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.

In 2002, faced with a similar issue when the RIAA and a group of small webcasters with which I worked tried to reach a deal, Congress stepped in and passed the Small Webcaster Settlement Act.  SWSA allowed a settlement to bypass what was then the Copyright Arbitration Royalty Panel (the "CARP") and go into effect simply upon submission of the settlement to the Library of Congress by a set deadline, and the Copyright Office publishing it in the Federal Register.  The Webcasting Settlement Act adopts that same system. If any group reaches a settlement with SoundExchange by February 15, 2009, they need only submit it to the CRB, which will then publish it in the Federal Register, and it will become effective and binding on all copyright holders as part of the statutory royalty. Unlike pre-hearing settlements, no notice and public comment is necessary on this settlement. 

The bill allows for settlements to be entered into for an 11 year period, starting with the end of 2005 when the last set of rates expired.  This would allow the settlement to displace the CRB decision from last year, and eliminate the need for a CRB proceeding for the next 5 years (the current CRB decision is to run through the end of 2010).

But such a settlement must be reached by February 15 ( the date was December 15 in the original draft of the bill, but it seems to have been changed in later versions).  Why wouldn’t the period be unlimited?  Already, there was some unease with the adoption of this bill by broadcasters – as they have argued that they have not been involved in any settlement discussions with SoundExchange in a long period of time.  While that seems to have dissipated, perhaps others would object to an unlimited ability of copyright holders and webcasters to reach a deal without any opportunity to comment on a deal.   Yet why not?  If a group of webcasters and SoundExchange want to enter into a deal that would be available to any similarly situated webcaster, why do you need notice and comment?  If other webcasters don’t like the deal, they can call for a CRB proceeding at the next opportunity to determine a rate for that objecting group.

In any event, the Webcaster Settlement Act makes it easy for settlements to go into effect – now we need to see if the hard part – actually entering into those settlements – will occur.