July 2009

The US Court of Appeals for the District of Columbia Circuit today issued a decision basically upholding the royalty rates set by the Copyright Royalty Board due under Section 114 of the Copyright Act by satellite radio operators for the public performance of sound recordings.  The CRB decision, setting royalties for the years of 2007 to 2012, established rates that grew from 6% to 8% over the six year term. As we explained in our post, here, the Board looked at the the public interest factors set out by Section 801(b) of the Copyright Act, factors not applicable to Internet Radio royalties, in reaching the determination these royalties.  Particularly important was the factor which took into account the potential impact of the royalties on the stability of the businesses that would be subject to the royalty, resulting in a reduction of the perceived fair market value of the royalty from what the board determined to be about 13% of gross revenues to the 6-8% final royalty set by the Board.  The Court upheld the Board’s reasoning, rejecting SoundExchange’s challenge to the decision, though the Court did remand the case to the Board to decide the proper allocation of the royalty to the ephemeral rights covered by Section 112 of the Copyright Act.

What was perhaps most interesting about the Court’s decision was the concurring opinion of one of the three Judges, who stated that the fact that the Board’s judges were appointed by the Librarian of Congress, and not by the President, "raises a serious constitutional issue."   This was the same issue raised by Royalty Logic in challenging the constitutionality of the CRB in the webcasting proceeding (see our posts here and here).  The Judge concurred in the majority decision as none of the parties to the satellite radio case raised the constitutional issue, but this very question was squarely raised in the webcasting proceeding, and thus may well be resolved in the decision on that appeal.Continue Reading Court Upholds Copyright Royalty Board Decision on Satellite Radio Royalties, But Questions Board’s Constitutionality

A settlement under the Webcaster Settlement Act of 2009 was signed today by SoundExchange and a group of webcasters that I represented in the Copyright Royalty Board proceeding to determine the royalty rates for the use of sound recordings by Internet Radio stations for the period from 2006-2010. This agreement is for “pureplay” webcasters, i.e. those that are willing to include their entire gross revenue in a percentage of revenue calculation to determine their royalties. As permitted under the terms of the WSA, this agreement not only reaches back to set rates different, and substantially lower, than those that were arrived at by the CRB for the period from 2006-2010, but also resolves the rates for 2011-2015, relieving webcasters who join the deal from having to litigate another CRB proceeding to set the rates for those years. 

While no deal arrived at under the circumstances in which these webcasters found themselves (a CRB decision that did not set any percentage of revenue royalty rate and would seemingly put these webcasters out of business, the prospect of a new CRB proceeding that would costs significant sums to litigate with no guarantee of success, and with the only other current option being the “microcasters” deal unilaterally advanced by SoundExchange that severely limited the amount of streaming that a webcaster could do and imposed significant “recapture provisions” in the event of a sale of the webcaster’s business) may not be ideal, the settlement does provide significant benefits over any other existing option for any webcaster who qualifies under its provisions. These deal points are set out below.Continue Reading Pureplay Webcasters and SoundExchange Enter Into Deal Under Webcaster Settlement Act to Offer Internet Radio Royalty Rate Alternative for 2006-2015

In three cases released last week, the FCC made clear that its EEO rules, requiring wide dissemination of information about job opportunities at broadcast stations (and cable systems), are not satisfied by solely posting of information about openings on websites.  Instead, the Commission required that additional outreach efforts be undertaken in order to assure that the notice of the job opening reaches all groups within a  community.  The decisions pointed to the FCC’s 2003 Report and Order adopting the current rules which stated that the FCC did not feel that the Internet was sufficiently ubiquitous that they could feel comfortable with on-line postings being sufficient to reach all groups within a community.  In the recent decisions, the FCC staff said that they were not ready to change the determination of the 2003 Commission.

What does this mean on a practical level?  The decisions hold that simply using internal station sources plus on-line postings (in one case website postings plus some combination of walk-ins, industry referrals, and internal postings; in another case  the use of the station’s website, plus employee referrals) were insufficient to assure wide dissemination.  To avoid getting caught in this trap, broadcasters must use some other traditional outreach services (e.g. employment agencies, community groups, educational institutions, and the local newspapers) to assure that they meet the Commission’s wide dissemination requirements. Continue Reading On-line Recruitment Not Sufficient EEO Outreach for the FCC

This week, the FCC announced that it will begin accepting applications for new digital-only LPTV and translator stations in rural areas as of August 25, 2009. Beginning on that date, the FCC will also begin to accept applications for major changes to existing analog and digital LPTV and TV translators in rural areas, and applications for digital companion channels (DCCs) for existing analog stations in rural areas. By "rural areas", the FCC means stations that specify a transmitter site that is located more than 75 miles away from the reference coordinates of the 100 U.S. cities listed in the FCC’s Public Notice. Applications for new analog facilities will not be accepted. This filing opportunity will be on a first-come, first-served processing basis, and mutually exclusive proposals will be resolved by auction.  A copy of the FCC’s Public Notice is available here.

While this window is for new stations, major changes, and DCCs in rural areas, prior to that date all existing LPTV, TV translator, and Class A television stations may wish to review their present options for converting to DTV. The Commission’s Public Notice reminds existing stations that they may file an application for on-channel digital conversion (i.e. flash-cut) at any time. In order to retain processing priority, existing stations are encouraged to file flash-cut applications prior to August 25th, and certainly by January 25, 2010, at which point the FCC will open the door for new digital licensing opportunities on a nationwide first-come, first-served, as discussed below. Continue Reading Filing Opportunity for LPTV and Translator Stations in Rural Areas Commences August 25th; Nationwide Window Opens Jan. 25, 2010