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The Copyright Royalty Board today announced that it is taking comments on a settlement to establish royalties for the use of sound recordings to be paid by companies that are planning to provide audio services to be delivered with satellite and cable programming.  In contrast to the "preexisting subscription services" who were in existence at the time of the adoption of the Digital Millennium Copyright Act in 1998, who recently reached a settlement agreeing to pay 7 to 7.5% of gross revenues for royalties (see our post, here), this settlement is with "New Subscription Services" which did not offer these kinds of subscription services in 1998.  This settlement does not apply to subscription services provided through the Internet.  The covered "new subscription services" have agreed to pay the greater of 15% of revenue or a per subscriber fee that will escalate over the 5 years that the agreement is in effect.  Given that these new services will be providing essentially the same service as the Preexisting Services, why the difference in rate?  Perhaps, it is because the difference in the law.

As we wrote earlier this week, the Preexisting Satellite Service pay royalties set based on the standards of Section 801(b) of the Copyright Act, which takes into account a number of factors including the interest of the public in getting access to copyrighted material, the relative contributions and financial risks of the parties in distributing the copyrighted material, the stability of the industry, and the right of the copyright holder to get a fair return on their intellectual property.  By contrast, the new subscription services who entered into the settlement just announced, who weren’t around at the time of the drafting of the DMCA, use the "willing buyer, willing seller" standard also used for Internet radio.  And, because of the applicability of the willing buyer willing seller standard and the apparent uncertainties of the litigation process using it, these new services apparently decided to agree to a royalty double that of the preexisting services, even though they provide essentially the same service.Continue Reading Another Proposed Settlement of Another Copyright Royalty Board Proceeding – New Subscription Services

On Friday, in a number of publications, a story was carried questioning the claims made by the NAB that the broadcast performance royalty being sought by the music industry could amount to 10-35% of the revenue of the radio industry.  A post on the Wired Listening Post blog seemed to have started the story.  This is the royalty which would be paid to the copyright holders in the sound recording – and would be in addition to the royalties paid to ASCAP, BMI and SESAC for the composers of music (see our post on the topic, here and here) .  Wired quoted a spokesman for the Music First Coalition (the music industry coalition seeking the performance royalty) claiming that the NAB’s claims are overstated – and that any broadcast royalty to be paid to sound recording copyright holders would be similar to those paid in Europe for the use of sound recordings, and similar to the amounts currently paid to ASCAP, BMI and SESAC for the use of the musical compositions, in the range of 3-5% of revenues. Only the Radio and Internet Newsletter seemed to question this statement.  From looking at the history of SoundExchange’s claims made in other royalty proceedings, the questions raised by RAIN seem entirely justified.  SoundExchange has consistently argued in connection with all of the other on-going royalty proceedings that the sound recording royalty is far more valuable than the composition royalty – asking for a royalty over 6 times the amount of the composition royalty – 30% of gross revenues.  How can Music First now contend that the royalty will be only a few percent of revenue, when their representaives have consistently requested royalties many multiples of that amount?

At the House Judiciary Committee hearing on the broadcast performance royalty (see our post, here), when committee members asked how much the royalty would be, Marybeth Peters, the Register of Copyrights, suggested that it could a simple matter of applying the "willing buyer, willing seller" criteria of Section 114 of the Copyright Act to broadcasting.  That standard is exactly the same one that led to the current Internet radio royalties which have been so controversial (see our coverage here).  In that proceeding, SoundExchange had asked for royalties of the greater of the per performance royalty that the Copyright Royalty Board imposed or 30% of gross revenue.  While the Copyright Royalty Board did not adopt a percentage of revenue royalty because they feared that it was too difficult to compute for services that had multiple revenue streams, most observers have estimated that the pe performance royalty exceeds 100% of revenue of the small commercial webcasters, and are close to 100% of revenue even for the Internet radio services provided by the major Internet content companies.  In making their offer of a "special deal" to Small Commercial Webcasters on May 23, with royalties between 10 and 12% of gross revenue, SoundExchange specifically stated that it thought that the 10-12% rate was "a below-market rate to subsidize small webcasters … to help small operators get a stronger foothold" in developing their businesses.  While 10% is suggested to be a "below market" rate in an immature industry still struggling to find a business model, the Music First Coalition now suggests that a royalty less than half that amount is what they would request for broadcast radio.Continue Reading Broadcast Performance Royalty – Getting Fooled Again?