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The big news in the music world this week is that Apple finally is able to sell digital downloads of the Beatles catalog in its iTunes music store.  For years, the copyright holders who control the Beatles master recordings have withheld permission to use the Beatles recordings on iTunes and other digital download and on-demand streaming services, seemingly afraid of diluting the value of their copyrights.  There are other bands who have had a similar reluctance to make their recordings available on-line.  While this impasse has now been broken by the biggest name among these digital holdouts, at least as to iTunes, some have asked why it is that the Beatles were never missing from Internet radio, while they were absent from these other services.  The answer is the statutory license under which Internet Radio operates.

While there have been many disputes over the royalties that have been imposed under the statutory license created by Congress which allow non-interactive digital music companies to use sound recordings to provide music to their customers, there is no question that the license has fulfilled one of its primary functions – making sure that there is access by Internet radio operators to the entire catalog of sound recordings available in the United States.  One of the principal reasons that the statutory license was created was the inherent difficulty, if not the impossibility, for a radio-like digital service operating under the sound recoding performance royalty first adopted in 1995 to secure permission from all of the copyright holders of all of the music that such services might want to use.  Thus, Congress adopted the statutory license which requires the copyright holder to make available its sound recordings to non-interactive services, in exchange for the service agreeing to pay a statutory royalty – the royalty now set by the Copyright Royalty Board.  But only non-interactive services, where listeners cannot select the songs that they hear, are covered by that statutory royalty (see our summary here of one of the cases dealing with the question of what is and what is not a non-interactive service).Continue Reading Apple iTunes Gets the Beatles – Why Internet Radio Had Them All Along

The Copyright Office has just released a Notice of Inquiry asking whether Federal protection should be extended to sound recordings recorded prior to 1972.  A sound recording is a song as recorded by a particular artist.  Sound recordings were first protected under Federal law in 1972.  Prior to that, unauthorized recordings or reproductions of an artist’s recoding were policed under various state criminal and civil law.  While the Copyright Act has provided for the protection of pre-1972 sound recordings first registered in other countries, US sound recordings recorded prior to 1972, have not received Federal copyright protections.  Many have assumed that this also exempts pre-1972 sound recordings from royalty requirements under Section 114 of the Copyright Act – i.e. the royalties paid by Internet and satellite radio and other digital music providers under the statutory license.  How would a change in the law affect Internet radio operators?

That is one of the questions that is asked by the Notice of Inquiry.  Many Internet radio operators have not excluded pre-1972 recordings from royalty payments based on any exception that may exist for pre-1972 sound recordings, as the possibility has not been widely publicized.  Moreover, some copyright holders have suggested that the digitization of older songs may somehow bring pre-1972 recordings under the coverage of the Copyright Act, or that there may be state remedies that are somehow the equivalent of the Federal public performance right.  Others may just not want to go to the trouble of determining which copyrighted songs are subject to the Uruguay Round Agreements Act (making the non-US pre-1972 sound recordings subject to US Federal law).  The Copyright Office’s Notice of Inquiry asks what impact the inclusion of pre-1972 sound recordings would have on many undertakings – including the archiving and restoration of sound recordings, and on the current benefits that copyright holders and others enjoy under state laws.  In addition, it asks about the benefits and issues that would arise under Section 114 of the Copyright Act – the section that sets out the statutory license under which most Internet radio companies operate.Continue Reading Copyright Office Asks if Federal Protection Should be Extended to Pre-1972 Sound Recordings – What’s the Impact on Internet Radio?

The NAB Radio Board today voted to adopt a Terms Sheet to offer to the musicFirst Coalition which, if agreed to by musicFirst and adopted by Congress, will settle the contentious issue of whether to impose a sound recording performance royalty (the "performance tax") on over-the-air broadcasters.  If adopted, that will mean that broadcasters in the United States, for the first time, will pay a royalty to artists and record labels, in addition to the royalties paid to ASCAP, BMI and SESAC that go to the composers of the music.  What does the Term Sheet provide, and what will this mean for broadcasters, webcasters and others who pay music royalties?

The Term Sheet sets out a number of points, including the following:

  • A 1% of gross revenue sound recording royalty to be paid to SoundExchange
  • A phase-in period for the 1% royalty, that will be tied to the number of mobile phones that contain an FM chip.  A royalty of one-quarter of one percent would take effect immediately upon the effective date of the legislation adopting it.  The royalty would rise in proportion to the number of mobile phones with enabled FM chips.  Once the percentage of phones with FM chips reached 75%, the full royalty would take effect.
  • The 1% royalty could only be changed by Congressional action.
  • The royalty would be lower for noncommercial stations and stations with less than $1.25 million in revenue – from a flat $5000 for stations making between $500,000 and $1.25 million in revenue down to $100 for those making less than $50,000 per year.
  • Broadcasters would also get a reduction in their streaming rates – but only when FM chips in mobile phones exceed 50% penetration.  The reduction would be tied to the rates paid by "pureplay webcasters" (see our summary of the Pureplay webcasters deal here), but would be set at a level significantly higher than pureplay webcasters, rising from $.001775 in 2011 (if FM chips were quickly deployed) to $.0021575.
  • Future streaming royalties would not be set by the Copyright Royalty Board but by a legislatively ordered rate court – presumably a US District Court similar to that which hears royalty disputes for ASCAP and BMI.
  • An acknowledgment by AFTRA that broadcasters can stream their signal on the Internet in their entirety – apparently agreeing to relieve broadcasters from any liability for the additional amounts due to union artists when commercials featuring union talent are streamed
  • An agreement that broadcasters can directly license music from artists and reduce their  liability for the new royalty by the percentage of music that the broadcasters is able to directly license
  • Agreements to "fix" issues in Sections 112 and 114 of the Copyright Act in making the provisions of these laws regarding ephemeral copies and the performance complement consistent with the waivers that major record labels gave to broadcasters when the NAB reached its settlement with SoundExchange on streaming royalties last year.  See our post here on the provisions of those waivers.
  • musicFirst would need to acknowledge the promotional effect of radio in promoting new music, and would need to work with radio in attempting to secure legislation mandating the FM chip in mobile phones.

[Clarification – 10/26/2010 – Upon a close reading of the Terms Sheet, it looks like the phase in of the 1% royalty and the delay in the streaming discount only kick in if Congress does not mandate active FM chips in cell phones.  If the mandate is enacted, then the full 1% royalty and streaming discount is effective immediately. Given the opposition of much of the wireless industry to a mandated FM chip, this may represent a recognition that the legislation requiring the active FM chip will not be enacted in the near future]

What does this all mean?Continue Reading NAB Radio Board Adopts Proposal for Settlement of Performance Tax Issue – Where Do We Go From Here?

Dave Oxenford this week conducted a seminar on legal issues facing broadcasters in their digital media efforts.  The seminar was organized by the Michigan Association of Broadcasters, and originated before a group of broadcasters in Lansing, but was webcast live to broadcasters in ten other states.  Dave addressed a variety of legal issues for broadcasters in connection with their website operations and other digital media platforms.  These issues included a discussion of service marks and copyrights, employment matters, music on websites, the use of social media, privacy, and sponsorship disclosure.  The slides used in the Lansing presentation are available here.    During the seminar, Dave also mentioned that stations with websites featuring user-generated content, to help insulate themselves from copyright infringement that might occur in the content posted to their website by their audience, should take advantage of the registration with the Copyright Office that may provide safe harbor protection if a station follows the rules and takes down offending content when identified by a copyright holder.  The Copyright Office instructions for registration can be found here.   

One of the most common issues that arise with radio station websites is the streaming of their programming.  In August, Dave gave a presentation to the Texas Association of Broadcasters providing  a step-by-step guide to streaming issues, with a summary of the royalty rates paid by different types of streaming companies.  That summary to Internet Radio issues is available here.  Additional information about use of music on the Internet can be found in Davis Wright Tremaine’s Guide to The Basics of Music Licensing in a Digital Age.   Dave also presented this seminar at the Connecticut Broadcasters Association’s Annual Convention in Hartford on October 14.Continue Reading David Oxenford Conducts Webinar for State Broadcast Associations on Legal Issues in the Digital Media World – Including a Discussion of Ephemeral Copies of Sound Recordings

Broadcasters have a host of other legal issues that they should consider in connection with their digital presence.  At last week’s Maine Association of Broadcasters Annual Convention in Bangor, Dave Oxenford addressed these issues, including service marks and copyrights, employment matters, music on websites, the use of social media, privacy and sponsorship disclosure.  A copy of Dave’s presentation on the Legal Issues…

So you want to start streaming your radio station on the Internet?  Or maybe you want to start a whole new Internet radio station.  In a session at last week’s Texas Association of Broadcasters Annual Convention in Austin, Dave Oxenford talked about the legal considerations starting an Internet radio station, while Chris Dusterhoff…

David Oxenford, Bob Corn-Revere, David Silverman, Brendan Holland, and others from Davis Wright Tremaine’s media and communications practice will be in Las Vegas, Nevada from April 10-15 for the 2010 NAB Show.  The NAB convention is an annual event and a focal point for engineering, legal, and business issues for the broadcasting and greater media worlds.  Bob Corn-Revere will be speaking at the American Bar Association Conference, Representing Your Local Broadcaster, on April 11, on a panel on new technology and the dangers it poses for journalists reporting from disaster areas or other scenes where immediate verification of information is not possible – the panel is called:  "Clear and Present Danger, Guiding Journalists Through the Catastrophic Perils."  David Oxenford, on the morning of April 12, will be speaking at the NAB Show on a panel called, "Copyright Licensing: Seeking a Bridge Over Troubled Waters", a panel dealing with the proposed broadcast performance royalty, streaming fees, the current ASCAP and BMI negotiations, and other copyright issues that arise in day-to-day operation of a broadcast station.  Dave will also be moderating a panel at the Radio and Internet Newsletter’s RAIN Internet Radio Summit, to be held in conjunction with the NAB Show, at the Renaissance Hotel on April 12.  Be sure to join us at these and other events in Las Vegas.

To help you attend the Show, we have been offered some discounts and free admissions for our readers.  The RAIN Summit, Internet Radio’s main event, has offered readers of the Broadcast Law Blog a 30% discount on admission to the conference.  That conference includes a full day of discussion of Internet radio topics, and will feature many of the industry’s biggest names.  From past experience, this always a great event with much great information, important for anyone with any interest in Internet radio and digital media.  The Summit features great networking opportunities, with a box lunch and post-conference reception.  An Exhibit Hall pass to the NAB Show is also included for RAIN attendees

For those not interested in Internet radio, we can still get you into the NAB Show’s Exhibit Hall – for free!  The NAB has offered our readers free access to the Exhibit Hall at the show. This free Exhibits-Only pass includes:

  • Access to the Exhibit Hall at the Show
  • Access to the Opening Keynote and State of the Industry Address
  • Access to Info Sessions on the Convention floor
  • Content Theater and Destination Broadband Theater

To find out how to register for these discounted offers, click on the Continue Reading link below.Continue Reading DWT Going to Las Vegas for the 2010 NAB Show – Discounts for RAIN Internet Radio Summit and Free Passes to NAB Exhibits and Keynote Available for Our Readers

In recent weeks, SoundExchange has begun to send letters to broadcasters who are streaming their signals on the Internet without paying their SoundExchange royalties.  Despite all of the publicity about Internet radio royalties and the controversy about the rates for those royalties, there still seem to be webcasters unfamiliar with their obligations to SoundExchange.  As we have written many times, SoundExchange collects royalties for the public performance of the "sound recording", a song as recorded by a particular artist.  Those royalties, which are charged only to digital media companies like Internet radio, satellite radio and digital cable radio, are paid half to the copyright holder in the recording (usually the record company for most popular songs) and half to the performers on the recording.  These royalties are paid in addition to the royalties paid to ASCAP, BMI and SESAC for the public performance of the musical work – the underlying musical composition, the words and music of a song – money that is paid to the composers of that musical work.  So just paying ASCAP, BMI and SESAC is insufficient to cover your streaming operations when music is being used. 

While these royalties have been law since 1998, and have been set by decisions first by a CARP (Copyright Arbitration Royalty Panel) in 2003, and then by the Copyright Royalty Board in 2007, it seems like some companies still have not gotten the message about the obligations to pay these fees.  Thus, in the last few weeks, SoundExchange has been sending out letters to companies that have not been paying.  The letter are not particularly threatening – instead pointing out the obligations that companies have to pay the royalties, and asking if the webcaster may be paying under some corporate name that is not readily apparent from the website.  The letter also points the webcaster to the SoundExchange website for more information.  Finally, it notes that SoundExchange represents the copyright holders for collections purposes, and notes that nothing in the polite letter waives any rights that those holders have to pursue actions for failure to pay the royalties – in other words to sue for Copyright infringement.   So, gently, webcasters are reminded to pay their royalties or risk being sued for copyright infringement, with potential large penalties for playing music without the necessary licenses.Continue Reading SoundExchange Sending Reminders to Broadcasters Who Are Not Paying Royalties for Streaming Music Sound Recordings

In the last two weeks, David Oxenford has, at two different conferences, moderated panels on digital music rights and licenses.  At the Digital Music Forum East, in New York City on February 25, 2010, his panel focused on rights and licenses generally, featuring panelists from SoundExchange, BMI, the Harry Fox Agency, Rightsflow and MediaNet. …

In one more indication that the Broadcast Performance Royalty (or "performance tax" as opponents of the legislation call it) is not dead yet is an article in yesterday’s New York Times reviewing the issues at stake in the proceeding.  What was perhaps most interesting about that article was the fact that it appeared only one page away from an article about Internet Radio service Pandora, and a discussion of how that hugely popular service was almost driven out of business by music royalties set by the Copyright Royalty Board in their 2007 royalty decision.  The article about the broadcast performance royalty mentions that one of the difficulties in assessing the impact of the proposed royalty is that no one knows how much it will be, as it would be set by the Copyright Royalty Judges on the CRB.  Yet the Times makes no mention of the controversy over the previous decisions of the Board in the context of the Internet radio royalties, and how such royalties almost impacted services such as Pandora.  

How much would the proposed royalties on broadcasters be?  We have written before on that subject,here.  Under previous decisions using the "willing buyer, willing seller" royalty standard which is set out in the legislation that has passed House and Senate Judiciary committees dealing with this issue, the lowest royalty for the use of music in any case before the CRB has been 15% of gross revenues.  Even using a standard seemingly more favorable to the copyright user (the 801(b) standard that assesses more than the economic value of the music but also looks at the impact that the royalty would have on the stability of the industry on which it is imposed), the royalties have been in the vicinity of 7% of gross revenues for both satellite radio and digital cable radio, the two services that are subject to royalties set using the 801(b) standard.  This is more than broadcasters currently pay to ASCAP, BMI and SESAC – rates which are also currently the subject of proceedings to determine if these rates should be changed (see our posts here and here).   Continue Reading Proposed Broadcast Performance Royalty Back in the News – Where is It Going?