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Each year, we remind webcasters about their obligations under various settlement agreements entered into with SoundExchange and under CRB decisions to make minimum payments and, in some cases, to file a Notice of Election to be covered under certain negotiated rates - all due by January 31.  All webcasters have minimum fee obligations due by January 31.  Many, though not all, Webcasters who have elected the the royalty rates set by many of the settlement agreements entered into pursuant to the Webcasters Settlement Act must also file an election notice with SoundExchange by January 31 to continue to be covered by those settlement agreements.   These agreements were entered into by groups of webcasters and SoundExchange, and allow the webcasters to pay royalties at rates lower than those rates set by the Copyright Royalty Board for 2011. 

While SoundExchange has, in the past, sent out reminders of these obligations to services that had paid in the prior year, sometimes these notices get lost, so Internet Radio operators need to remember to make these filings.  The original election forms filed under settlement agreements signed by the NAB and by Sirius XM cover the entire settlement period from 2006-2015, so no election form must be filed each year, though minimum fee payments must still be made.  Note that certain small broadcasters, who under the Broadcaster agreement need not comply with SoundExchange recordkeeping obligations, do need to file an election to certify that they still meet the standards necessary to count as a small broadcaster.  The WSA settlement agreements that cover Pureplay webcasters, Small Commercial webcasters, and certain Noncommercial Educational webcasters are all are entered into on a year-by-year basis (though, as noted below, there is a default in certain noncommercial webcasting agreements that, if you were covered in prior years, you will be continued to be covered in the current year, unless you opt out).  Thus, to continue to be covered, parties currently governed by these agreements need to file a Notice of Election to again be covered by these agreements by January 31.

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Dave Oxenford this week conducted a seminar on legal issues facing broadcasters in their digital media efforts.  The seminar was organized by the Michigan Association of Broadcasters, and originated before a group of broadcasters in Lansing, but was webcast live to broadcasters in ten other states.  Dave addressed a variety of legal issues for broadcasters in connection with their website operations and other digital media platforms.  These issues included a discussion of service marks and copyrights, employment matters, music on websites, the use of social media, privacy, and sponsorship disclosure.  The slides used in the Lansing presentation are available here.    During the seminar, Dave also mentioned that stations with websites featuring user-generated content, to help insulate themselves from copyright infringement that might occur in the content posted to their website by their audience, should take advantage of the registration with the Copyright Office that may provide safe harbor protection if a station follows the rules and takes down offending content when identified by a copyright holder.  The Copyright Office instructions for registration can be found here.   

One of the most common issues that arise with radio station websites is the streaming of their programming.  In August, Dave gave a presentation to the Texas Association of Broadcasters providing  a step-by-step guide to streaming issues, with a summary of the royalty rates paid by different types of streaming companies.  That summary to Internet Radio issues is available here.  Additional information about use of music on the Internet can be found in Davis Wright Tremaine's Guide to The Basics of Music Licensing in a Digital Age.   Dave also presented this seminar at the Connecticut Broadcasters Association's Annual Convention in Hartford on October 14.

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Broadcasters have a host of other legal issues that they should consider in connection with their digital presence.  At last week's Maine Association of Broadcasters Annual Convention in Bangor, Dave Oxenford addressed these issues, including service marks and copyrights, employment matters, music on websites, the use of social media, privacy and sponsorship disclosure.  A copy of Dave's presentation on the Legal Issues in the Cyber Jungle is available here.    Dave also mentioned that stations with websites featuring user-generated content, to help insulate themselves from copyright infringement that might occur in the posts from their audience members, should take advantage of the registration with the Copyright Office that may provide safe harbor protection if a station follows the rules and takes down offending content when identified by a copyright holder.  The Copyright Office instructions for registration can be found here.   

One of the most common issues that arise with radio station websites is the streaming of their programming.  In August, Dave gave a presentation to the Texas Association of Broadcasters providing  a step-by-step guide to streaming issues, with a summary of the royalty rates paid by different types of streaming companies.  That summary to Internet Radio issues is available here.  Additional information about use of music on the Internet can be found in Davis Wright Tremaine's Guide to The Basics of Music Licensing in a Digital Age. 

Dave will be presenting a version of the Cyber Jungle presentation to the Michigan Association of Broadcasters on October 12, a presentation that will be webcast to several other states.  Information and registration for that seminar is available here.

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The Corporation for Public Broadcasting has entered into a settlement with SoundExchange extending their current agreement on Internet Radio royalties for "Public" radio stations through 2015.  The previous deal, about which we wrote here, covered the period from 2006 to 2010.  This new agreement picks up in 2011 and covers included stations through 2015.  As in the previous deal, the new agreement has a payment by CPB to SoundExchange satisfying all royalties for all of the covered stations.  This was the fourth agreement that was announced last week, about which we wrote here, although details of this deal had not previously been released.  We have written about the other deals entered into under the Webcaster Settlement Act of 2009 ("WSA"), including the deals with Sirius XM (here) and with other noncommercial webcasters (here). 

This agreement covers stations affiliated with NPR, American Public Media, Public Radio International, and the Public Radio Exchange. CPB will pay to SoundExchange $2,400,000 in five yearly installments, covering up to 490 public radio stations in the first year, and up to 10 additional stations per year thereafter (up to 530 in 2015).  The fee is also subject to adjustment if all of the covered stations exceed certain listening levels.  Those levels, and the required true-up for performances in excess of the caps, are set out below.  However, the CPB payments for excess performances are limited to a total of $480,000 over the 5 year period of the Agreement:

Year              Music ATH Cap              Per Performance Rate

2011                279,500,000                         $0.00057

2012                280,897,500                         $0.00067

2013                282,301,988                         $0.00073

2014                283,713,497                         $0.00077

2015                285,132,065                         $0.00083

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Noncommercial webcasters were provided with two royalty options under settlements reached with SoundExchange pursuant to the Webcaster Settlement Act of 2009 ("WSA").  One settlement was with Noncommercial Educational Webcasters.  The other, when announced, was characterized by SoundExchange as being a settlement with noncommercial religious broadcasters, though it applies to any noncommercial webcaster who elects to be subject to its terms.  As set forth below, except for certain mid-sized noncommercial webcasters who have more forgiving recordkeeping options under the Educational deal, it would seem that the settlement with the religious broadcasters provides far more advantageous terms, and it also reaches back to cover the period from 2006 through 2010.  The Educational webcasters agreement covers only the rates for the periods from 2011-2015.  These settlements provide another example of the issue raised before the Senate Judiciary Committee of the arbitrary nature of the precedential nature that will be accorded to WSA settlements in future webcasting proceedings.  The noncommercial agreement with significantly higer prices has been accorded precedential weight in future CRB proceedings, while the one with lower rates is, by its terms, not precedential in future proceedings.

It is easiest to start with a review of the 'Religious" broadcaters settlement (which, as we said above, is open to any noncommecial webcaster).  The agreement provides for a $500 per channel fee for each channel or stream offered by the noncommercial webcaster.  For that flat fee of $500 per channel, the webcaster can stream up to 159,140 monthly aggregate tuning hours of programming on each stream.  An Aggregate Tuning Hour ("ATH") is one hour of programming streamed to one person.  Thus, if you have 2 people who each listen for an hour, you would have two aggegate tuning hours.  A station with 2 listeners who each listen for half an hour would have one ATH of listening.  4 listeners for 15 minutes each would also add up to one ATH.  The 159,140 monthly ATH number represents listening of approximately 221 average simultaneous listeners 24 hours a day, 7 days a week.  If a webcaster exceeds this listening level, it must pay for excess listening on a per performance (per song per listener) basis, at the rates set out below.

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On August 20, David Oxenford attended the Texas Association of Broadcasters Annual Convention in Austin Texas.  At the Convention, Dave participated with two other Washington attorneys in a session updating broadcasters on legal issues that could affect their operations.  He addressed topics including the proposed Broadcast Performance royalty, the proposed increase in power of HD radio operations, and the current state of broadcast indecency regulation.

In a separate session, Dave and addressed the legal issues that arise when a broadcaster streams their station on the Internet, including issues concerning the Internet Radio royalties for the use of sound recordings, as collected by SoundExchange.  A copy of Dave's PowerPoint used in that session is available here.

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SoundExchange has posted on its website this afternoon four press releases announcing new settlements of amounts due for Internet radio music royalties.  These settlements were negotiated under the provisions of the Webcaster Settlement Act of 2009.  The announcement lists settlements with two noncommercial groups representing College Broadcasters and noncommercial religious broadcasters, as well as a deal with Sirius XM for their streaming of music.  The fourth deal is with a group to be named later - a little mystery that sounds like something out of a trade of baseball players done right at the trading deadline.  In effect, that is the case here, as yesterday was the final date for deals to be done under the terms of the WSA.  These deals join the Pureplay Webcasters settlement announced earlier this month, as well as the deals with the Corporation for Public Broadcasting for NPR affiliates, the NAB for commercial broadcasters, and with microcasters done in February under the terms of the Webcasters Settlement Act of 2008 (links to our description of these deals can be found here).

The press releases do not release detailed terms. For Sirius, the release states that the parties agreed to a per performance rate which is not specified, covering webcasting royalties through 2015.  These rates do not apply to Sirius performances that are done by satellite, which are covered by the Copyright Royalty Board rates recently upheld by the US Court of Appeals.  Instead, these rates only cover the streaming of Sirius programming done over the Internet or to mobile devices using Internet technology.  The Collegiate Broadcasters agreed to a rate that provided the flat $500 fee for the first 159,140 aggregate tuning hours a month set by the CRB decision, and then per performance fees at the NAB rates for all streaming above that amount.  The religious broadcasters deal is less defined, discussing a per performance rate, but not providing any more details of the agreement.  For both noncommercial groups, there are references to reduced recordkeeping requirements for some webcasters, but again, those have not yet been detailed.

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The Pureplay Webcasters settlement agreement, which we summarized here, was published in the Federal Register on Friday, starting the 30 day clock running for the election of the deal by existing webcasters.  While this deal offers better per performance rates to large webcasters than offered by the rates established by the Copyright Royalty Board, and higher permissible listening levels to Small Commercial Pureplay webcasters than allowed under the Microcaster deal, this option still is not for everyone.  For larger webcasters, there is a minimum fee of 25% of total revenue, so companies with multiple lines of business will not want to opt into the deal.  For smaller webcasters, the fees are higher than under the Microcaster deal, including a $25,000 minimum yearly fee, and there are per performance rates that are charged when the webcaster offers services that are "syndicated," i.e. played through a website other than that of the webcaster itself.  So electing this deal is right only for larger "small pureplay" webcasters who have revenues over $250,000 (where they will be paying royalties in excess of the $25,000 minimum fee under any deal) and those entities nearing the audience caps of the Microcaster deal.  Nevertheless, for those webcasters who fit within the constraints of the deal, it offers benefits over the other existing options.  The opt-in date set by the deal is August 17, 2009.  The forms to opt into the the Small Pureplay webcasters agreement are here.  The forms for larger Pureplay webcasters are here. 

Note that this is just one of many options available to webcasters, each tailored to webcasters of specific types.  Noncommercial webcasters associated with NPR or the Corporation for Public Broadcasting have their own deal, where essentially CPB pays the royalties.  See our description of this deal, here.  Streaming done by broadcasters, who would not want to take the "pureplay" deal as their broadcast revenues would be subject to the royalties, have their own settlement agreement, which we described here and here, setting out per performance rates different than those arrived at by the CRB.  Small commercial webcasters can elect the "Microcaster" deal, which we described here.  And for those entities that don't fit under any of these categories, they will have to pay the CRB rates, which we described here and here.  The Radio and Internet Newsletter recently ran a good, basic summary of these alternatives, here.  Note that there still is another two week period where, under the Webcaster Settlement Act of 2009, agreements can be reached with SoundExchange by other webcaster groups to potentially pay rates that are different from any of those agreed to so far.

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The US Court of Appeals for the District of Columbia today released its decision for the most part rejecting the appeals of webcasters of the 2007 decision of the Copyright Royalty Board setting Internet Radio royalty rates for the use of sound recordings.  The Court generally upheld the Board's decision, finding that the issues raised by the appealing parties did not show that the decision was "arbitrary and capricious" - a high standard of judicial review that the Courts accord when reviewing supposedly "expert" administrative agency decisions.  On only one issue did the Court have concerns with the CRB's decision - that being the question of the $500 per channel minimum fees that it had required that webcasters pay.  The Court found that per channel fee, which could result in astronomical fees for some webcasters regardless of their listenership, was not supported by the record evidence, and remanded that aspect of the case to the CRB for further consideration.

The Court surprised some observers by not reaching the constitutional issue of whether the Copyright Royalty Judges were properly appointed.  As we wrote before (see our posts here and here), issues were raised by appellant Royalty Logic, contending that these Judges should be appointed by the President, and not by the Librarian of Congress.  In the recent Court decision on the CRB rates for satellite radio, where the issue had not even been raised, one Judge nevertheless wrote that he questioned the constitutionality of the CRB.  The Court here decided not to decide the issue - finding that it had been raised too late by Royalty Logic, and raised too many fundamental issues (including whether the Register of Copyrights should herself be appointed by the President, potentially invalidating many copyrights) to be decided on the minimal briefing accorded it by the parties.

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The US Senate yesterday passed the Webcaster Settlement Act of 2009, following House passage 10 days ago.  Once the Act receives the signature of President Obama, the law will go into effect, and give webcasting groups and the recording industry 30 days to reach a settlement (or settlements) on Internet radio music royalties for the use of sound recordings.  While the parties did not need the Act to reach settlements for the period of 2011-2015, which is subject to a new royalty proceeding which is now in its early stages, the WSA extension was necessary to cover royalties for the period of 2006-2010, which are covered by the Copyright Royalty Board decision released in 2007.  Without this extension, the rates in effect under the CRB decision (or the rates agreed to under settlements with broadcasters, certain very small webcasters and NPR, and announced earlier this year as authorized by the Webcaster Settlement Act of 2008 ) would have to be paid for that period absent a successful outcome of the currently pending appeal. 

Several groups which participated in the last CRB proceeding have yet to reach settlements, including the "Small Commercial Webcasters" (the independent pureplay webcasting companies), the large webcasters associated with the Digital Media Association, and noncommercial webcasting groups not affiliated with NPR.  In the only statement made on the floor of the Senate before the unanimous approval of the Act, Senator Leahy, the Chair of the Judiciary Committee, cited the controversy over the rates set by the CRB decision, and stated that it was preferable that the parties involved in the case reach an agreement rather than having new rates imposed by the government (see his statement here).  With the passage of this act, the parties now have that opportunity to reach a settlement of the royalties reaching back to 2006. We will see what settlements are announced during the upcoming 30 day period.

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In recent months, SESAC has been writing letters to broadcasters who are streaming their signals on the Internet, asking for royalties for the performance of SESAC music on their websites.  More than one broadcaster has asked me why they have any obligation to SESAC when they are already paying SoundExchange for the music that they stream.  In fact, SoundExchange and SESAC are paid for different rights, and thus the payments to SoundExchange have no impact on the obligations that are owed to SESAC.  SESAC, along with ASCAP and BMI, represent the composers of music in collecting royalties for the public performance of their compositions.  SoundExchange, on the other hand, represents the performers of the music (and the copyright holders in those performances - usually the record companies).  In the online digital world, the SoundExchange fees cover the public performance of these recordings by particular performers (referred to as "sound recordings").  For an Internet radio company, or the online stream of a terrestrial radio station, payments must be made for both the composition and the sound recording. 

To illustrate the difference between the two rights, let's look at an example.  On a CD released a few years ago, singer Madeleine Peyroux did a cover version of the Bob Dylan song "You're Gonna Make Me Lonesome When You Go."  For that song, the public performance of the composition (i.e. Dylan's words and music) is licensed through SESAC.  The actual "sound recording" of Peyroux's version of the song would be licensed through SoundExchange, with the royalties being split between Peyroux and her record label (with backing singers and musicians receiving a small share of the SoundExchange royalty). 

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We recently wrote about the agreements between SoundExchange and various groups of webcasters, which became effective under the terms of the Webcasters Settlement Act.  These rates act as a substitute for the rates set by the 2007 Copyright Royalty Board decision  setting Internet radio royalties for the use of sound recordings in the period from 2006-2010.  The deal with broadcasters set lower rates than the CRB for 2009 and 2010, and also waived certain requirements otherwise applicable to webcasters, limiting the number of songs from the same artist that can be played in a given period of time (see our posts here and here).  There is also a deal that SoundExchange unilaterally advanced to certain small webcasters which allows for a percentage of revenue royalty, but limits the amount of listening to these webcasters allowed at these rates, and imposes significant recapture fees if a webcaster sells its service to another company that would not qualify as a small webcaster (see our post here).  April 30 is an important date under both deals, as it is the date by which small webcasters must elect the deal, and the date by which all broadcasters who elected the broadcaster deal earlier this month are to pay any back royalties which they owe for streaming from 2006 through the date of the agreement.

In talking to Internet radio operators, both broadcasters and small webcasters, many seem to be unaware of the records that need to be maintained to remain in compliance with the requirements of the deals.  Both the small webcasters agreement and the NAB-SoundExchange settlement require "full census" reporting of  all songs played by the service, which will include information for every song - including the name of the song that was played, the featured artist who performed the song, the album on which the song appeared, and the label on which the album was released.  In addition, the webcaster must report on the number of times each song was played, and how many people heard each transmission of the song.  Only very small broadcasters and "microcasters" under the small commercial webcaster deal, are totally exempt from these requirements.  Under their deal, broadcasters need not provide all the information for up to 20% of their programming, but this percentage of the broadcast week that can avoid full reporting will shrink every year (see our post here for details).

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The oral argument on the Webcasting appeal of the March 2007 Copyright Royalty Board decision setting Internet radio sound recording royalty rates for 2006-2010 has now been set for March 19.  So, if no settlement under the Webcaster Settlement Act (about which we wrote here) is reached before the February 15 deadline set out in that act, the case will go on to the argument, though apparently without NPR, which benefits from the settlement that the Corporation for Public Broadcasting has reached with SoundExchange.  Even with a settlement with all of the webcasters, SoundExchange is still being challenged by Royalty Logic, which wants to be an alternative collection agency for music royalties, so the case will probably go forward.  Royalty Logic is the party which raised the issue of whether the Copyright Royalty Board was properly appointed under the Appointments Clause of the Constitution, an issue that looks to invalidate the entire CRB decision.  Even thought the Court's argument will be held in March, a final decision will likely not be released for several months after the argument.

The royalty case that resulted in the much lower royalties for Sirius XM is also scheduled for argument in March, the week after the webcasters case. That decision, about which we wrote here, was decided under the 801(b) standard, which takes into account not only the perceived economic value of the music (the "willing buyer, willing seller" standard used in the webcasting case), but also factors involving the public's interest in receiving music, and the impact on the industry that the royalties will have.  If these cases both go forward, after hearing them in short order, the US Court of Appeals will become the center of the digital music royalty world - at least for a short period of time.  Watch for more as these cases develop.

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The Copyright Royalty Board today published a notice in the Federal Register announcing the start of its next proceeding to set the royalties to be paid by Internet radio operators for the performance rights to use "sound recordings" (a particular recording of a song as performed by a particular performer) pursuant to the statutory royalty.  As we've written extensively on this blog, the statutory royalty allows an Internet radio station to use any publicly released recording of a song without the permission of the copyright owner (usually the record company) or the artist who is recorded, as long as the station's owner pays the royalty - currently collected by SoundExchange.  In 2007, the Copyright Royalty Board set the royalties for 2006-2010, a decision which prompted much controversy and is still under appeal.  In the Notice released today, the CRB set February 4 as the deadline for filing a Petition to Participate in the proceeding to set the royalties for the next 5 year period.

The 2006-2010 royalties are currently the subject of negotiations as the parties to the last proceeding attempt to come to a voluntary settlement to set royalties that are different than those established by the CRB decision.  The Webcasting Settlement Act (which we summarized here) gives webcasters until February 15 to reach an agreement as to rates that would become an alternative to the rates that the CRB established.  The Act also permits parties to reach deals that are available not only for the 2006-2010 period, but also allows the deals to cover the period from 2011-2016.  Thus, theoretically, webcasters could all reach agreements with SoundExchange to establish rates that cover the next royalty period, obviating the need for the proceeding of which the CRB just gave notice.  But, as is so often the case, those settlements may not be reached (if they are) until the last minute - so parties may need to file their Petitions to Participate before they know whether a settlement has been achieved.

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Both the House and the Senate have now approved the Webcaster Settlement Act of 2008, which will become law when it is signed by the President. Just what does this bill do? It does not announce a settlement of the contentious Internet Radio royalty dispute, about which we have extensively written here. It does not change the standard for judging Internet radio royalties, as had been proposed in the Internet Radio Equality Act, introduced last year and now seemingly dead in the waning days of this Congress, and in the Perform Act, about which we wrote here (the IREA and the Perform Act proposed different standards – the first more favorable to webcasters and the second more favorable to SoundExchange). These issues will seemingly be left to be disputed in a future Congress. Instead, the Webcaster Settlement Act seems to only adopt a simplified process for the approval of settlements that may be reached by the parties on or before February 15, 2009 – a settlement process that had been previously used in the Small Webcaster Settlement Act (the language of which this bill amends).

What is the significance of these new settlement processes? Under current law, any settlement between any group of webcasters and SoundExchange could only be binding on the entire universe of sound recording copyright holders if that settlement was approved by the Copyright Royalty Board. If an agreement is not binding on all copyright holders, then the reason for the statutory royalty - being able to pay one entity and get access to all the music in the world - would not be met.  The current procedures for approving settlements seem to contemplate such settlements only before a decision on royalties is reached by the CRB.   While some have speculated that the Court of Appeals that is currently considering the CRB appeal could remand the case to the CRB to effectuate a settlement and force the CRB to address it, that is by no means certain. For instance, the large webcasters, through their organization DiMA, reached a settlement with SoundExchange to cap minimum fees at $50,000 per webcaster. In their briefs filed with the Court of Appeals, both DiMA and SoundExchange have asked the Court to remand that aspect of the case to the CRB for adoption – yet that request has been opposed by the Department of Justice acting on behalf of the CRB. Thus, voluntary settlements may not be easy to obtain.

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Today, the National Music Publishers Association ("NMPA"), DiMA, the RIAA and other music publishing groups issued a press release announcing a settlement of certain aspects of the current Copyright Royalty Board proceeding to determine the royalties due under Section 115 of the Copyright Act for the mechanical royalty for the reproduction and distribution of the musical work (i.e. the composition - the words and music of a song).  According to the Press Release issued by the parties, this agreement covers interactive streaming and limited-time downloads, setting a royalty of 10.5% of revenue, less any amounts due for performance royalties (to ASCAP, BMI and SESAC, which also reimburse composers of music).  While many press reports (at least some of which have already been pulled) have concluded that this is a settlement of the Internet Radio royalties proceeding - that is wrong.  The Internet radio royalty proceeding involves Section 114, not Section 115, of the Copyright Act.  Section 114 deals with a royalty paid to the performers, not the composers.  Section 114 compensates performers and the copyright holders in the performance for the public performance of their works, not for the mechanical royalty for reproduction and distribution covered by Section 115.  And Section 114 covers non-interactive streaming - where users cannot dictate the songs that they want to hear - unlike the services, on-demand streams and limited time downloads, involved in this settlement which allow users to select the songs that they want to hear.  So don't believe what you read - the Internet radio royalties are still very much a subject of dispute, and services like Pandora are not yet saved by any sort of settlement. 

According to the press release, the one benefit to Internet radio under this agreement is that the parties conclude that there is no royalty due to the music publishers for any copies made in the transmission of non-interactive streaming.  The Copyright Office recently began a proceeding to ask if such royalties were due (about which we wrote here).  So, even  were the Copyright Office to determine that there was a Digital Phonorecord Delivery (a "DPD") made during the Internet radio streaming process, at least for the length of this agreement (assuming that it is approved by the Copyright Royalty Board), no royalty will be assessed.  We will write more about this settlement once we have seen the full terms - but wanted to post this notice to alert readers that, contrary to press reports, the Internet Radio proceeding has not been settled. 

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The Washington Post today ran an article on the continuing Internet radio royalty battle - highlighting the service Pandora and the fact that it will likely go out of business if the current dispute about royalties is not resolved.  We wrote (here and here) about many of these same issues in our coverage of the recent Senate Judiciary Committee hearings.  What is notable about the article is its mention of settlement discussions that are being conducted under the supervision of Congressman Berman of the House Judiciary Committee.  But the article also makes clear that the disconnect continues between the perception of the recording industry and of the Internet radio industry on the revenue potential of Internet radio.  The differing perception continues to make settlement difficult, as the recording industry keeps complaining that the industry has not done enough to monetize their operations - and the Internet radio companies express frustration at that attitude.  If there was some way of making more money from Internet radio operations, doesn't the recording industry think that the webcasters would take advantage of those practices?  Why would they leave money on the table if they could figure out a way to make it?  If they could make money, they would - though the recording industry seems not to believe it.

The other issue that the article overlooks is that the settlement discussions that are going on are apparently the same settlement discussions referenced at the Senate Judiciary Committee hearing - those between the recording industry and the large webcasters.  But there are many other groups involved in webcasting - the small commercial webcasters that I have worked with in the Copyright Royalty Board proceeding, the broadcasters who also stream their programs, and noncommercial webcasters (including NPR affiliates, religious broadcasters and other noncommercial entities).  There is no discussion in the article of any talks with them and, as set out in the written testimony at the Judiciary Committee of Kurt Hanson of Accuradio, the small commercial webcasters have heard nothing from SoundExchange in months.  A resolution by the large webcasters, unless it is all encompassing and on terms that all parties can live with (which seems unlikely given the diverse interests involved), will not resolve the dispute over the CRB decision.  So the battle continues.

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Last week, we wrote about one issue that was addressed at last week's Senate Judiciary Committee hearing on music royalties - the standards used to derive the royalties, and expressed hope that there was at least some interest in compromise on behalf of the Senators and industry representatives.  However, another issue which came out of those hearings suggests that compromise may not be so easy if the parties really believe what they say - as there is a fundamental distinction in both how the parties view the health of the Internet radio business, and how they view the relationship between royalties and the music business generally.  One can only hope that the gulf that was evident was just due to public posturing as, if it was not, there may well be an insurmountable differences between the parties that cannot be bridged in any settlement negotiations over the royalties that Internet radio pays for the use of sound recordings.

The gap became evident from the opening statements of the first panel - comprised of two Senators interested in the issue- Senator Wyden on behalf of the Internet Radio Equality Act stating that it was necessary to avoid having the high royalties decided by the Copyright Royalty Board destroy a fledgling technology, while Senator Corker of Tennessee talked about the importance of music to radio and the exhaustive process that the CRB had gone through in arriving at the royalties that it approved.  But in the day's principal panel, the issues became crystal clear, as John Simson of SoundExchange talked about the "vibrant" business of Internet radio, citing an analyst's report that Internet radio would be a $20 billion advertising market by 2020, and the statement of an employee of CBS that Internet radio was a great business and that CBS was going to "own it."  Speaking next, Joe Kennedy, CEO of Internet radio company Pandora had a dramatically different perspective - talking about an industry analyst who stated that the royalties that would result from the CRB royalties would exceed the revenue of the Internet Radio industry, and that, for Pandora, the failure to find a compromise solution to the CRB-imposed royalties would mean that his service would "die."  He pointed to Pandora's position as the largest of the Internet radio companies in terms of listenership, the $25 million in revenue that it expects to make this year, and how $18,000,000 of that would go just to the SoundExchange royalties - 75% of its revenue to this one expense. 

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We recently wrote about the challenge to appointment of the Copyright Royalty Board's judges filed by Royalty Logic as part of the appeal of the Board's decision on Internet Radio royalties.  Royalty Logic argued that the appointment of the Copyright Royalty Judges was improper, as the Librarian of Congress was not the "head of a department" who can appoint lesser government officials under the Appointments Clause of the Constitution.  Thus, Royalty Logic contends that the decision reached by the Board as to Internet radio royalties was a nullity, as the Board effectively does not legally exist.  Earlier this week, the Board and SoundExchange filed their replies to the Royalty Logic motion, arguing that, in fact, the Librarian is the head of a department, as he is appointed by the President and approved by Congress and runs a government "department," i.e. the Library of Congress, of which the Copyright Office is a part.  In demonstrating that the Library is a department, the briefs reach back to the creation of the Library by Thomas Jefferson, and look at the legislative history of legislation modifying the powers of the Library and the process for the appointment of the Librarian - legislation passed in 1870 and 1897.  Essentially, the very technical argument about why the Board was not properly constituted was met with an equally technical one that says it was properly formed.  Clearly, arguments only lawyers could love.

While Royalty Logic will have the opportunity to respond, the litigation process continues on the main portion of the appeal, as SoundExchange filed its intervenor's brief the week before last, defending the decision of the Copyright Royalty Board.  In one notable departure, SoundExchange, while contending that the Board was correct in determining the minimum fees that would be required of webcasters, it said that, because of the agreement that it reached with certain webcasters that would cap minimum fees at $50,000  no matter how many channels a service might have (see our discussion of the agreement here), it asked that the Court remand that one limited matter back to the Board for adoption of the limitation on minimum fees so that it would apply to all webcasters and not just those who signed the agreement.  In all other respects, SoundExchange opposed the briefs of the webcasters.

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Each year, Internet radio stations must pay a minimum fee to SoundExchange, and that fee is due by January 31.  These minimum fees are applied against  the obligations of a Internet radio service to pay royalties for the use of sound recordings on their stations.  SoundExchange does not send bills, so webcasters must remember, on their own, to make the payments.  For commercial webcasters (including broadcasters who stream their signals on the Internet), under the Copyright Royalty Board decision released last March, a minimum fee of $500 per channel is due.  While SoundExchange and certain large webcasters agreed to cap this minimum fee liability at $50,000 no matter how many channels a webcaster transmits (see our post here), this agreement has yet to be submitted to the CRB for approval.  Minimum payments are also due from noncommercial and small webcasters.

Under the CRB decision, noncommercial webcasters also owe a minimum fee of $500 per channel.  Small webcasters, who earlier this year accepted the SoundExchange offer about which we wrote here, owe a minimum fee of $2000 if they had 2007 revenues of less than $50,000, and minimum fees of $5000 if their 2007 revenues exceeded $50,000.  Note that details about these minimums are difficult to locate on the SoundExchange website.  Nevertheless, the current rules require that these payments be made.  Future settlement negotiations may adjust some of these minimums but, as of this moment, the failure to pay the minimum fees could, at a minimum, subject an Internet radio service to penalty fees and interest payments. 

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This week, the Copyright Royalty Board issued an Order denying a request by SoundExchange for rehearing of certain aspects of the decision released last month setting the royalties for satellite radio - XM and Sirius.  These are the royalties for the use of sound recordings by these services on their digital systems.  The decision, which set royalties at 6 to 8% of revenues of these services, and the denial of the rehearing motion, provide examples of how the CRB applies the 801(b) standard of the Copyright Act.  In setting royalties, that standard assesses not only the economic value of the sound recording, but also the public interest in the wide dissemination of the copyrighted material and the impact of the royalty on the service using the music.  The satellite radio decision sets a royalty far lower than that assessed on Internet radio - where the royalty is set using a "willing buyer, willing seller" standard looking only at the perceived economic value of the sound recording.  That willing buyer, willing seller standard is also proposed for broadcast radio in the recently introduced performance royalty bills now pending before Congress (see our summary here) - so it could be expected that any royalty set using that standard would be higher than that set for satellite radio. 

The initial Copyright Royalty Board decision, the full text of which is available here, first made a determination of how to compute the royalty.  While both the satellite radio companies and SoundExchange initially suggested a percentage of revenue royalty given that satellite radio can't count specific listeners, the parties later amended their proposals (after the Internet radio decision) to include a computation based on the frequency of a song's play, to try to more closely approximate the Internet radio performance-based model (about which we wrote here).  In addition to the suggestion that this metric more closely approximated that used in the Internet radio decision, the satellite radio companies suggested that a metric based on the songs played would give them the opportunity to adjust their use of music to reduce their royalty obligation.  The satellite companies suggested that, if the royalty was too high, they could reduce the number of different songs that they played.  While not specifically referenced in the decision, it is possible that they also considered the possibility of getting waivers from artists to encourage playing particular songs, which could further reduce a royalty based on a per song computation.  The Board declined to provide that option, finding that the percentage of revenue option best took into account the business of the companies.  The Board also suggested that it doubted that satellite radio really had the ability to lessen the use of music in reaction to a high royalty rate.  (The Board does not discuss the possibility of royalty waivers, which are essentially worth nothing in a situation where the royalties are based on a percentage of a service's entire revenue). 

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The Copyright Royalty Board today announced that it is taking comments on a settlement to establish royalties for the use of sound recordings to be paid by companies that are planning to provide audio services to be delivered with satellite and cable programming.  In contrast to the "preexisting subscription services" who were in existence at the time of the adoption of the Digital Millennium Copyright Act in 1998, who recently reached a settlement agreeing to pay 7 to 7.5% of gross revenues for royalties (see our post, here), this settlement is with "New Subscription Services" which did not offer these kinds of subscription services in 1998.  This settlement does not apply to subscription services provided through the Internet.  The covered "new subscription services" have agreed to pay the greater of 15% of revenue or a per subscriber fee that will escalate over the 5 years that the agreement is in effect.  Given that these new services will be providing essentially the same service as the Preexisting Services, why the difference in rate?  Perhaps, it is because the difference in the law.

As we wrote earlier this week, the Preexisting Satellite Service pay royalties set based on the standards of Section 801(b) of the Copyright Act, which takes into account a number of factors including the interest of the public in getting access to copyrighted material, the relative contributions and financial risks of the parties in distributing the copyrighted material, the stability of the industry, and the right of the copyright holder to get a fair return on their intellectual property.  By contrast, the new subscription services who entered into the settlement just announced, who weren't around at the time of the drafting of the DMCA, use the "willing buyer, willing seller" standard also used for Internet radio.  And, because of the applicability of the willing buyer willing seller standard and the apparent uncertainties of the litigation process using it, these new services apparently decided to agree to a royalty double that of the preexisting services, even though they provide essentially the same service.

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With summer and the August Congressional recess drawing to a close, will consideration of the Internet Radio controversy over royalties be on the agenda when the September legislative session begins?  In recent weeks, there has been a settlement between the Digital Media Association (DiMA), representing the largest webcasters, and SoundExchange on the issue of the minimum royalty fee - agreeing that the $500 per channel minimum fee imposed by the Copyright Royalty Board ("CRB"), which might have by itself driven many webcasters like Pandora or Live 365 out of business had it not been resolved, would be capped at $50,000.  SoundExchange has also extended a unilateral offer to small commercial webcasters allowing them to continue to pay a percentage of revenue royalty of 10-12% for use of the music produced by SoundExchange members - but limiting the offer to webcasters with under $1.2 million in annual revenue, and requiring that any webcaster with over 5,000,000 tuning hours in any month to pay at the CRB rates for all listening in excess of that limit.  We wrote about that deal, and some of the concerns that larger small webcasters have, here.  These adjustments to the CRB rates may resolve some issues for some webcasters, but they leave open many other issues as set forth below - but will these tweaks to the CRB decision be enough to take the Congressional heat, in the form of the Internet Radio Equality Act, off of SoundExchange?

What issues remain?  There are still many.  These include:

• The issues of the larger independent webcasters who may currently fit under the Small Webcaster Settlement ("SWSA") Act caps - but may well go over those caps before 2010, and could not afford to pay royalties at the CRB-mandated rates if they exceed the SWSA limits.
• The CRB mandated rates are themselves problematic for virtually all commercial webcasters - and DiMA made clear that the settlement of the minimum fee issue was the first step in resolving the issues that preclude a vibrant webcasting industry under the CRB rates (see the DiMA press release on the settlement, here)
• Noncommercial webcasters have not announced any settlement with SoundExchange - even though many expressed concerns over the fees for large noncommercial webcasters  which will, by the end of the royalty period, increase about 9 times over the rates that they had been paying (and more for larger NPR affiliates), and over recordkeeping and reporting requirements.
• Broadcasters who stream their over-the-air signal over the Internet have not been involved in any of the tweaks to the CRB decision, nor has SoundExchange responded to the NAB's settlement offer made in June (according to the clock on the NAB homepage, the NAB settlement offer has been outstanding without response for 84 days at the time this post is being written). 

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Yesterday, SoundExchange sent to many small webcasters an agreement that would allow many to continue to operate under the terms of the Small Webcaster Settlement Act as crafted back in 2002, with modifications that would limit the size of the audience that would be covered by the percentage of revenue royalties that a small webcaster would pay. A press release from SoundExchange about the offer can be found on their website by clicking on the "News" tab.  This is a unilateral offer by SoundExchange, and does not reflect an agreement with the Small Commercial Webcasters (the “SCWs”) who participated in the Copyright Royalty Board proceeding to set the rates for 2006-2010 and who are currently appealing the CRB decision to the US Court of Appeals (see our notes on the appeal, here). The SoundExchange offer, while it may suffice for some small operators who do not expect their businesses to grow beyond the limits set out in the SWSA (and who only play music from SoundExchange artists - see the limitations described below), still does not address many of the major issues that the SCWs raised when SoundExchange first made a similar proposal in May, and should not be viewed by Congress or the public as a resolution of the controversy over the webcasting royalties set out by the CRB decision (see our summary of the CRB decision here).

The proposal of SoundExchange simply turns their offer made in May, summarized here, into a formal proposal.  It does not address the criticisms leveled against the offer when first made in May, that the monetary limits on a small webcaster do not permit small webcasters to grow their businesses – artificially condemning them to be forever small, at best minimally profitable operations, in essence little more than hobbies. The provisions of the Small Webcasters Settlement Act were appropriate in 2002 when they were adopted to cover streaming for the period from 1998 through 2005, as the small webcasters were just beginning to grow their businesses in a period when streaming technologies were still new to the public and when these companies were still exploring ways to make money from their operations. Now that the public has begun to use streaming technologies on a regular basis, these companies are looking to grow their businesses into real businesses that can be competitive in the vastly expanding media marketplace. The rates and terms proposed by SoundExchange simply do not permit that to occur. 

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As reported in Digital Music News and other publications on Friday, Clear Channel Communications dropped its waiver of music royalties from its on-line agreement signed by musicians submitting songs to the Company in hopes that their music would be played on the Company's radio stations.  In writing about this decision, most publications attribute the decision to the petition filed with the FCC by the Future of Music Coalition and other public interest groups arguing that the waiver requests constituted a form of payola - the giving of something of value (the waiver of the right to receive a royalty) in exchange for the playing of music.  However, on close inspection, that would appear to be a misunderstanding of the royalty, as there would seem to be no royalty that would be affected by the waiver in connection with the playing of this music by radio stations, and therefore there would be no payola over which the FCC has any jurisdiction.

According to the Future of Music petition, Clear Channel's promise to play new music was made in connection with the payola settlement that it and other companies entered into with the FCC, and was apparently contained in a side letter filed with the FCC, as it was not spelled out in the settlement agreements themselves. See our analysis of the settlement agreements, here.  The side letter promised that the Company would dedicate a certain amount of radio airplay on the Company's radio stations to new local music.  However, such play would not implicate any music royalties - so a waiver of royalties would not confer any benefit on the Company.  Broadcast stations pay no royalty for the use of a sound recording - thus the waiver that Clear Channel requested was without any value as there was no royalty to waive.  While broadcast stations do pay a royalty for the composition (the underlying words and music of a song), stations play flat fees to ASCAP and BMI that are a function of the station's market size and power - not a function of how many songs are played.  Thus, as there is no sound recording royalty and a flat fee for the composition royalty unaffected by any waivers, the waiver did not confer any benefit to the Company in connection with its broadcast operations.  Thus, there where would appear to be no payola issue over which the FCC would have any jurisdiction.

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Yesterday, a three judge panel of the US Court of Appeals in Washington, D.C. denied the Emergency Motion for a Stay of the Internet Radio Royalty rates set earlier this year by the Copyright Royalty Board.  Our coverage of the stay motion can be found here and here.  Coverage of the entire royalty issue and the surrounding controversy can be found in various posts on our blog, here.  The denial of the stay means that, absent Congressional action or some voluntary agreement of the parties, the new rates will go into effect with payments for the period since the CRB decision being due on Monday, July 16.

The Court's decision was very brief - in essence three sentences which merely stated that the moving parties had not met the high legal burden necessary for the Court to impose a stay.  A stay is an extraordinary legal action, taken by a Court as part of its equitable powers to insure that justice is carried out.  In order to justify a stay, a party must show the Court that there is a likelihood of success on the merits of the case (in other words, it must prove in a 20 page stay motion the likelihood that it will eventually win its appeal after full briefing and oral argument), plus it must prove that there will be irreparable harm if the stay is not issued (more than simply a loss of money - but harm that cannot be remedied if the appeal is eventually successful).  Weighing those factors, and balancing the competing interests of the parties and the public interest, the Court decides whether or not to issue a Stay.  In this case, as there was no more than the pro forma Order, we do not know what shortcomings the Court perceived in the Motion seeking the Stay, but no reasons are required as the Court can merely decide not to exercise its equitable discretion in a case.

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Last week brought more action, and not much in the way of  results, as we count down to the July 15 effective date of the new Internet Radio Royalties.  The actions that received the largest amount of press coverage were the hearing before the US House of Representatives Small Business Committee, and the offer by SoundExchange suggesting that the minimum $500 per channel fee be capped at $2500 per service. While both initially seemed to offer the prospect of some resolution of the dispute over the Internet Radio royalties that were adopted by the Copyright Royalty Board, in fact neither ultimately resulted in much.

The Committee hearing featured webcasters and musicians - equally divided between those who believed that the royalties were fairly decided, and those who believed that the rates were too high.  The one thing on which most of the witnesses seemed to agree was that some rate adjustment was warranted for small webcasters, though no one was able to quantify how such a settlement should be reached.  The Congressional representatives, on the other hand, were cautious to act, asking again and again whether the parties were going to be able to settle the case between themselves.  While Congressman Jay Inslee testified in favor of his Internet Radio Equality Act, the members of the committee seemed hesitant to act while there were judicial avenues of relief still pending, and the possibility of settlement.

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As the clock ticks down to the July 15 effective date of the royalty rates for Internet Radio as determined by the Copyright Royalty Board, webcasters held a Day of Silence today, June 26, to demonstrate to listeners what may well happen if the rates go into effect, and to galvanize their listeners to ask Congress for relief. With the Day of Silence bringing publicity to the Congressional efforts to put the webcasting royalties on hold and to change the standard applied by the Copyright Royalty Board so that it is not focused completely on a hypothetical "willing buyer, willing seller" model, it's worth looking at some of the other issues that have arisen in the royalty battle in the last few days - including further pleadings filed in connection with the Motion for Stay currently pending in the US Court of Appeals, and the Congressional hearing that will occur on Thursday. 

As we've written before, there is currently pending a Motion for Stay of the CRB decision which was submitted jointly by the large and small webcasters and NPR.  Last week, the Department of Justice, acting on behalf of the Copyright Royalty Board to defend the royalty decision, and SoundExchange, each filed oppositions to the Motion for Stay. Each raised many of the same arguments. First, they argued that the large webcasters had procedurally forfeited their rights to challenge the question of the $500 per channel minimum fee by not raising their objection early enough in the CRB proceeding. The DOJ also argued that the damage from the minimum fee was speculative as there was no way to know how that minimum fee would be interpreted. The DOJ contended that, as it was unclear that SoundExchange would prevail on any claim that those Internet Radio services that produced a unique stream for each listener would have to pay $500 for each such stream, the question might end up in a lawsuit – but wouldn’t inevitably lead to the irreparable harm that is necessary for a stay to be issued.

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With July 15 now less than a month away, the new Internet Radio music royalties are still scheduled to go into effect.  Congressional legislation is slowly being considered, and a Motion for Stay to put the regulations on hold pending appeal has been filed (see our post here).  Some discussions on settlement have also taken place, though no deals have been done.  Without some action, payments under the new rules will soon be due.  See our memo, here, for more details on the CRB decision, and all of our posts on this issue, here.  While the legal and legislative actions are still proceeding, and the clock is counting down, the coverage in the popular media continues to grow.  In two recent discussions of the issue, SoundExchange spokesmen seem to blame Internet Radio for the current woes of the recording industry and to justify the high royalty rates through comparisons to the illegal pirating of copyrighted music.  All of these issues will be discussed at a seminar that I am moderating later this week at the Digital Media Conference in the Washington DC area.

One example of SoundExchange's recent claims can be found in a series of articles found on the Los Angeles Times website featuring a "Dust-up" exchange of viewpoints on the Internet radio issue,  between Kurt Hanson, owner of Internet radio broadcaster Accuradio and the publisher of the Radio and Internet newsletter, and Jay Rosenthal, a Board member of SoundExchange.  Mr. Rosenthal, in attacking the value of Internet radio as a promotional tool, said that while webcasters might excite people about new music, most new music is now illegally downloaded so that the promotion doesn't actually help the artists.  But, as Kurt Hanson points out, that would essentially be an excuse for never promoting any music in any venue - in fact it seemingly would be an excuse for shutting down the recording industry.  If music promotion just leads to illegal file sharing sites, and little or no music is ever to be sold again, why bother?  Does the recording industry really expect to make up for lost sales by receiving royalties from Internet radio?  Yet the same point seems to be made by SoundExchange President John Simson in a piece done by the PBS program NOW.  That program focused on the Internet Radio station Radio Paradise and how its popular, eclectic music mix will be silenced if the new royalties go into effect.  In that story, Simson also points to illegal downloading as causing the woes of the music industry, seemingly implying that this justifies outrageous royalties - yet offers nothing to tie downloading to Internet radio.

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The past few days have been eventful ones in the battle over Internet radio royalties.  Appeals from the decision of the Copyright Royalty Board decision (see our memo explaining that decision, as well as our coverage of the history of this case) were submitted by virtually all of the parties to the case.  In addition, the National Association of Broadcasters, which had not previously been a party to the case, filed a request to intervene in the appeal to argue that the CRB decision adversely affects its members.  Also in Court, a Motion for Stay of the decision was submitted, asking that the CRB decision be held in abeyance while the appeal progresses.  The "appeals" that were filed last week are simply notices that parties dispute the legal basis for the decision, and that they are asking that the Court review that decision.  These filings don't contain any substantive arguments.  Those come later, once the Court sets up a briefing schedule and a date for oral arguments - all of which will occur much later in the year.  As the CRB decision goes into effect on July 15, absent a Stay, the appeal would have no effect on the obligations to begin to pay royalties at the new rates.

The Stay was filed by the large webcasters represented by DiMA, the smaller independent webcasters that I have represented in this case, and NPR.  To be granted a stay, the Court must look at a number of factors.  These include the likelihood that the party seeking the stay will be successful on appeal, the fact that irreparable harm will occur if the stay is not granted, the harm that would be caused by the grant of a stay, and the public interest benefits that would be advanced by the stay.  The Motion filed last week addressed these points.  It raised a number of substantive issues including the minimum per channel fee  set by the CRB decision, the lack of a percentage of revenue fee for smaller webcasters, and issues about the ability of NPR stations to track the metrics necessary to comply with the CRB decision.  The Motion raised the prospect of immediate and irreparable harm that would occur if the decision was not stayed, as several webcasters stated that enforcement of the new rates could put them out of business.

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On the same day that many webcasters were on Capitol Hill lobbying for the Internet Radio Equality Act, the Copyright Royalty Board issued its Final Determination of Rates and Terms today, and it was published in the Federal Register.  That action starts the clock ticking on appeals which must now be filed in 30 days.  In the Final Determination, the Board included a few revisions in its initial decision, reflecting the issues that it addressed in response to the Rehearing motions - including provisions adding a transitional period of two years during which webcasters can pay using an Aggregate Tuning Hour formula instead of paying based on each performance.  Surprisingly, the Board also amended the rules that it adopted governing the timing of the first payment under the new royalty rate, making the first payment due 45 days from the end of the month during which the Final Determination was issued.  As the decision was issued today, May 1, that would delay the due date for the first payments under the new royalties until July 15.

The statute governing the Copyright Royalty Board allowed the Library of Congress to review the CRB decision to determine if the Librarian (through the Copyright Office) saw any obvious errors of law.  Apparently, the Librarian found none (though that does not mean that there are not issues that can be raised on appeal), leading to the publication of the decision in the Federal Register.  Appeals are due 30 days after that publication.  On that date, parties file a Notice of Appeal, which provides notice to the Court of Appeals that parties believe that the decision was in error.  After those notices are filed, the Court will set briefing schedules and oral arguments.  The appeal process that can take a year or more before a decision is rendered.

Our previous coverage of the CRB proceeding can be found, here.

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The Internet Radio Equality Act was introduced in the House of Representatives today, proposing several actions - most significantly the nullification of the decision of the Copyright Royalty Board raising royalty rates for the use of sound recordings by Internet radio stations.  Our summary of the decision and its aftermath can be found here.  In addition to nullifying the decision of the Board, the Act does the following:

1. Changes the "willing buyer, willing seller" standard used to determine royalty rates for Internet radio to the "801(b)" standard - named after section 801(b) of the Copyright Act, which considers a variety of factors in determining royalties - factors including possible disruption to the industry of royalties, the maximization of the distribution of the copyrighted work to the public, the relative value of the contributions of the copyright holder and the service, and the determination of a fair rate of return to the copyright holder.  The 801(b) standard is the used for determining rates for satellite radio and digital cable radio.
2. Establishes an interim royalty rate for 2006-2010 of  (at the choice of the webcaster) either .33 cents per Aggregate Tuning Hour of listening or 7.5% of the service's revenues directly related to Internet radio
3. For noncommercial radio, places the royalty determination into Section 118 of the Copyright Act, which is where other noncommercial royalties (including the royalty for ASCAP and BMI for over-the-air use of musical compositions) are found, using the standards set forth in that section; and
4. Establishes a royalty for 2006-2010 for noncommercial entites at 150% of the fee that the service paid for the sound recording royalty during 2004.
5. Requires three studies to be conducted after the initiation of the next royalty proceeding, that will be submitted to the Copyright Royalty Board for their consideration in that case.  One study, by the National Telecommunications and Information Administration ("NTIA"), would study the economic impact of royalties on the competitiveness of the Internet radio marketplace.  A second, to be conducted by the FCC, would study the impact of royalties on local programming, diversity of programming (including foreign language programming), and the competitive barriers to entry into the Internet radio market.  A final study, by the Corporation for Public Broadcasting, would provide information to the CRB on the impact of the royalties on public radio operators. 

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