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The proposals for the royalty rates to be paid by webcasters to SoundExchange for the public performance of sound recordings for 2016-2020 are now on file with the Copyright Royalty Board, and they represent two differing perspectives on the state of the industry and how much Internet radio companies can and should pay to record companies and recording artists.  As we wrote many months ago, the CRB initiated its proceeding to set these royalties back in January, and earlier this month, participating parties, including internet music services and SoundExchange, were required to file their “direct case exhibits” – written witness statements setting out the arguments to justify the proposals of each side, and their proposed royalty rates.  These direct cases (with certain confidential information redacted) are now available on the CRB website. So what are the parties proposing?

SoundExchange provided expert testimony and exhibits from record company executives to contend that there are many new entrants into the streaming industry and that the industry is healthy and growing.  Looking at deals that have been done in the marketplace, including deals for “interactive streaming” (deals negotiated directly between services and copyright holders, and not subject to CRB oversight and review – see our article here), SoundExchange suggests that the royalties should increase from their current rate of $.0023 per performance (e.g. per song per listener).  Their rate proposal is to go from $.0025 in 2016 to $.0029 in 2020. But, in a new wrinkle, they propose that the CRB should adopt a new “greater of” formulation, suggesting that all commercial Internet radio services should pay the greater of the suggested per performance royalty or 55% of revenue related to their streaming.  This greater of formulation is partially justified by SoundExchange based on their witnesses claim that such “greater of’ formulations are common in interactive streaming agreements.
Continue Reading Webcasting Rate Proposals for 2016-2020 Now Public – What Will The Copyright Royalty Board Be Considering in Setting Royalty Rates for Internet Radio?

An Alabama radio station recently received a notice about the new royalty rates that are payable to ReSound, the Canadian equivalent of SoundExchange, a collective set up to receive from webcasters royalties for the public performance of sound recordings and to distribute those royalties to the copyright holders (usually the labels) and the artists who recorded the songs, according to a story in today’s issue of Tom Taylor Now (a radio industry newsletter).  Tom asked me why would a radio station in Alabama get this notice – shouldn’t their payments to SoundExchange take care of the royalties that they owe for their streaming?  In fact, webcasters receiving these notices do need to consider their practices.

The general principle in the Internet world is that a webcaster is liable for paying music royalties for listeners where the listener is located – not where the transmitting entity may be located.  The same principle applies to rights to video and other content made available through the Internet – which is why your US HBO Go or Netflix subscription may not work the next time you visit London or Tokyo and try to watch a movie on your computer in your hotel room.  Rights are usually granted country by country (or sometimes by region), but in many cases rights granted in one country don’t give the Internet service acquiring those rights permission to circulate the content worldwide.  Thus, many large webcasters block their streams outside the US – notably webcasters like Pandora, who pulled their non-US streams back in 2007 (see our article here that we wrote when they took that action, which reminds me how long I have been writing this blog!). 
Continue Reading Why is a US Radio Station Getting a Notice about Webcasting Royalties in Canada? – Why Webcasters Geo-Block Their Streams to Avoid International Music Royalties

As the summer of copyright comes to an end, the music licensing issues which arose causing me to repeatedly write about this extremely contentious season in copyright law are by no means finished (see the most recent of our Summer of Copyright articles here).  In fact, on the first full day of autumn, we received a very interesting decision out of a US District Court in California on the lawsuit brought by Flo and Eddie against Sirius XM, finding that the music service improperly failed to pay royalties for the public performance of pre-1972 sound recordings from the duo’s former band, the Turtles (a copy of the decision can be found in this Billboard article).  As we have written before, Flo and Eddie brought suit against Sirius XM, arguing that the service needs to get permission to make public performances of these recordings and, by not doing so, it violated their California state law copyrights. 

Pre-1972 sound recordings first registered in the US are not covered by Federal law, so the current mechanism for Sirius XM to pay for the digital public performance of sound recordings (paying a royalty, set by the Copyright Royalty Board, to SoundExchange) does not exist.  To the surprise of many (including this author) the Court concluded that there is in fact a public performance right in pre-1972 sound recordings under California state law, and went on to conclude that Sirius XM violated its obligations under the law to pay for the use of music.  This decision, on a summary decision motion, may quite well be appealed.  The issue is also before many other courts, both in California and elsewhere.  But this decision is certainly worth review, as it could have an impact not only on digital services, but also on any other company that publicly performs such recordings – including other digital music services, bars and restaurants, stadiums, and potentially even broadcasters.
Continue Reading Court Rules in Favor of Flo & Eddie in California Suit Against Sirius XM for Public Performance of Pre-1972 Sound Recordings – What Does This Decision Mean for Broadcasters, Digital Media Companies and Other Music Users?

September is one of those few months of the year where there are no regular FCC filing deadlines – no quarterly issues programs lists, no children’s television reports, no annual EEO public file reports, and no ownership reports or renewal deadlines.  For TV stations that recently filed a renewal, or which are about to file one, there are the pre-or post-filing notices.  But for most broadcasters, the one routine regulatory deadline in September (which has, in the past, sometimes fallen in August), is the obligation to pay annual regulatory fees.  But, so far, the FCC has not released the Order officially stating what those fees will be, or the Notice setting the filing deadlines – though we expect these notices any day (perhaps any moment).  As the fees need to be paid before the start of the FCC’s new fiscal year on October 1, expect that those fees will be due at some point before the end of September.

While there are few of these routine filing deadlines in September (though broadcasters should, of course, be preparing for the due date for many of these reports in early October), there are a number of important proceedings with September comment dates, appeal deadlines or other important milestones.  And there is the start of the Lowest Unit Rate window for the November election.  Some of the September deadlines are summarized below.
Continue Reading September Regulatory Dates for Broadcasters – Regulatory Fees, Lowest Unit Rates, and Comments on Multiple Ownership, Online Public File for Radio and MVPDs, Music Licensing and Class C4 FM Stations

As we wrote in our previous articles on the music licensing issues being considered during this summer of copyright (here, here and here), one of the concerns driving many of the proposed reforms is the current demand of songwriters and publishing companies for a larger share of the music royalty pie.  In licensing the public performance of musical compositions, ASCAP and BMI represent the vast majority of songwriters, with SESAC representing far fewer writers (together ASCAP, BMI and SESAC are referred to as the “PROs,” the performing rights organizations).  ASCAP and BMI, having such a significant representation of musical compositions, have for over 50 years been subject to antitrust Consent Decrees that limit their operations and oversee the rates that they set for the use of their music.  Among the many requirements under the consent decree are those that obligate ASCAP and BMI to license all users of music who are similarly situated under the same rates and standards, and the oversight of a “rate court” to determine whether rates are reasonable whenever either of the PROs can’t agree on the amount of those rates with a class of music users.  In June, the US Department of Justice asked for public comment on several aspects of the consent decrees, and whether modifications of the decrees were called for.  Comments on the DOJ notice are due today.  Why was this proceeding started, and what is the DOJ looking at?

In two recent hearings examining music licensing, the motivations for ASCAP and BMI to seek changes in the consent decrees were discussed.  The first proceeding was a Copyright Office roundtable held in Nashville in June, in which I was a participant.  There, representatives of ASCAP discussed potential changes to the laws dealing with music licensing. The second was at the two part House Judiciary Committee hearing on music licensing held in late June.  ASCAP and BMI representatives in these forums suggested that there were several objectives in their seeking these reforms, and several specific changes that were requested in the Consent Decrees.  These include the following:

  • Replacing the rate court judges who determine rates when ASCAP or BMI don’t reach an agreement with a company that uses music (currently US Federal District Court Judges in the Southern District of NY) with an arbitration panel.
  • Instead of setting “reasonable rates” as required under the current consent decrees, the PROs request that a new standard be used to set rates – the willing buyer willing seller standard currently used in setting Internet radio sound recording performance royalty rates.
  • Allow publishers to withdraw some of their compositions from the PROs for licensing to certain classes of companies – specifically to withdraw so that the publishers can negotiate with digital media companies at rates that are not overseen by a rate court, while still leaving those same compositions with the PROs to collect from business establishment services (retail businesses that use “background” music) and potentially over the air radio stations – companies where there are lots of licensees who pay small amounts, making it difficult for anyone but a large, well-established company like ASCAP or BMI to pursue
  • Allow ASCAP and BMI to do more than simply license the public performance rights to music services – most likely allow them to provide reproduction and synch rights to the music that they license.
  • To impose interim royalties on any service that asks to be licensed, until an appropriate rate for that service can be set

What prompted this desire to change the consent decrees, and what will the DOJ be doing with the information it collects?
Continue Reading The Summer of Copyright Part 4 – The Department of Justice Reviews the ASCAP and BMI Consent Decrees – What Should Broadcasters and Music Services Know?

Extensions of time were just announced in two proceedings affecting music licensing – one a Copyright Office proceeding studying music licensing generally, and another a Copyright Royalty Board proceeding on webcasting recordkeeping.  Only a week after announcing that it would take another round of comments on its music licensing study, the Copyright Office announced an …

Time flies, and more regulatory requirements and comment deadlines in regulatory proceedings are upon us in the month of August.  The regular regulatory deadlines include license renewal for TV and LPTV stations in California, and EEO Public Inspection File yearly reports for stations in California, Illinois, North Carolina, South Carolina, and Wisconsin.  Noncommercial TV stations in California and North and South Carolina all have ownership reports on Form 323E due on the August 1, and noncommercial radio stations in Wisconsin and Illinois have ownership report obligations too.  We can also expect that the deadline for submission of Annual Regulatory Fees will be set this month but, as we have not yet heard about that date, the deadline for the fees to be paid may not be until sometime in September.

In addition to the regular filings, there are numerous proceedings in which various government agencies will be receiving comments in proceedings that could impact broadcasters.  Next Wednesday, August 6, the FCC will be taking comments on it Quadrennial Review of the multiple ownership rules. The issues to be considered include the TV ownership rules (including the question of how to deal with Shared Services Agreements) about which we wrote yesterday.  Also to be considered in the proceeding are questions about the radio ownership rules, and the cross-interest rules – including whether to change the newspaper-broadcast cross-ownership rules.  But the FCC is not the only one who will be receiving comments on issues that can affect broadcasters.
Continue Reading August Regulatory Dates for Broadcasters – Renewals and EEO, and Comments on Multiple Ownership, Music Rights, New Class of FM, and Much More

We’ve already written twice about the copyright issues being considered this summer before various agencies and branches of government – all dealing with music licensing issues (see our previous Summer of Copyright articles here and here).  The pattern continues, as the Copyright Office has now requested further comments on music licensing issues, following up on its roundtables held across the country during the month of June to discuss its music licensing inquiry begun in the spring (see our summary of the initial Copyright Office notice on its study, here).  In yesterday’s Federal Register, there is a notice asking a series of questions about specific issues that were raised in the roundtables which the Office apparently finds to be of significance.  Additional comments on these issues, and on any related issues affecting music licensing, are due on or before August 22.

What are the questions being asked by the Copyright Office, and what do they portend for its ultimate recommendations to Congress who, as we recently wrote, is itself considering music licensing issues and the potential for a comprehensive reform of music licensing in this country?  The areas in which the questions are being raised are not new ones, but instead continue the themes raised in other forums this summer.  They include questions as to how withdrawals of major publishers from the Performing Rights Organizations (ASCAP and BMI in particular) could affect those organizations.  We first wrote about potential publisher withdrawals and the impact that could have on music services back in 2011.  Also, on a related question, they ask why, when these organizations have collected record amounts of money in recent years, songwriters are complaining that they are economically struggling.  In addition, questions are asked about the procedures used by the Copyright Royalty Board in their rate-setting process and whether those procedures should be revised, how better identification of musical works and sound recordings could be adopted to make recordkeeping and royalty administration easier, how a system of setting mechanical royalties could work without a statutory license, and whether there are international licensing models that might be adaptable to the US market.  Some details below.
Continue Reading The Summer of Copyright, Part 3 – The Copyright Office Requests Further Comments in its Inquiry on Music Royalties and Licensing

The House of Representatives Judiciary Committee last week finished its second hearing on music licensing (written witness statements and a link to the webcast can be found here).  Congressional hearings usually are not in-depth proceedings looking to establish detailed facts as done in a hearing in a court proceeding.  Instead, they are formalized proceedings where parties get to make their canned statements setting out positions on issues.  Congressional representatives themselves make statements setting out their positions on the issues, and ask pointed questions to selected witnesses to reinforce those positions.  Minds are rarely changed, and the truly undecided are rarely illuminated on the issues.  But the hearings do serve to set out the issues that are going to be considered by the Committee in ultimately crafting legislation.  And last week’s hearing did just that – highlighting the issues likely to be considered in legislation promised by the Committee Chair, Representative Goodlatte, who promised an omnibus bill on music licensing, dubbed the “Music Bus,” to address the many issues on the table.

Note that any bill that is ultimately introduced will address many seemingly minor issues – details of process and procedure that don’t make the headlines.  But the big issues are the ones that will cause the most industry argument before the lawyers work out the details.  It’s also important to note that it is very late in the legislative calendar right now, with the Senate not putting the same emphasis on copyright issues as it the House.  With elections coming up in the Fall, and scheduled upcoming summer recess, Congress has much must-pass legislation that will fill up their legislative days before the next Congress is sworn in in January.  The start of a new Congress means that all legislation will have a fresh start.  Thus, any Omnibus bill that is introduced this year will most likely not become law, but instead will set the agenda for discussions for next year in the new Congress.  Certainly, there may be more limited bills that sponsors may try to get stuck on other legislation that must move before the end of the Congressional session, so interested parties will remain vigilant during the final days of this session of Congress.  But what are the issues that are on the table for inclusion in any Music Bus?
Continue Reading The Summer of Copyright, Part 2 – The House Judiciary Committee Plans Omnibus Music Licensing Bill – The “Music Bus”

July brings a number of new regulatory dates for broadcasters – including the effective dates of two new compliance obligations for small market TV stations, as well as numerous routine regulatory filing dates.  July 10 brings one deadline for all broadcast stations – it is the date by which your Quarterly Issues Programs lists, setting out the most important issues that faced your community in the last quarter and the programs that you broadcast to address those issues, need to be placed in the physical public inspection file of radio stations, and the online public file of TV broadcasters.

Full power TV and Class A TV stations by January 10 also need to have filed with the FCC their FCC Form 398 Children’s Television Reports, addressing the educational and informational programming directed to children that they broadcast.  Also, by that same date, they need to upload to their online public files records showing compliance with the limits on commercials during programming directed to children.  And there are other new obligations for smaller TV stations that are effective this month.
Continue Reading July Regulatory Dates for Broadcasters – New Captioning Obligations, Online Political File for Small TV Stations, Issues Programs List and Children’s Television Reports, and More