With the Copyright Royalty Board now in the early stages of the next proceeding to consider webcasting royalties (see our article here) as well as other proceedings including the distribution of cable and satellite television royalties to TV programmers (see these CRB notices), the Chief Judge of the CRB, Suzanne Barnett, announced her
What should SoundExchange do with money that it collects for the performance of sound recordings, when it does not know what sound recordings were played by a particular service? As we’ve written many times on this blog, SoundExchange collects royalties from digital music services , including satellite radio, cable radio and webcasters, for the performance of sound recordings (i.e. a recording of a song by a particular artist). It is charged with the obligation to distribute these royalties one-half to those who hold of the copyright to the sound recording and one-half to the artists who perform on those recordings. However, SoundExchange, according to a filing recently made with the Copyright Royalty Board, does not always know which songs were played by a particular music service. Thus, it has had difficulty distributing all of the money it collects – currently holding $28 Million in royalties from the period 2004 to 2009 that have not been distributed. Why? According to SoundExchange much of the problem is that not all services report what they played and how often, and other information that is submitted is sometimes inaccurate or otherwise does not adequately identify the music that was played. To deal with this problem, SoundExchange has asked that the Copyright Royalty Board authorize it to use proxy information to distribute these funds from 2004-2009. The CRB has asked for comments on that proposal. Comments are due on May 19.
What is proxy information? Basically, SoundExchange plans to infer from the information that it does have what music was played by the services for which it has no information. According to the SoundExchange filing, they would make these assumptions based on the type of service. Thus, information from webcasters would be used to estimate what other webcasters were playing. Information from background music services who did report would be used to determine what other background music services played, and so on. The CRB, in its request for comments, asks if the proxy should be further broken down so that, for instance, noncommercial webcasters would serve as a proxy for other noncommercial webcasters, and commercial webcasters would serve as a proxy for other commercial webcasters. The Copyright Royalty Judges are also seeking to assess whether SoundExchange has done all that it can do to get the required information, and if the proxy system is a fair way of determining distributions for the money that has not yet been awarded to rightsholders and artists.
Does this proposal have any impact on the services themselves? Apparently not, as SoundExchange is at this point only looking for this authority in order to distribute money collected for royalties that came in from 2004 to 2009. It does not appear to be looking at imposing any new restrictions on webcasters or other digital music services. Instead, it is only looking for the authority to distribute the money that it has already collected based on the information that it has available. What should music services take away from this request?
Last year’s Court of Appeals decision on Internet radio royalties for 2006-2010 remanded one issue to the Copyright Royalty Board for further consideration – the issue of the minimum annual fee to be paid by each webcaster. The Copyright Royalty Judges (“CRJs”) had decided on a $500 per channel minimum fee – a fee that created much concern in the Internet radio community as there was no clear delineation of what a channel was. For services, like Pandora, where there is a unique stream created for each listener, by some definitions there could be an almost infinite number of channels all subject to the $500 minimum fee. Following the CRB’s initial decision, a number of the larger webcasters and SoundExchange entered into a settlement capping the minimum fee obligation at $50,000 per webcaster per year. Thus, services with more than 100 channels would only pay a minimum fee of $50,000 at the beginning of each year. However, this settlement was never extended to all webcasters – it applied only to those webcasters who signed the deal. Following the Court remand, SoundExchange and DiMA (the Digital Media Association which represents many webcasters), submitted the 2007 settlement to the CRB to be codified into the rules that govern webcasters generally. Just before Christmas, the CRJs asked for comments on that settlement. Comments are due by January 22.
In many cases, this settlement has been superseded by subsequent events – namely the settlements with webcasters that were entered into in February and then later in the summer under the provisions of the Webcaster Settlement Acts. Settlements with broadcasters, pureplay webcasters, small commercial webcasters and various noncommercial groups all set their own minimum fees (and, for the most part, cover the periods through 2015), and thus this proceeding is largely irrelevant to these webcasters. If this settlement is approved, the only remaining question before the CRJs on the remand of the 2006-2010 proceeding will be the minimum fee for some noncommercial groups that did not enter into any settlement, as this agreement on minimum fees applies only to commercial webcasters.
Just when you think that the year will come to a quiet end, something always seems to pop up. Today, the Copyright Royalty Board announced a Notice of Proposed Rulemaking that would change the reporting requirements for services that pay royalties for the use of sound recordings to SoundExchange. The proposed new rules would require that Reports of Use submitted by services relying on the statutory royalty contain "full census reporting" of all songs played by any service. Services would include all users of music who pay royalties due under Sections 112 or 114 of the Copyright Act – including Internet Radio, satellite radio, digital cable radio, digitally transmitted business establishment services, and radio-like services delivered by other digital means, including deliveries to cell phones. This reporting requirement would replace the current system, about which we wrote here, that only requires reporting for two weeks each quarter. Under the new rules, an Internet radio service would have to submit the name of every song that they play to SoundExchange, along with information as to how many times that song played, the name of the featured artist, and either the recording’s ISRC code or both the album title and label. Comments on this proposal are due by January 29.
Currently, the quarterly reports are filed electronically using an ASCII format and using either an Excel or Quattro Pro spreadsheet template as created by SoundExchange. The Board asks for comments as to whether there are technological impediments to providing this information in this manner, and if other changes should be made to more easily facilitate the delivery of this information. The Copyright Royalty Judges who make up the CRB expressed their opinion that the full census reporting is preferable to the limited information now provided, so that SoundExchange does not need to rely on estimates or projections to insure that all artists are fairly compensated when their works are played. Using census reporting, all artists can be paid based on how often their songs are actually played.