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?