Today, the National Music Publishers Association ("NMPA"), DiMA, the RIAA and other music publishing groups issued a press release announcing a settlement of certain aspects of the current Copyright Royalty Board proceeding to determine the royalties due under Section 115 of the Copyright Act for the mechanical royalty for the reproduction and distribution
The Copyright Office today issued an Order extending the dates for comments on the Notice of Proposed Rulemaking to determine if, in addition to royalties to ASCAP, BMI and SESAC for the public performance of a musical composition, a royalty is also be due for reproductions of the composition made by real-time webcasting such as…
Last week, we wrote about one issue that was addressed at last week’s Senate Judiciary Committee hearing on music royalties – the standards used to derive the royalties, and expressed hope that there was at least some interest in compromise on behalf of the Senators and industry representatives. However, another issue which came out of those hearings suggests that compromise may not be so easy if the parties really believe what they say – as there is a fundamental distinction in both how the parties view the health of the Internet radio business, and how they view the relationship between royalties and the music business generally. One can only hope that the gulf that was evident was just due to public posturing as, if it was not, there may well be an insurmountable differences between the parties that cannot be bridged in any settlement negotiations over the royalties that Internet radio pays for the use of sound recordings.
The gap became evident from the opening statements of the first panel – comprised of two Senators interested in the issue- Senator Wyden on behalf of the Internet Radio Equality Act stating that it was necessary to avoid having the high royalties decided by the Copyright Royalty Board destroy a fledgling technology, while Senator Corker of Tennessee talked about the importance of music to radio and the exhaustive process that the CRB had gone through in arriving at the royalties that it approved. But in the day’s principal panel, the issues became crystal clear, as John Simson of SoundExchange talked about the "vibrant" business of Internet radio, citing an analyst’s report that Internet radio would be a $20 billion advertising market by 2020, and the statement of an employee of CBS that Internet radio was a great business and that CBS was going to "own it." Speaking next, Joe Kennedy, CEO of Internet radio company Pandora had a dramatically different perspective – talking about an industry analyst who stated that the royalties that would result from the CRB royalties would exceed the revenue of the Internet Radio industry, and that, for Pandora, the failure to find a compromise solution to the CRB-imposed royalties would mean that his service would "die." He pointed to Pandora’s position as the largest of the Internet radio companies in terms of listenership, the $25 million in revenue that it expects to make this year, and how $18,000,000 of that would go just to the SoundExchange royalties – 75% of its revenue to this one expense. Continue Reading Senate Hearing: The Search for Compromise on Music Performance Royalties – Part Two: The Issue of Perspective
Broadcasters and other digital media companies have recently been focused on the royalties that are to be charged by the record labels for public performance of a sound recording in a digital transmission (under the Section 114 compulsory license administered by SoundExchange). In a Notice of Proposed Rulemaking issued this week, the Copyright Office tentatively concludes that there could be yet another royalty due for streaming – a royalty to be paid to music publishers for the reproductions of the musical compositions being made in the streaming process under Section 115 of the Copyright Act. This notice was released just as the Copyright Royalty Board is concluding its proceeding to determine the rates that are to be paid for the Section 115 royalty. While there have been reports of a settlement of some portions of that proceeding, the details of any settlement is not public, so whether it even contemplated noninteractive streaming as part of the agreement is unknown.
How did the Copyright Office reach its tentative conclusion? First, some background. The Office for years has been struggling with the question of just what the section 115 royalty covered. Traditionally, the royalty was paid by record companies to the music publishers for rights to use the compositions in the pressing of records. This was referred to as the "mechanical royalty" paid for the rights to reproduce and distribute the composition used in a making copies of a sound recording (a record, tape or CD). These copies were referred to as "phonorecords." However, in the digital world, things get more complicated, as there is not necessarily a tangible copy being made when there is a reproduction of a sound recording. Thus, Congress came up with the concept of a Digital Phonorecord Delivery (a "DPD") as essentially the equivalent of the tangible phonorecord. But just what is a DPD?Continue Reading Copyright Office Issues Notice of Proposed Rulemaking That Could Make Section 115 Royalty Applicable to Internet Radio
At a meeting held this week, the Radio Advertising Bureau (RAB) adopted Guidelines promoting the use of "posting" or audience delivery guarantees for the radio industry. While these guidelines are voluntary, and no doubt some broadcasters will not adopt the practice, those who do should be aware of the political broadcasting implications. For years, at political broadcasting seminars that I have conducted around the country, the question of how posting affects the political broadcasting obligations of television broadcasters has been much discussed. In its 1991 policy statement on Political Broadcasting, which essentially established the rules that broadcasters have followed in the years since, the Commission’s entire discussion of how audience underdelivery make good spots affected a station’s political broadcasting obligations was essentially addressed in two sentences – essentially saying that such guarantees must be made available to candidates in the same manner as commercial advertisers. Thus, stations must offer audience delivery guarantees to political advertisers if they offer such guarantees to commercial advertisers. The 1992 reconsideration added a few more sentences, making clear that any make-good spots provided to meet any delivery guaranty would not need to be considered in determining the lowest unit charge of the time periods in which the make good runs. What the Commission leaves to the broadcaster, however, is to fashion a way to compensate the candidate for underdelivery when the underdelivery may not be discovered for months (when the next ratings book is released), which will usually be after the election for which the candidate purchased the spots.
In the television industry, where posting has been common for years, stations deal with the political implications in many different ways. First, not all purchased spots will have delivery guarantees. Under Commission rules, spots that have different rights can be considered to be spots of a different class, and each class of spots will have its own lowest unit rate. Thus, spots with audience delivery guarantees will likely have a higher price than those that do not have the guarantees. As the make good spots for any underdelivery of audience will be of little value if they are not available until after an election, the candidates will usually opt for the lower priced spots without the guarantees. Alternatively, stations can offer candidates a discount off of their lowest unit rates for spots with guarantees in exchange for the candidates agreeing to waive any underdelivery make-good spots. In a few cases, candidates agree to take any make-good spots to which they may be entitled, and use them after the election to thank their supporters or to convey policy positions to their constituents.Continue Reading RAB Adopts Guidelines for “Posting” – Remember to Consider the Political Broadcasting Implications