Last Monday, briefs were filed by the parties addressing the motions seeking rehearing of the Copyright Royalty Board’s decision to dramatically raise the royalty rates paid for the use of a sound recording on an Internet radio station.  In its briefs opposing each of the webcasters’ rehearing motions, SoundExchange took a very aggressive position challenging the very right of the webcasters to raise their rehearing points.  Following the filing, SoundExchange issued another press release, quoting its President John Simson, "just because you don’ like the outcome of a fairly played game doesn’t mean that you should ask the referee to order the game to be replayed."  In fact, what the webcasters are really doing is asking for an instant replay review of an alleged winning touchdown.  Webcasters are arguing that the "officials" were mistaken in their initial determination, including arguments that the principal basis of the CRB decision, reliance on a SoundExchange expert witness who derived a model for determining what the royalties for noninteractive Internet radio should be based on what parties pay for music use in the interactive marketplace, was a fundamentally flawed model contradicted by one of SoundExchange’s own expert witnesses in the satellite radio royalty proceeding which is currently underway. 

SoundExchange spent much of its briefs challenging the right of the webcasters to raise their arguments – claiming that the webcasters should have raised their arguments at an earlier stage of the proceeding, that the webcasters’ arguments lacked supporting evidence, and even suggesting that the Broadcasters had breached the "protective order" in the satellite radio proceeding against the use of confidential material when the Broadcasters offered the evidence of the conflicting expert in the satellite radio proceeding.  Each of the webcasting parties amplified their arguments about various aspects of the decision – small webcasters suggesting that the Board should have recognized an "opt-in" category of webcasters who would pay royalties based on a percentage of their total revenue (avoiding many of the issues that the Board found with trying to compute a percentage of revenue for an entity that had multiple business lines), all webcasters challenging the $500 minimum fee per channel, and each arguing that there needed to be an aggregate tuning hour metric on which to compute royalties.  And, as set forth above, most interestingly, there was a fundamental issue raised by the Broadcasters, who discovered that a witness presented by SoundExchange in the CRB proceeding involving the royalties for satellite radio contradicted the premises of the SoundExchange expert in this proceeding on which the Board placed its greatest reliance in reaching its decision.


SoundExchange’s press release also went on to claim that many musicians are "aghast" at the negative reaction to paying a "fair rate" for the use of music by Internet radio operators.  In fact, as many musicians seems to have recognized, these are not fair royalties.  In Friday’s Radio and Internet Newsletter, there are links to two musician websites which dispute the SoundExchange claim that the royalties are good for musicians.   David Byrne, formerly of the Talking Heads, notes in his blog that his own Internet radio station would be hit with substantially higher royalties, and such royalties impede the distribution of new music on the Internet.  And, as we’ve discussed before, the higher royalties may end up with more webcasters engaging in direct negotiations with copyright holders in sound recordings (mostly the record companies), that could result in lower royalties for webcasters, but higher income for record companies as they would not have to share the royalty with musicians, as required by the statutory license set in this case.

There are obviously more considerations at play than any press release would have interested parties believe.