The question of when a digital music service is “interactive” and therefore requires direct negotiations with a copyright holder in order to secure permission to use a sound recording is a difficult one that has been debated since the Digital Millennium Copyright Act was adopted in 1998. In a decision of the Second Circuit Court of Appeals released today, upholding a jury decision in 2007, the Court concluded that Yahoo’s Launchcast service (now operated by CBS) is not so “interactive” as to take it outside of the statutory royalty despite the fact that the service does customize its music offerings to the tastes of individual listeners. To reach its decision, the Court went through an extensive analysis of both the history of the sound recording copyright and of the details of the criteria used by Launchcast to select music for a stream sent to a specific user. By determining that the service is not interactive, the service need only pay the SoundExchange statutory royalty to secure permission to use all legally recorded and publicly released music.  Had the service been found to be interactive within the meaning of the statute, the service would have to negotiate with each sound recording copyright holder for each and every song that it wanted to use on its service to get specific rights to use each song – potentially resulting in hundreds of negotiations and undoubtedly higher fees than those paid under the statutory license.

The issue in the case turned on an analysis of the DMCA’s definition of an interactive service.  The statute defines an interactive service as one where a user can select a specific song or “receive a transmission of a program specially created for the recipient.” It is clear that Launchcast did not allow a user to request and hear a specific song.  But, by specifying a genre of music, and by specifying favorite artists and songs and rating other songs played by the service, a listener could influence the music that was provided to it.  Was this ability to influence the music sufficient to make it an “interactive service” and thus take it out of the coverage of the statutory royalty?

Continue Reading Court of Appeals Determines that Launchcast is Not an Interactive Service – Thus Not Needing Direct Licenses From the Record Labels

The Commission today announced the agenda for its August 27, 2009 FCC Open Meeting.  The agenda contains two Notices of Inquiry involving Wireless Telecommunications matters, as well as a Notice of Inquiry Notice of Inquiry about protecting American consumers by ensuring sufficient access to information about communications services.  The first of the Wireless NOIs seeks input regarding the factors that encourage innovation and investment in wireless services and aims to identify concrete steps the Commission can take to support and encourage further innovation and investment in the area, while the second solicits info for the FCC’s next annual report to Congress on the status of competition in the mobile wireless market.  A copy of the agenda is available here.

So there are no proposed orders on deck for adoption and no radical agenda items at this month’s meeting, but rather a few new proceedings as the new Commission starts to get its sea legs.  We’ll see if September brings any Media issues to the table.  As we’ve written earlier there are plenty already in the pipeline. 

The FCC yesterday issued another in its series of EEO random audit notices, asking that approximately 170 radio stations nationwide provide information about their hiring practices.  Information requested includes the last two years worth of broadcast EEO Public File reports, plus more complete documentation of the efforts outlined in the Public File reports and demonstrating that the information provided in the annual report was really conducted and accurately reported.  In addition, the FCC asks that a station provide an explanation if their most recent EEO public fie report cannot be found on the Station’s website.  The FCC’s Public Notice about this audit, which lists the stations that must respond, can be found here.  That Public Notice also reminds broadcasters of the obligation to post the EEO public file report on the station’s website, perhaps indicating that the FCC has been investigating and has found instances where this is not being done.  Responses to the audit must be filed by September 21.  A form of the EEO audit letter is available here. 

On the same day as the FCC issued this audit for radio stations, it issued a Public Notice to remind Multi-Channel Video Programming Distributors (MVPDs) with six or more full-time employees, including cable systems, of their obligation to file by September 30 their Annual EEO Program Reports on FCC Form 396-C .  This form is to be filed through the FCC’s electronic filing system.  This notice also reminds certain cable systems of the need to submit supplemental information about their hiring efforts to the FCC. 

Continue Reading FCC Announces New Round of EEO Audits for Radio Stations; Reminds Broadcsters of Requirement to Post Annual EEO Public File Report on Station Website, and Cable Companies of Obligation to File EEO Program Annual Report

The FCC has announced the due date for their Annual Regulatory Fees – September 22.  We wrote about the amount of those fees here, and have just published an advisory summarizing some of the filing details.  Our Davis Wright Tremaine Advisory on these fees is available here.  Being even one day late with the payment of these fees can result in a penalty late fee of 25% of the amount due – a stiff penalty for being even a little late.  So read the advisory, review the FCC’s instructions in the notices that the Commission is now sending to broadcasters, and check out to the links that the FCC’s website information that are available through the advisory – and then pay what you owe on time!

The four settlement agreements between SoundExchange and different groups of webcasters were published in the Federal Register today, setting the dates by which Internet radio operators need to opt into the terms of certain of these deals by filing a Notice of Election with SoundExchange.  The deals each have different opt in dates, so it does get confusing.  For larger webcasters interested in taking advantage of the rates set by the Sirius XM deal (which we summarized here), their notice must be filed on this form with SoundExchange within 15 days.  For noncommercial webcasters wishing to take advantage of the deal struck with the Northwestern College on behalf of Religious Broadcasters, but open to any noncommercial webcaster (a deal we summarized here), the option to be included in this deal must be made by an existing webcaster by September 15 (on this form for most noncommercial webcasters, but on this one, and similar forms for 2006 – 2008, for those eligible for the microcaster provisions).  Noncommercial webcasters affiliated with educational institutions who want to take advantage of the record-keeping breaks contained in that Noncommercial Educational deal, also summarized here, apparently need not submit a form until it pays its minimum fee for 2010, but the end of January.  As the fourth deal, with the Corporation for Public Broadcasting, does not even affect periods until 2011, affiliated stations need not file a notification with SoundExchange at this time, though CPB may have its own opt-in requirements for its member stations.

As we’ve written before (here and here), these deals are on top of the Pureplay settlement, summarized here, where an Internet radio station can still opt in by submitting this form by August 17 (or a small pureplay webcaster can file this form by that same date).  Broadcasters have had their own settlement (summarized here and here), where the opt in dates have passed, as have the dates for opting into the  "microcasters" deal for small commercial webcasters (see our summary here).  New stations just launching have the option to select from any of these alternative rate structures.  It is a confusing jumble of regulations that a webcaster needs to carefully sort through to determine which set of rates would best fit their own business model.  Read these deals carefully, as all have details that must be observed to insure full compliance.

The FCC today asked for public comments on the petition of the MusicFirst Coalition asking the Commission to take action against broadcast stations who did not fairly address on air the proposed sound recording public performance royalty for terrestrial radio.  The Petition, about which we wrote here, alleges, with very few specifics, that some radio stations have taken adverse actions against musical artists who have spoken out in support of the royalty, and also that stations have refused to run ads supporting the performance royalty while running their own ads opposing the royalty (opposing ads which MusicFirst claims contain false statements).  MusicFirst submits that these actions are contrary to the public interest.  The FCC has asked for comment on specific issues raised in the Petition.  Comments are to be filed by September 8, and Replies on September 23.  

The specific questions on which the FCC seeks comment are as follows:

(i)      whether and to what extent certain broadcasters are “targeting and threatening artists who have spoken out in favor of the PRA, including a refusal to air the music of such artists";

(ii)    the effects of radio broadcasters’ alleged refusal to air advertisements from MusicFIRST in support of the PRA;

(iii)   whether and to what extent broadcasters are engaging in a media campaign, coordinated by NAB, which disseminates falsities about the PRA; and

(iv) whether certain broadcasters have evaded the public file requirements by characterizing their on-air spots in opposition to the PRA as public service announcements.

 While we were concerned about the fact that the Commission is seeking these comments potentially indicating that the FCC might feel that the broadcaster has some obligation to address all sides of all controversial issues, implying that there is life in some vestige of the Fairness Doctrine, we were heartened by the FCC’s acknowledgment of the First Amendment issues that the petition raises.  The Commission stated:

We recognize that substantial First Amendment interests are involved in the examination of speech of any kind, and it is not clear whether remedies are necessary or available to address the actions alleged by MusicFIRST.

 

Continue Reading FCC Asks for Comment on MusicFirst’s Petition Against Broadcasters for On-Air Activities Opposing Radio Performance Royalty

The Corporation for Public Broadcasting has entered into a settlement with SoundExchange extending their current agreement on Internet Radio royalties for "Public" radio stations through 2015.  The previous deal, about which we wrote here, covered the period from 2006 to 2010.  This new agreement picks up in 2011 and covers included stations through 2015.  As in the previous deal, the new agreement has a payment by CPB to SoundExchange satisfying all royalties for all of the covered stations.  This was the fourth agreement that was announced last week, about which we wrote here, although details of this deal had not previously been released.  We have written about the other deals entered into under the Webcaster Settlement Act of 2009 ("WSA"), including the deals with Sirius XM (here) and with other noncommercial webcasters (here). 

This agreement covers stations affiliated with NPR, American Public Media, Public Radio International, and the Public Radio Exchange. CPB will pay to SoundExchange $2,400,000 in five yearly installments, covering up to 490 public radio stations in the first year, and up to 10 additional stations per year thereafter (up to 530 in 2015).  The fee is also subject to adjustment if all of the covered stations exceed certain listening levels.  Those levels, and the required true-up for performances in excess of the caps, are set out below.  However, the CPB payments for excess performances are limited to a total of $480,000 over the 5 year period of the Agreement:

Year              Music ATH Cap              Per Performance Rate

2011                279,500,000                         $0.00057

2012                280,897,500                         $0.00067

2013                282,301,988                         $0.00073

2014                283,713,497                         $0.00077

2015                285,132,065                         $0.00083

Continue Reading SoundExchange and Corporation for Public Broadcasting Settlement on Internet Radio Royalties for 2011-2015

Noncommercial webcasters were provided with two royalty options under settlements reached with SoundExchange pursuant to the Webcaster Settlement Act of 2009 ("WSA").  One settlement was with Noncommercial Educational Webcasters.  The other, when announced, was characterized by SoundExchange as being a settlement with noncommercial religious broadcasters, though it applies to any noncommercial webcaster who elects to be subject to its terms.  As set forth below, except for certain mid-sized noncommercial webcasters who have more forgiving recordkeeping options under the Educational deal, it would seem that the settlement with the religious broadcasters provides far more advantageous terms, and it also reaches back to cover the period from 2006 through 2010.  The Educational webcasters agreement covers only the rates for the periods from 2011-2015.  These settlements provide another example of the issue raised before the Senate Judiciary Committee of the arbitrary nature of the precedential nature that will be accorded to WSA settlements in future webcasting proceedings.  The noncommercial agreement with significantly higer prices has been accorded precedential weight in future CRB proceedings, while the one with lower rates is, by its terms, not precedential in future proceedings.

It is easiest to start with a review of the ‘Religious" broadcaters settlement (which, as we said above, is open to any noncommecial webcaster).  The agreement provides for a $500 per channel fee for each channel or stream offered by the noncommercial webcaster.  For that flat fee of $500 per channel, the webcaster can stream up to 159,140 monthly aggregate tuning hours of programming on each stream.  An Aggregate Tuning Hour ("ATH") is one hour of programming streamed to one person.  Thus, if you have 2 people who each listen for an hour, you would have two aggegate tuning hours.  A station with 2 listeners who each listen for half an hour would have one ATH of listening.  4 listeners for 15 minutes each would also add up to one ATH.  The 159,140 monthly ATH number represents listening of approximately 221 average simultaneous listeners 24 hours a day, 7 days a week.  If a webcaster exceeds this listening level, it must pay for excess listening on a per performance (per song per listener) basis, at the rates set out below.

Continue Reading Details of Webcasting Royalty Settlements for Noncommercial Webcasters Including Educational and Religious Internet Radio Operators

The recent settlement on Internet radio royalties between Sirius XM Radio and SoundExchange provides yet another option for commercial webcasters trying to determine the royalties to be paid for the public performance of sound recordings.  While the settlement is signed by just these two parties, it will be published in the Federal Register and be available for all commercial webcasters who comply with its terms – which will essentially be any webcaster who is not a "Broadcaster" as defined in the NAB Settlement, about which we wrote here.  As set forth below, the royalty rates available under this settlement are slightly lower for 2009 and 2010 than those set by the Copyright Royalty Board back in 2007, but slightly higher than those available under the NAB settlement.  However, in 2013-2015, the rates available under this deal are actually lower than those agreed to by the NAB, meaning that they present a better deal for webcaster expecting their audiences to grow in the next few years.

First, the most important issue – how much will it cost?  As with the CRB decision, the NAB deal, and the Pureplay deal (about which we wrote here) as it applies to large pureplay webcasters, the rates established by the deal are based on a "per performance" charge.   A performance is one song as listened to by one listener.  So if a song is played on an Internet radio station subject to the deal and 100 people are listening at the time the song is played, there are 100 performances.  The rates established by the deal are as follows:

           Year              Rate per Performance

2009                      $0.0016

2010                      $0.0017

2011                      $0.0018

2012                      $0.0020

2013                      $0.0021

2014                      $0.0022

                        2015                      $0.0024

Continue Reading Details on Sirius XM and SoundExchange Settlement on Internet Radio Royalties – An Option for Some Commericial Webcasters

The Commission today released yet another forfeiture for what has become an increasingly common oversight among broadcasters — the failure to timely file a license renewal application for a satellite earth station.  What made today’s forfeiture unique, however, is the fact that the Commission proposed to double the amount of the forfeiture based on the size of the broadcast licensee and its presumed ability to pay such a fine.  After balancing all the factors, the Commission ultimately ratcheted the fine down a bit, but in the end it assessed a $25,000 fine for the failure to timely file license renewal applications for two earth stations and for the continued operation of those facilities without proper authority.  In light of today’s decision, broadcasters should be sure to review and track the expiration dates for all FCC authorizations. 

The FCC’s decision in this case makes clear that in imposing a large fine in this case it is attempting to send a message that the Licensee will heed.  Per the Commission’s decision:  "This $16,000 forfeiture amount [the baseline forfeiture]  is subject to adjustment, however.  In this regard, we consider the size of the violator and ability to pay a forfeiture, as well as its prior violation of the same rule sections before us today.  To ensure that forfeiture liability is a deterrent, and not simply a cost of doing business, the Commission has determined that large or highly profitable companies such as [Licensee] , could expect the assessment of higher forfeitures for violations, and that prior violations of the same or other regulations would also be a factor contributing to upward adjustment of apparent liability.  Given [Licensee’s] size and its ability to pay a forfeiture, coupled with its previous violation, we conclude that an upward adjustment of the base forfeiture amount to $32,000 is appropriate."  [Emphasis added.]  In reaching its decision, the Commission noted that the Licensee in this case was a large broadcaster with "net yearly sales" of over $110 million.  

This forfeiture should serve as a clear warning to broadcasters both big and small to review and track the expiration dates of any earth stations or other authorizations held by a broadcast station.  Rarely (if ever) will the license term of an earth station authorization coincide with the renewal of the parent broadcast station, which means it is easy for the earth station to slip through the cracks.  

Continue Reading Broadcasters Beware: Failure to Timely Renew Earth Stations Can Draw Large Fines