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Last week, the Copyright Royalty Board asked for comments on a proposed settlement agreement between Sirius XM and SoundExchange, and some articles about that announcement have not been entirely clear about what the deal covers.  It has nothing to do with webcasting royalties for 2016-2020, which are still being litigated (see our article here about the proposals of the parties in that case).  Nor does it have to do with the royalties payable for Sirius’ primary satellite radio service, which were just upheld by the Court of Appeals (see our article here).  Instead, these royalties have to do with a very narrow part of Sirius’ business – providing music channels packaged and sold to consumers along with video services like cable and satellite TV.

Some who closely follow these issues (and the coverage of CRB issues on this blog) may think that the rates for these services were set at the same time as the Sirius rates for their satellite music service, as the CRB at that time set the rates that were applicable to Music Choice, which also offers a music service bundled with cable or satellite video programming (see our articles on the recent decision on the appeal of the rates, and the article on the CRB decision itself here).  Even though Music Choice offers pretty much the same service, their rates are different – as Music Choice was classified as a “preexisting subscription service” in the Digital Millennium Copyright Act, while the service that Sirius provides is classified as a “new subscription service” paying at a different royalty rate set by the CRB using a different royalty standard.  How did this happen?
Continue Reading Copyright Royalty Board Announces Settlement between Sirius and SoundExchange for New Subscription Services Packaged with Cable and Satellite Video – How Different Royalty Standards Result in Different Royalty Rates

A decision by the US Court of Appeals on the appeal of the Copyright Royalty Board decision as to the Sirius XM and Music Choice royalties for the public performance of sound recordings is one of the many year-end decisions important to broadcasters and digital media companies that seems to be flooding out from Courts and agencies in DC and elsewhere. The Court of Appeals rejected the appeal of SoundExchange, which was arguing that the royalties for both services should have been set higher by the CRB, and the Court also rejected the appeal of Music Choice, which argued that the royalties that were set by the CRB should have been lower.  We wrote about the CRB’s decision, here, when it was initially released about 2 years ago.

The proceeding involved the Preexisting Subscription Services (“PSS”) and the Preexisting Satellite Digital Audio Services (“SDARS”), services that were singled out when Congress adopted the Digital Millennium Copyright Act in 1998 by applying a different standard to those services for use by the CRB in determining the amount of sound recording performance royalties.  Instead of using the “willing buyer, willing seller” standard that applies to webcasters and any other digital music service that was not in existence in 1998, these services are evaluated under the 801(b) standard of the Copyright Act, which looks at a variety of factors including the market rate expressed by the willing buyer willing seller standard, but also at the relative financial contributions of the parties to bringing the music to the public, and the effect of royalty changes on the stability of the industries involved (see our articles here, here and here about the differences between these standards)  Using this 801(b) standard, most observers believe that royalties have been set at rates lower than have prevailed in the cases involving services subject the willing buyer willing seller standard.
Continue Reading Court of Appeals Upholds Copyright Royalty Board Decision on Sirius XM and Music Choice Royalties

The full decision of the Copyright Royalty Board setting the royalty rates to be paid to SoundExchange by Sirius XM and Music Choice from 2013 through 2017 has now been released.  We wrote about the initial release of the summary of the decision before Christmas.  The final decision is interesting in many respects. First, it is the first decision to be released since two of the original three Copyright Royalty Judges left the bench. The decision, as released was actually two decisions – one signed by the new Chief Judge and an acting judge who filled in for Judge Wisniewski, the Board’s economic expert, when he had to retire for health reasons. The second decision, reaching the same result but based on different reasoning, was signed by the Board’s lone holdover, Judge Roberts, a long-time fixture at the Copyright Office before joining the Board. In addition, the decision seems to reject some premises that had long been used to justify royalty rates in other proceedings – and thus may give some insights on approaches to be used in the webcasting royalty proceeding that will begin in 2014 and conclude in 2015. The majority decision also, for the first time, gives at least some weight to direct licensing deals for the public performance of sound recordings by a noninteractive service. Finally, the decision provides explicitly for carve-outs from the established royalties for music on which no royalties need to be paid, including music that is directly licensed, and for pre-1972 sound recordings.

Before looking at the decision, it needs to be noted that these royalties are theoretically decided not just for Sirius XM and for Music Choice, but also for other services that fit into their class of service as defined by Sections 112 and 114 of the Copyright Act. Thus, the Music Choice decision applied theoretically to all "Preexisting Subscription Services" (or a "PSS") and the Sirius XM decision to all "preexisting satellite digital audio services" (or, as used in the decision, "SDARS" – satellite digital audio services). The "pre-existing language means that these services were either in existence or authorized by the FCC (for the SDARS services) at the time of the adoption of the Digital Millennium Copyright Act in 1998.  Of course, since 1998, all of Music Choices then-existing competitors in the cable audio business have gone out of business with one exception, and the second SDARS service – XM Radio – has merged with Sirius. So, effectively, these rates apply only to very few companies.Continue Reading Full Text of Copyright Royalty Board Decision on Sirius XM and Music Choice Royalties Released – The Basics of the Decision