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 August 9, 2009 by David Oxenford

Details of Webcasting Royalty Settlements for Noncommercial Webcasters Including Educational and Religious Internet Radio Operators

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.

For listening above the 159,140 monthly ATH level, a noncommercial webcaster electing the Religious broadcasters deal would pay at the following rates:  

  (i)   2006-2010:

 

             (a)        $0.0002176 per performance; or

(b)        $0.00251 per ATH , except in the case of channels or stations where substantially all of the programming is reasonably classified as news, talk, sports or business programming, in which case the royalty rate shall be $.0002 (.02¢) per aggregate tuning hour;

 

      (ii)        2011-2015:

Year

Per Performance Rate

2011

$0.00057

2012

$0.00067

2013

$0.00073

2014

$0.00077

2015

$0.00083

For large noncommercial webcasters, these rates cut the payments for performances in excess of the 159,140 cap by 2/3 from the rates set by the Copyright Royalty Board in its 2007 decision.  These rates are more in line with the noncommercial rates set under the Small Webcasters Settlement Act, which were in effect prior to 2006 and set rates at 1/3 of the commercial rates for performances in excess of 200 average simultaneous listeners. 

The Educational deal, by contrast, while structured very similarly ($500 per channel minimum and a per performance fee above 159,140 monthly ATH), requires far higher per performance fees.  The fees for performances above the cap are essentially the fees agreed to by the NAB, and which SoundExchange seems to be trying to make the standard for per performance fees that they will use as a benchmark in the upcoming proceeding to set royalties for 2011-2015.  The rates under the Educational deal are deemed precedential (while those under the Religious broadcasters deal are not).  For streaming above 159,140 ATH per month, the Educational webcaster would pay the following per performance rates:

                      Year         Rate per Performance

2011                      $0.0017

2012                      $0.0020

2013                      $0.0022

2014                      $0.0023

                        2015                      $0.0025

With the Educational Webcaster paying 3 times what a noncommercial entity would pay under the Religious Broadcasters deal, why would anyone ever elect the Educational deal?  For one reason - its treatment of recordkeeping requirements for smaller webcasters.  Apparently, recognizing that many schools will have webcasting operations which may receive some degree of listening, but which may not get the large nationwide audiences of some religious or other nationally-focused nonprofit webcasters, the Educational webcasters seem to have traded higher per performance rates above the 159,140 cap to get a bigger break on recordkeeping requirements for smaller webcasters.

Under the Educational Webcaster deal, stations streaming up to 55,000 ATH per month can pay an additional $100 yearly fee to SoundExchange and be exempt from recordkeeping and reporting requirements on the songs that they play.  The $100 fee is supposed to be used by SoundExchange to develop alternate methods of sampling and reporting the music played by these smaller webcasters.  55,000 monthly ATH is approximately 76 average simultaneous listeners 24 hours a day, 7 days a week. 

In contrast, while there is a "Noncommercial Microcaster" option under the Religious Broadcasters settlement which allows for a similar recordkeeping exemption, it applies to stations with up to 44,000 ATH per year, meaning a station can average only 5 simultaneous listeners on a 24 hour a day, seven day a week basis to qualify for the recordkeeping exemption under that deal.

Under both deals, webcasters agree to provide census reporting (reporting to SoundExchange each song played and how many times it was listened to), but only for larger webcasters exceeding the 159,140 ATH per month cap.  Here, again, there is slightly more flexibility for the Educational webcaster, not having to report on the number of listeners for each song, instead only having to report how often the song was played.  Large webcasters under the Religious Broadcasters deal do need to report on the number of listeners (though that information can be provided by ATH rather than on a per performance basis).  Under both deals, webcasters with less than 159,140 need only report for two weeks each quarter.

Parties deciding to elect the Religious Broadcasters deal must do so by September 15.  There is no comparable deadline for the Educational deal, as it covers only the periods after January 1, 2011, except for stations wishing to take advantage of the recordkeeping benefits, which can be elected immediately for 2009, and in January for 2010.  Under both deals, elections must be made every year, by January 31, as to whether or not a webcaster wants to continue to be covered by one of these deals.  The Educational deal is open only to those webcasters who are affiliated with educational institutions.

Thus, there are now two options (in addition to a third option for stations eligible for funding by the Corporation for Public Broadcasting, and to the option the Copyright Royalty Board adopted for 2006-2010 and any option that they may adopt for 2011-2015) for the noncommercial webcaster.  One option provides more recordkeeping breaks for Educational institutions that stream a moderate amount, while the other provides price breaks for the largest noncommercial webcasters.  Read these deals carefully when they are published in the Federal Register, and carefully choose the option that best meets your needs. 
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