We reported on the settlement under the Webcaster Settlement Act between the NAB and SoundExchange on Internet Radio Royalties. As provided in the Webcaster Settlement Act, that settlement has now been published in the Federal Register, and thus it is available for broadcasters who are streaming their signal on the Internet, or who are streaming other programming on the Internet, to claim coverage under that settlement. To do so, broadcasters who are already streaming must file a notice of Intent to Rely on this settlement, available here, with SoundExchange, by April 2, 2009 – thirty days after the Federal Register publication occurred. Broadcasters who are not now streaming, but who start in the future, must file the election notice within 30 days of the start of their streaming, or they will be bound by the rates established by the Copyright Royalty Board in their 2007 decision (see our post here). The publication sets out several other details of the settlement, set forth below.

The rates: The rates, which represent some savings under the CRB rate for the years between 2007 and 2011, are set forth below.  These rates are "per performance", meaning that the rate is paid on a per song, per listener basis.  If you play 10 songs in an hour, and each song is heard by 10 people, you have 100 performances.  There are companies that provide services to track and report on performances.  See our post, here, for details.  There are also limited exceptions to the full "per performance" reporting, summarized below.  The rates under this agreement are as follows:

 

2006 ……………………………….. $0.0008

2007 ……………………………….. 0.0011

2008 ……………………………….. 0.0014

2009 ……………………………….. 0.0015

2010 ……………………………….. 0.0016

2011 ……………………………….. 0.0017

2012 ……………………………….. 0.0020

2013 ……………………………….. 0.0022

2014 ……………………………….. 0.0023

   2015 ……………………………….. 0.0025


Continue Reading Details of the Broadcaster SoundExchange Settlement on Webcasting Royalties

The battle over the broadcast performance royalty has begun anew, with the introduction of legislation to impose a performance royalty for the use of sound recordings on broadcast stations.  This royalty would be in addition to the royalties paid to ASCAP, BMI and SESAC (which go to compensate composers of music), as this royalty would be paid to the performers of the music (and the copyright holders in the recorded performance – usually the record companies).  The statement released by the sponsors of the bill cites numerous reasons for its adoption – including the facts that most other countries have such a royalty, that satellite and Internet radio have to pay the royalty, and that it will support musicians who otherwise do not get compensated for the use of their copyrighted material.  The NAB has countered with a letter from its CEO David Rehr, arguing that musicians do in fact get  compensation through the promotional value that they get from the exposure of their music on broadcast stations.  The 50 state broadcast associations also sent a resolution to Congress, taking issue with the premises of the sponsors – citing the differences in the broadcast systems of the US and that of other countries where there is a performance royalty, and arguing that broadcasting is different from the digital services who have a greater potential for substitution for the purchase of music.  What does this bill provide?

The bill introduced this year are very similar to the legislation proposed last year (which we summarized here); legislation that passed the House Judiciary Committee but never made it to the full House, nor to the Senate.  Some of the provisions of this year’s version include:

  • Expansion of the public performance right applicable to sound recordings from digital transmissions to any transmission
  • Royalties for FCC-licensed noncommercial stations would be a flat $1000 per year
  • Royalties for commercial stations making less than $1.25 million in annual gross revenues would pay a flat $5000 per year.  There is no definition of what constitutes "gross revenues," and how a per station revenue figure could be computed in situations where stations are parts of broadcast clusters
  • Excludes royalties in connection with the use of music at religious services or assemblies and where the use of music is "incidental."  Incidental uses have been defined by Copyright Royalty Board regulations as being the use of "brief" portions of songs in transitions in and out of programs, or the brief use of music in news programs, or the use in the background of a commercial where the commercial is less than 60 seconds – all where an entire sound recording is not used and where the use is less than 30 seconds long
  • Allows for a per program license for stations that are primarily talk
  • Establishes that the rates established for sound recordings shall not have an adverse effect on the public performance right in compositions (i.e. they can’t be used as justification for lowering the ASCAP, BMI and SESAC rates)
  • Requires that 1% of any fees paid by a digital music service (such as a webcaster, or satellite radio operator) for the direct licensing of music by a copyright owner (usually the record company) be deposited with the American Federation of Musicians to be distributed to non-featured performers (background musicians), while the distribution of any fees to the featured performer be governed by the contract between the performer and record company
  • Requires that any 50% of any fees paid by a radio station for direct licensing of music be paid to the agent for collection of fees (i.e. SoundExchange) for distribution in the same manner that the statutory license fees are distributed (45% to the featured performer, 2.5% to background musicians, and 2.5% to background vocalists)


Continue Reading Broadcast Performance Royalty Battle Begins Anew – Bills Introduced in the House and Senate

Under the compulsory license for the use of sound recordings – the license which allows Internet radio services to use all legally recorded sound recordings by paying a royalty set by the Copyright Royalty Board – the designated collection agency can, once each year, audit a licensee to assess its compliance with the royalty requirements.  Under the law, when the collective decides to audit a company, it must notify the Copyright Royalty Board, who then gives public notice of the fact that an audit is to take place.  The Copyright Royalty Board has just announced that SoundExchange has decided to audit Last.FM.  Based on a number of public statements, SoundExchange has been citing Last.FM as an example of problems with royalties – contending that Last.FM had paid royalties of only a couple of thousand dollars a year, under the Small Webcasters Settlement Act, just before selling out to CBS for over $200 million.  Given SoundExchange’s tough talk about Last.FM, this notice of an audit is not surprising.  SoundExchange’s focus on this company illustrates the difficulty of valuing music use, and the different perceptions of music users and copyright holders as to what that value should be.

 In past years, SoundExchange has audited a number of webcasters – usually large webcasters.  As SoundExchange must bear the cost of the audit unless a significant underpayment is discovered, it is unlikely that more than a few companies will be audited each year.  However, as SoundExchange has made such a big deal of Last.FM, with witnesses on performance royalty issues mentioning it at Congressional hearings, and representatives mentioning it on various industry conferences (including SoundExchange President John Simson’s reference to the company on a panel on which we jointly appeared at Canadian Music Week earlier this month), many expected that an audit would be forthcoming.


Continue Reading SoundExchange to Audit Internet Radio Royalty Payments of Last.FM – What is the Value of Music?

With 2008 almost upon us, webcasters streaming music on the Internet need to remember that the way of computing and paying royalties to SoundExchange will shift on January 1- a change that may be especially important for broadcast stations.  Under the Copyright Royalty Board decision reached last March, webcasters must pay royalties computed on a per "performance" basis.  A performance is a per song, per listener computation.  In other words, if an Internet radio station plays a song and 15 listeners are logged into the station at the time that the song plays, there would be 15 performances on which the royalty would need to be paid.  While broadcasters objected that they did not (and in many cases could not) track the number of performances that were made by their stations on the Internet, the CRB, on reconsideration of their initial decision, only went so far as the give stations an interim rate based on the number of  "Aggregate tuning hours" that a station served (e.g. one listener listening for one hour, or two for a half hour each would both be the equivalent of one aggregate tuning hour).   See our post, here, on the CRB’s reconsideration decision.  The aggregate tuning hour (or ATH) metric is one that is more readily obtain from a content delivery network or other bandwidth provider, and a metric that has been used since the first royalties were established in 2002.  Yet as of January 1, as the interim ATH rate applied only to 2006 and 2007, that method of payment will no longer be available, and many webcasters are wondering what to do to compute the per performance royalty.

Neither the CRB decision nor SoundExchange, which collects the royalties, explained what a webcaster who cannot count performances is to do when the option to pay based on aggregate tuning hours disappears.   The royalty for January performances is due to be paid to SoundExchange on March 16 (45 days after the end of the month), and a webcaster preparing to file its royalty statement on that day will need to have a performance count to include on its statement.  Many Internet radio companies have been trying to determine how to count performances and, while there are some services that offer to provide software to do so, it is my understanding that none are foolproof and, in some cases, they may not be able to get a complete count of performances.  And many smaller stations may not be able to afford such systems.


Continue Reading Internet Radio Reminder – No More Aggregate Tuning Hour Royalty After January 1