Posted on March 23, 2010 by David Oxenford

SoundExchange Sending Reminders to Broadcasters Who Are Not Paying Royalties for Streaming Music Sound Recordings

In recent weeks, SoundExchange has begun to send letters to broadcasters who are streaming their signals on the Internet without paying their SoundExchange royalties.  Despite all of the publicity about Internet radio royalties and the controversy about the rates for those royalties, there still seem to be webcasters unfamiliar with their obligations to SoundExchange.  As we have written many times, SoundExchange collects royalties for the public performance of the "sound recording", a song as recorded by a particular artist.  Those royalties, which are charged only to digital media companies like Internet radio, satellite radio and digital cable radio, are paid half to the copyright holder in the recording (usually the record company for most popular songs) and half to the performers on the recording.  These royalties are paid in addition to the royalties paid to ASCAP, BMI and SESAC for the public performance of the musical work - the underlying musical composition, the words and music of a song - money that is paid to the composers of that musical work.  So just paying ASCAP, BMI and SESAC is insufficient to cover your streaming operations when music is being used. 

While these royalties have been law since 1998, and have been set by decisions first by a CARP (Copyright Arbitration Royalty Panel) in 2003, and then by the Copyright Royalty Board in 2007, it seems like some companies still have not gotten the message about the obligations to pay these fees.  Thus, in the last few weeks, SoundExchange has been sending out letters to companies that have not been paying.  The letter are not particularly threatening - instead pointing out the obligations that companies have to pay the royalties, and asking if the webcaster may be paying under some corporate name that is not readily apparent from the website.  The letter also points the webcaster to the SoundExchange website for more information.  Finally, it notes that SoundExchange represents the copyright holders for collections purposes, and notes that nothing in the polite letter waives any rights that those holders have to pursue actions for failure to pay the royalties - in other words to sue for Copyright infringement.   So, gently, webcasters are reminded to pay their royalties or risk being sued for copyright infringement, with potential large penalties for playing music without the necessary licenses.

Webcasters can find much information about the royalties on the SoundExchange website.  We have also written extensively on the subject.  Some of our posts of particular interest include the following:

  • A summary of the meaning of these royalties, here.  Note that this summary was written before many of the settlement agreements listed below were arrived at, so it mentions only the royalties set by the Copyright Royalty Judges in their 2007 decision. 
  • A summary of the provisions of the broadcaster-SoundExchange settlement setting special royalty rates for broadcasters who stream, with additional posts about the waiver of the "performance complement", allowing broadcasters to play more songs from an album or by the same artist than might otherwise be permitted,here, and a summary of recordkeeping obligations, here and here.
  • A summary of the provisions of the Small Webcaster deal, an option for companies who, with all of their affiliates, have less than $1.25 million in annual gross revenues, allowing payments based on a percentage of revenue.
  • A summary of the royalties for noncommercial operators, here, and special royalties for stations affiliated with the Corporation for Public Broadcasting (including NPR affiliates), here. 
  • Summaries of deals for "Pureplay webcasters", those whose only business is streaming, here, and another deal for other webcasters who do not fit these categories, here.
  • A reminder about annual election requirements and minimum fee obligations, with links to SoundExchange forms.

Check out these posts, and other items that we have written about the SoundExchange royalties for Internet radio, here, and make sure that, if you are streaming, you are paying what you owe.  SoundExchange now seems to be looking for those who have not paid, so to avoid any unpleasant legal surprises, don't get caught not being in compliance. 

 
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Posted on March 29, 2009 by David Oxenford

With April 2 Webcasting Election Due for Broadcasters - A Look at the Record Label Waivers of the Performance Complement

As we have written, by April 2, broadcasters who are streaming need to file with SoundExchange a written election in order to take advantage of the SoundExchange-NAB settlement.  For broadcasters who make the election, the settlement agreement will set Internet radio royalty rates through 2015.  One aspect of this agreement that has not received much attention is the waiver from the major record labels of certain aspects of the performance complement that dictates how webcasters can use music and remain within the limits of the statutory license.  When Section 114 of the Copyright Act, the section that created the performance royalty in sound recordings, was first written in the 1990s, there were limits placed on the number of songs from the same CD that could be played in a row, or within a three hour period, as well as limits on the pre-announcing of when songs were played.  These limits were placed seemingly to make it more difficult for listeners to copy songs, or for Internet radio stations to become a substitute for music sales.  In conjunction with the NAB-SoundExchange settlement, certain aspects of these rules were waived by the 4 major record labels and by A2IM, the association representing most of the major independent labels.  These waivers which, for antitrust reasons, were entered into with each label independently, have not been published in the Federal Register or elsewhere.  But I have had the opportunity to review these agreements and, as broadcasters will get the benefit of the agreements, I can provide some information about the provisions of those agreements.

First, it is important to note that each of the 5 agreements is slightly different.  In particular, one has slightly more restrictive terms on a few issues.  To prevent having to review each song that a station is playing to determine which label it is on, and which restrictions apply, it seems to me that a station has to live up to the most restrictive of the terms.  In particular, the agreements generally provide for a waiver of the requirement that stations have in text, on their website, the name of the song, album and artist of a song that is being streamed, so that the listener can easily identify the song.  While most of the labels have agreed to waive that requirement for broadcasters - one label has agreed to waive only the requirement that the album name be identified in text - thus still requiring that the song and artist name be provided.  To me, no station is going to go to the trouble of providing that information for only the songs of one label - so effectively this sets the floor for identifying all songs played by the station and streamed on the Internet.

The agreements otherwise agree to waive the requirements that a webcaster play:

  • No more than 3 songs in a row by the same artist
  • Not more than 4 songs by same artist in a 3 hour period
  • No more than 2 songs from same CD in a row

However, these provisions are waived only insofar as the broadcaster does not "depart materially from today's range of typical over-the-air radio programming practices," citing specifically the practices of having DJs talk between songs and stations running commercials and PSAs between songs.  Presumably, if a station were to go all music, with no talk or no commercials for a long period, that would not be within the typical practices of over-the-air radio stations.  These waiver agreements also cover HD-2 stations, so stations should be careful that their formatics on these stations which are being streamed do not so totally depart from normal broadcast practices in such a way as to violate these waiver provisions.  (Note these waiver agreements do not cover Internet-only channels that a broadcaster may program on its website).

The waivers also do not allow the streaming of an entire CD.  In fact, the most restrictive of the provisions limit a broadcaster to streaming no more than half the songs from an album or CD at any time within a 3 hour period.  So the "6 album sides at 6" type of promotion may be permissible, as long as the station does not then play another song from the same CD in a proximate time period.

The agreements also provide for a waiver of a provision that many broadcasters are probably not even aware exists - a requirement under Section 112 of the Copyright Act that does not allow "ephemeral copies" of recordings to be kept for more than 6 months.  An ephemeral copy is a temporary copy of a sound recording made to facilitate a transmission.  For instance, a copy of songs from a CD made by a broadcaster to put the music into a station's hard drive music system would be an ephemeral copy that normally could not be retained for more than 6 months without negotiating a license with the copyright holders.  These waivers eliminate that six month limitation.

These waivers are different from the agreement with SoundExchange which covers all copyright holders.   The waivers cover only those labels who have signed a waiver agreement.  But, as the four major labels and the association representing the major independent labels have signed, most artists played by most radio stations will be covered by these agreements. 

Broadcasters who are planning to sign on to the NAB-SoundExchange agreement will have the extra benefit of these waiver agreements.  Broadcasters should carefully review these agreements and take advantage of them - an advantage that may give them rights on the Internet that other webcasters do not have.
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