming its signal from playing more than 2 songs from the same CD or album in a row, or playing more than 3 songs in a row from the same artist, or from playing more than 4 songs from the same artist (or from the same box set) in a 3-hour period.  The waivers allow stations to exceed these limits, only if they continue to play music in a manner consistent with normal broadcast operations.  However, even with the waiver, no station can play more than half an album consecutively.
  • The waivers allow stations to announce upcoming artists, only if they don’t announce the specific times that specific songs will be played.
  • The waivers allow some relief from the obligation that a broadcaster streaming their on-air programming on the Internet identify in text on their website or mobile app the name of the song that is playing, the artist who performs the song, and the album from which that song is taken.  That relief is limited to circumstances where, from time to time, a station can’t easily provide such textual information.

Continue Reading NAB Announces Agreements with Sony and Warner to Waive Performance Complement and Other Statutory Requirements for Broadcasters Who Stream Their Signals

Business Establishment Services” are copyright-speak for those music services that provide background music to commercial establishments.  These services have come a long way from the elevator music that once was so derided – and now set the mood in everything from retail clothing stores to restaurants to department stores with formats as varied as the commercial businesses themselves.  While the rates paid by these services pay for music rights is a little off-topic for this blog, these rates are a bit unusual, so they are worth mentioning.  The Copyright Royalty Board just announced the adoption of a settlement between services and SoundExchange which will raise the rates from the current 10% of revenue to 12.5%, with a minimum annual fee of $10,000, effective January 1.

We have written about the rates paid by these services before (see for instance our articles here and here).  What makes them unusual is that the royalties are not paid to SoundExchange for the public performance of sound recordings, as are the royalties paid by other digital music services including webcasters or Sirius XM.  That is because, in adopting Section 114 of the Copyright Act, Congress did not want to impose on businesses a new performance right, as there is no general public performance right in sound recordings in the United States.  Businesses and other services that do not digitally transmit performances of audio recordings have no obligation to pay copyright holders in the sound recordings (usually the record companies) or artists for the public performance of music.  Users do, however, pay fees for the public performance of the underlying composition through ASCAP, BMI and SESAC.  As we wrote here, the Register of Copyrights has suggested that a general public performance right in sound recordings be paid in the United States, but as that would impose new fees on all businesses that use recorded music in the US, from stadiums playing “We Will Rock You” at the appropriate point in a big game, to DJs spinning their discs in nightclubs, to the trendy tunes playing in the hip clothing retail stores, to over-the-air radio – this proposal is very controversial.  So, if they are not paying public performance fees, why do background music services have to pay SoundExchange?
Continue Reading New Music Royalty Rates for Ephemeral Recordings Used By Business Establishment Services

No one ever claimed that music royalties are easy to understand, especially in the digital age when nice, neat definitions that had grown up over many years in the physical world no longer necessarily make sense. The complexity of the world of digital music licensing is clear from many sources, but the Commerce Department’s “Green Paper” on Copyright Policy, Creativity, and Innovation in the Digital Economy does a good job discussing many of the music royalty issues that have arisen in the last 20 years that make copyright so confusing for professionals, and pretty much incomprehensible for those not immersed in the intricacies of copyright law on a regular basis. The Green Paper discusses some of the issues in music policy that make this area so confusing, and highlights where interested parties and lawmakers should focus their efforts to reform current rules to make them workable in the digital age. The Paper also discusses other areas of copyright policy that we will try to address in other articles.  You can find the Green Paper here (though note that it is about 120 pages and will take some time to download).

One of the most controversial issues that it addresses is the concept of a general performance right for sound recordings. As did Register of Copyrights Maria Pallante in the speech we summarized here, the Commerce Department puts the current administration on record as supporting the creation of such a right – a right that has not existed in the United States, except for a limited sound recording performance royalty for performances by digital audio companies like webcasters (see our summary of the royalty rates paid by different types of Internet Radio services here) and satellite radio (see our summary of the royalties to be paid by Sirius XM under the most recent Copyright Royalty Board decision). While the most controversial aspect of the creation of a broad sound recording performance royalty has been in connection with the extension of that royalty to broadcasters, the adoption of a general royalty, as advocated by the Green Paper would extend payment obligations to others who publicly perform sound recordings – including bars, restaurants, stadiums and other retail establishments.Continue Reading Making Music Rights Manageable in a Digital World – Issues Identified In Commerce Department “Green Paper” on Copyright Policy

The Copyright Royalty Board has just announced that it is accepting petitions to participate in the next proceeding to set the royalty rates to be paid for the ephemeral copies made by "business establishment services" in connection with any digital transmission of sound recordings.  Business establishment services are essentially background music services who

The Copyright Office last week issued its Report to Congress on pre-1972 sound recordings (with an Executive Summary), addressing whether to bring these recordings under Federal law.  As we wrote last year when the Copyright Office solicited comments on the issues raised by this report, sound recordings (i.e. aural recordings embodied in some fixed form like a CD, record or digital file) created in the United States prior to 1972 are not protected under Federal copyright law.  Instead, any protections accorded to these sound recordings are under state laws.  Congress, at the request of a number of archivist and music library groups, asked that the Copyright Office review the issues that would be raised by bringing these sound recordings under Federal law.  Some archivists and librarians feared that, in preserving old recordings, they could run afoul of state copyright laws, and that a unified set of rules under Federal law might be easier to follow.  Why is this issue more broadly important to the music community?  For internet radio station operators, it is because the proposals to Federalize all such recordings could have an impact on digital performance royalties (as there does not appear to be any public performance right in sound recordings under state laws and, under current law, these recordings would not be covered under the SoundExchange royalties that most noninteractive services play).  The Report is also significant in that it raises questions about copyright laws dealing with user-generated content, specifically whether the DMCA safe harbor provisions protecting the operators of Internet service companies from copyright liability for the content posted by third parties apply to pre-1972 sound recordings.

This is only a report to Congress, and such reports have no binding impact.  Instead, they merely set out the position of the authors of the report from the Copyright Office.  Such reports are also cited as evidence in court cases as to what the Office believes the current state of the law to be.  The Office has written a number of reports over the years making suggestions about how copyrights should be administered and, given the complexity of copyright law and the competing interests affected by any revisions to the laws, many of their proposals have never been implemented.  This report suggests that pre-1972 sound recordings be brought under Federal laws.  Specifically, the report suggests that current copyright holders get protection for most pre-1972 works until 2067 (when state law protections are to run out under the current law, allowing the works to move into the public domain).  The protections would be accorded to works that are used by the copyright holder (sold at some reasonable price) and registered with the Copyright Office at some point after a law implementing its proposals became effective.  Works from prior to 1923 would be subject to a similar use and registration process, but would only get 25 years of additional protection.  Seemingly, protections for works that are not registered would pass into the public domain after the applicable registration period expires.  For some webcasting companies, this change could have an immediate impact.Continue Reading Copyright Office Report Recommends Federalization of Pre-1972 Sound Recordings – Possible Implications For Music Royalties and User-Generated Content