Posted on April 19, 2011 by David Oxenford

SoundExchange Claims Credit for Shutting Down Webcaster Who Was Not Paying Royalties

SoundExchange claims on its website that webcaster SWCast.net was shut down when SoundExchange complained to its ISP that the service was not paying royalties for the use of the music played by the site.  SWCast was an aggregator of webcast channels created by other individuals, who paid the company - allegedly for the streaming and for the royalties that were due for that streaming.  According to the SoundExchange press release, the webcaster was shut down when SoundExchange "sent a letter requesting that the hosting ISP disable access to the SWCast site."  SoundExchange's statement says that, despite repeated attempts to engage the webcaster, SWCast neither paid royalties nor filed reports of use for the songs streamed by the service, leading to SoundExchange's action.  As far as we know, this is the first time that SoundExchange has taken such an action. 

How did this work?  While we have not seen the letter that SoundExchange sent to the ISP, we can assume that it alleged that SWCast was infringing on copyrighted materials by not paying the required royalties.  ISPs have a safe harbor under the Digital Millennium Copyright Act, protecting them from liability for the infringement of users of their services, if the ISP does not encourage the infringement, registers an agent with the Copyright Office, and agrees to take down infringing content when properly notified by a copyright holder (see our post here).  We can only assume that SoundExchange or the copyright holders themselves notified the ISP that the material streamed by this webcaster was infringing as no royalties were being paid and, to protect itself, the ISP blocked access to the site.

Does this action reflect a new aggressiveness on the part of SoundExchange?  We have noted before that, from time to time, there seems to be a flurry of collection activity by SoundExchange.  We have heard from several streaming companies that they have recently received notices from SoundExchange inquiring about various compliance issues.  SoundExchange has been staffing up, and they have an attorney on staff whose principal job is enforcement.  Perhaps, with a new President, and with the last webcasting royalty proceeding done but for the appeals, this is a time when SoundExchange feels comfortable enough to act to ensure compliance with its royalty requirements. 

We've summarized the Internet radio royalty rates recently, and reminded webcasters not to forget their minimum fee payments and yearly election requirements.  If you are streaming, this might be a good time to check your royalty compliance to make sure that you are doing all that is expected by SoundExchange.  They may be watching!
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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 January 10, 2010 by David Oxenford

Reminder: Many Webcasters Have to Make Annual Election of SoundExchange Royalty Rates and Minimum Fee Payments By January 31, 2010

Many Webcasters who have elected the the royalty rates set by many of the settlement agreements entered into pursuant to the Webcasters Settlement Act must 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 2006-2010.  January 31 is an important date even for those webcasters who are covered by agreements that don't demand an annual election, as most Internet radio operators must make annual minimum fee payments by January 31.  SoundExchange does not send out reminders of these obligations, so Internet Radio operators must remember to make these filings on their own.  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 need not meet 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, Noncommercial Educational webcasters and other noncommercial webcasters all are entered into on a year-by-year basis.  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 (though note that the SoundExchange website provides for filings by February 1, presumably as January 31 is a Sunday).

The election forms are available on the SoundExchange website, though they are not easy to find. The forms that must accompany the annual minimum fees are also on the SoundExchange website.  Note that in some cases there are forms that cover both webcasters who paying under a particular settlement, as well as under the special provisions for small entities that are covered by these same agreements (e.g. Small Pureplay webcasters file a different form than other Pureplay Webcasters even though both are governed by the same agreement.  Similarly Small Broadcasters file a form different than other broadcasters, though both are covered by the same agreement).  These forms can be found at the links below.  Click on the name of the category of webcasters for a link to our article that summarizes the particular settlement, the minimum fees required, and the qualifications for small webcasters under that deal (if there is such a provision):

Note that there is no specific form for NPR affiliates covered under the NPR settlement, as an organization set up by the Corporation for Public Broadcasting handles all payments and SoundExchange filings.  Other companies providing Internet radio services need to pay attention to these dates - and file the necessary papers and make the required payments by the upcoming deadline. 

Update - 1/15/10 - After posting this entry, I learned that SoundExchange has in fact been sending reminder notices about minimum fees to webcasters who have previously paid royalties.  This obviously does not help new services, or other services that may have overlooked their obligations in 2009, but it does show that SoundExchange is developing the infrastructure of other performing rights organizations to better keep in contact with their "customers."  Note that these notices came by regular mail several weeks ago, so some may have overlooked or forgotten about them.  And, as with most other filing obligations, the failure to receive a reminder is not an excuse to miss the filing deadlines described above.  So pay attention to these obligations. 

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Posted on October 13, 2009 by David Oxenford

Copyright Royalty Board Requires Census Reporting for All Webcasters Except for Small Broadcasters

The Copyright Royalty Board has ordered that most digital music services provide "census reporting" of all songs played by their service, along with other information including the number of listeners who heard each song each time it was played.  The decision, published in the Federal Register today, is a follow up to the Notice of Proposed Rulemaking about which we wrote here, proposing this new permanent rule to replace the interim requirements that required that digital music services provide that information for two weeks each quarter.  The only exception to the new obligation was for "small broadcasters" - i.e. those broadcasters who are only obligated to pay the minimum $500 annual royalty. These small broadcasters will continue to report on the songs that they play for only two weeks each quarter.

The new general rule requiring census reporting applies to all digital music services that pay royalties to SoundExchange for the public performance of sound recordings. However, the obligations set out in this general rule do not replace different rules that may be contained in settlement agreements entered into between services and SoundExchange.  Settlements with recordkeeping exemptions include the broadcaster settlement (summarized here), which give stations the ability to exclude some of their tuning hours from the census reporting requirements that were included in that settlement, and the noncommercial settlement agreements summarized here.  The CRB decision also excludes those services where per performance reporting is not possible (such as satellite radio services where there is no easy way to count performances). 

For nonsubscription webcasters, the recordkeeping requirements require monthly Reports of Use which must contain information including:

  • The name of the service
  • The type of service (specific categories including broadcast music simulcast, broadcast simulcast of news program, music webcast)
  • The featured artist
  • The name of the song
  • The ISRC Code of the song or, instead of the ISRC Code, the following information:
    • Album Title
    • Marketing Label
  • The number of performances of each sound recording

The details of the obligations for webcasters and other digital services are set out in the rules published in today's Federal Register.  These are not easy rules to meet without using one of the commercial services that assist in counting performances.  These services can also assist services in completing the digital reporting requirements set out in the rules.  Digital services that use music should carefully review these rules to make sure that they are following the requirements set out in these rules.  In recent meetings, SoundExchange has indicated that it is going to emphasize reporting requirements, and potentially take action against webcasters who ignore their obligations.  Don't become an example.
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Posted on April 8, 2009 by David Oxenford

Copyright Royalty Board Asks for Further Comments on Costs of Census Recordkeeping for Internet Radio Services

In January, the Copyright Royalty Board asked for comments as to whether it should require "census reporting" of all sound recordings that are used by a digital service subject to the statutory royalty.  This would replace the current requirement that services need only report on the sound recordings used for two weeks every calender quarter.  Most of the comments that were filed dealt with the difficulties of certain classes of webcasters - particularly small webcasters and certain broadcasters - in keeping full census reports of every song that is played by a service, and how many people heard each song.  In a Notice of Inquiry published in the Federal Register today, the CRB asked for further information about the cost and difficulties of such reporting.  Comments on the Notice are due on May 26, 2009, and replies on June 8.

The real issues, as identified by the CRB, were raised by smaller entities that argued that they do not have the ability to track performances.  Especially problematic are stations that have on-air announcers who pick the music that they want to play in real time, and don't run their programming through any sort of automation system or music scheduling software.  Live DJs playing music that they want is a hallmark of college radio, but one that creates problems for tracking performances.  How can a DJ's on-the-fly selection of music be converted to the nice, neat computer spreadsheets required by SoundExchange for the Reports of Use of music played?

Specific questions to which the CRB want a response include:

  • How many small entities would be harmed by full census reporting
  • What the cost impact on these entities would be
  • Is there any means by which they could obtain the ability to track all songs played and the number of listeners to each song, and how much would it cost?
  • How does SoundExchange currently deal with reporting based on ATH rather than the number of performances?
  • How does SoundExchange deal with reports based on playlist information without corresponding listenership data?
  • If there were to be exemptions for smaller entities, what basis should be used for the exemptions?  Revenue?  Just those that are only subject to the minimum royalty fees?  Noncommercial only, or small commercial entities too?
  • How many broadcasters who are streaming do not have automated playlists?  How much would it cost to convert to systems using automated playlists?  Is the lack of automated playlists a creative choice or a financial necessity?

Under the recent settlements with the NAB (see our post here) and with certain small webcasters (see our post here), census reporting is already required for most programming.  The settlement with CPB requires that CPB come up with a record-keeping system.  Thus, the only webcasters now not providing these reports are those that did not settle and are governed by the CRB-imposed royalty rates.  This includes some of the largest pure webcasters, and many small, noncommercial entities not affiliated with NPR and CPB.  Particularly for these small entities, this proceeding may be very important.  So look to file your comments, with details on the costs and alternatives, by May 26. 
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