Monday was the deadline for the filing of Motions for Rehearing of the decision of the Copyright Royalty Board decision on Internet radio music royalties for 2006-2010. As we have written before, the decision proposes significant increases in the royalties, particularly for independent webcasters who have up to now paid royalties on a percentage of revenue basis, rather than on the per song per listener basis set out in the CRB decision. In motions filed today, many of the webcasters challenged specific aspects of the CRB decision. And at least one party raised an issue that seems to contradict the very foundation of the Board’s decision. Plus, in virtually all of the rehearing motions, the parties noted that additional issues may be raised on appeal to the US Court of Appeals, which do not need to be filed for several weeks.
In the Motion filed by the Broadcasters’ group, it was argued that an expert witness offered by SoundExchange in the proceeding which is now underway to determine royalty rates for satellite radio contradicted some of the basic assumptions used by SoundExchange’s witness in this proceeding. If the assumptions used by SoundExchange’s expert in the satellite proceeding were to be applied in this case, the royalties would actually decrease from those that were in effect before the Board’s decision. The assumptions used by the expert in the satellite proceeding seemed to confirm the claims offered by the webcaster’s witnesses in this proceeding. Could this be a smoking gun that could undermine the decision of the Board? We’ll have to see if the Board accepts this new evidence which seems to challenge the very foundation of the webcasting decision.
As the appeals are addressed to the CRB itself, asking that it reconsider or review its own decision, most of the other issues focused on limited matters that the parties thought that the Board might want to clarify as to avoid unintended consequences. For instance, the appeals of the DiMA group, representing large webcasters, and the appeal that I worked on for the small commercial webcasters, both addressed the issue of the $500 per channel minimum fee which, if it was to be paid on literally every unique channel streamed by a service, could mean that some webcasters could pay hundreds of thousands or even millions of dollars as a minimum fee. Some webcasters (like Pandora) serve up a unique stream for every listener. Virtually all of the parties also addressed the question of whether most webcasters could even compute a royalty based on a per song per listener basis. This is especially true for retroactive payments, when many webcasters did not keep such records (especially those small commercial webcasters paying on a percentage of revenue basis, or noncommercial webcasters who had payed on a flat fee basis).
The small webcasters also asked the Board to reconsider its decision not to recognize a class of small webcasters that would pay royalties based on a percentage of revenue. As the small webcasters are pure webcasters whose whole business is predicated on webcasting, they could pay royalties on their entire revenue, negating some of the bases for the Board’s refusal to adopt a percentage of revenue royalty.
SoundExchange itself asked that the Board make clear that the royalties apply not only to Internet transmissions, but also to transmissions that may be received over a cell phone. SoundExchange contended that the Board’s decision was clearly meant to encompass such transmissions, but some language in the rules that were adopted appeared to raise questions about whether mobile phone transmissions were covered.
The process for considering these motions is not clear under the Board’s rules. So we’ll see when the Board rules on these motions, and what is next for the Internet radio industry.