The Copyright Royalty Board today published a notice in the Federal Register announcing the start of its next proceeding to set the royalties to be paid by Internet radio operators for the performance rights to use "sound recordings" (a particular recording of a song as performed by a particular performer) pursuant to the statutory royalty. As we’ve written extensively on this blog, the statutory royalty allows an Internet radio station to use any publicly released recording of a song without the permission of the copyright owner (usually the record company) or the artist who is recorded, as long as the station’s owner pays the royalty – currently collected by SoundExchange. In 2007, the Copyright Royalty Board set the royalties for 2006-2010, a decision which prompted much controversy and is still under appeal. In the Notice released today, the CRB set February 4 as the deadline for filing a Petition to Participate in the proceeding to set the royalties for the next 5 year period.
The 2006-2010 royalties are currently the subject of negotiations as the parties to the last proceeding attempt to come to a voluntary settlement to set royalties that are different than those established by the CRB decision. The Webcasting Settlement Act (which we summarized here) gives webcasters until February 15 to reach an agreement as to rates that would become an alternative to the rates that the CRB established. The Act also permits parties to reach deals that are available not only for the 2006-2010 period, but also allows the deals to cover the period from 2011-2016. Thus, theoretically, webcasters could all reach agreements with SoundExchange to establish rates that cover the next royalty period, obviating the need for the proceeding of which the CRB just gave notice. But, as is so often the case, those settlements may not be reached (if they are) until the last minute – so parties may need to file their Petitions to Participate before they know whether a settlement has been achieved.
The Petitions to Participate can be filed either by individual parties interested in participating in the case, or jointly by parties with common interests. Section 351.1 of the CRB rules require specific contact information for the participant, and a statement of the interest of the party filing the request in the proceeding. A filing fee of $150 per petition is also required. In the next month, there may be the formation of various interest groups ready to participate in this next proceeding. These proceedings are long and expensive, so the formation of groups to jointly participate are often the only way for Internet music services can afford to participate in these proceedings.
At the same time, the CRB noticed the start of a proceeding for the royalty for "new subscription services." These services include subscription digital music services not provided over the Internet, and not in existence in 1998 when the Digital Millennium Copyright Act was adopted. Services that were in existence (like the satellite radio services that were authorized by the FCC when the DMCA was adopted and certain cable music services) are referred to as the "pre-existing subscription services" and are not governed by the "willing buyer, willing seller" standard that govern webcasting royalties. These services, unlike Internet radio, cannot measure exact listenership. Services that came later, such as music services provided by XM and Sirius to the satellite television systems, are the "new subscription services." In 2007, they negotiated a 15% royalty to cover the period through 2010. If they cannot reach an agreement on a new rate, they, too, would have to participate in a new proceeding to determine the royalties that they will pay for 2011-2015. The filing date for these services to partipate in the proceeding to set rates is also February 4.
So the fun starts again – get ready to litigate.