Noncommercial webcasters are often forgotten in the discussion of the current proceeding to set Internet radio sound recording royalties. But, along with the royalties for commercial webcasters (we wrote about the proposed commercial rates here), the current Copyright Royalty Board proceeding will also set the rates for noncommercial webcasters.  Various proposals for noncommercial royalties have been submitted to the Judges.  In fact, one proposed settlement agreement between SoundExchange and CBI (a group that represents college radio stations) has been submitted to the Judges, and last week that proposed settlement was published in the Federal Register, with a request for comments by November 26.  There are other proposals for noncommercial rates that were submitted by other parties, and we talk about those below. 

Setting rates for noncommercial webcasters is not easy.  Colleges and other schools, public radio and religious organizations usually are not motivated by the kinds of commercial considerations that give rise to evidence submitted under the “willing buyer willing seller” standard applicable to all CRB webcasting royalty decisions.  Thus, the noncommercial rates are often set as an afterthought.  In fact, perhaps because noncommercial rates have been such an afterthought, it has been these rates that have led to the greatest number of appellate issues for the CRB.  The decision on noncommercial rates from the 2006 proceeding was just issued by the Judges after an appellate court remand.  In that decision, the Board upheld the decision from the 2006 case setting the minimum fee for noncommercial broadcasters at $500 for the 2006-2010 proceeding – a decision reached after a remand of the case from the Court of Appeals to the Board following an appeal by IBS, another group of noncommercial broadcasters associated with colleges and other schools.  But let’s look at the proposals for the upcoming case, and compare them to the rates currently in effect.

The CBI/SoundExchange settlement proposal is very similar to a deal that these two groups currently have in place covering the period 2011-2015, a deal that was ultimately adopted as the default noncommercial rates by the CRB.  Under the existing deal, noncommercial webcasters pay $500 a year for up to 159,140 monthly aggregate tuning hours of listening (essentially 212 simultaneous listeners).  Under the 2011-2015 rates, above that listening threshold, the webcaster pays on a per song per listener basis, at essentially the same rates as commercial webcasters.  The new deal that is now subject to comments is much the same as the old, only there is no provision for any listening above the 159,140 limit.  Instead, the colleges who enter into the deal are required to work to limit their streaming to stay below those listening limits.

While this deal may work for most college broadcasters (and at a recent CBI convention at which I spoke, most attendees appeared to be pretty happy about being able to continue to operate at these rates), there are many other noncommercial webcasters who would not like these deals.  The appeals by IBS have sought lower minimum fees, as they represent smaller colleges and high school stations were, they argue, even the $500 annual base fee is too much money for them. 

On the other end of the spectrum, there are webcasters who don’t necessarily fit in the CBI deal, either because they are not associated with a college or other educational institution, or because their listening is higher than the 159,140 monthly ATH threshold.  NPR affiliates and religious noncommercial webcasters affiliated with the NRB through their noncommercial music licensing committee have in the past worked out separate deals – the NPR deal only for those webcasters with CPB funding, the NRB-NMLC deal open to any nonprofit company willing to accept its terms.    

Under the NPR/CPB deal that is currently in place, CPB pays a lump sum to SoundExchange to cover all stations that receive CPB funding, and reports on the aggregate listening to these stations.  Only when the listening reaches a cumulative threshold does CPB pay any additional fees, and those fees are capped no matter how much listening was done.  A summary of the current CPB deal is available here

The 2011-2015 deal with the NRB-NMLC is structured somewhat like the CBI deal, only the royalties paid by a noncommercial webcaster who exceeds the 159,140 monthly threshold pays a per song, per listener fee that is 1/3 of the commercial rate.  In exchange, recordkeeping obligations kick in at lower listening levels than for CBI webcasters, where there are reporting waivers of various obligations for smaller noncommercial webcasters.  Our summary of the differences between these two existing deals is available here.

In the new proceeding, the proposals for new royalties are vastly different.  SoundExchange proposes a $500 per channel annual fee for the 159,140 hours of monthly listening.  If a service exceeds that level, royalties would be paid at the per song per listener royalty rate that it suggests for commercial webcasters, as follows:

YEAR                        PER PERFORMANCE ROYALTY

2016                            $0.0025

2017                            $0.0026

2018                            $0.0027

2019                            $0.0028

2020                            $0.0029

The NPR proposal for the upcoming term is similar in structure to the deal entered into in 2009, but actually has a lower flat fee payment, as NPR suggests that music usage by its stations was lower than projected in that earlier deal.  The NPR case is available here.  NRB-NMLC proposes flat fee royalties of between $500 and $1500 per channel per year depending on the size of the audience for the channel.  Audience caps for the tiers of flat fees are at levels in excess of the 159,140 that are embodied in the current rules.  The NRB-NMLC proposal is here.

With this range of proposals, there will be many watching the royalty proceeding as it plays out over the next year.  As with the commercial royalties, absent a settlement, we will see a decision on the royalties for noncommercial webcasters set by the end of 2015, to go into effect in 2016.