performance

Subscribe to performance via RSS

The Copyright Royalty Board has asked for comments on proposed royalty rates for the use of sound recordings by "Preexisting Subscription Services."  In adopting the Digital Millennium Copyright Act, Congress divided digital music services into various categories, each of which are assessed different royalties for the use of sound recordings. Preexisting subscription services were those digital subscription music services in existence as of the date of the adoption of the DMCA. Basically, these were the digital cable music services that were in operation in 1997.  In the proceeding now being resolved by a settlement between Music Choice (the one remaining service that was in existence in 1997) and SoundExchange, the companies propose a royalty of 7.25% of gross revenues of the service for the period 2008-2011, and 7.5% of gross revenues for 2012. A $100,000 minimum payment is due at the beginning of each year.  Comments on the settlement are due on November 30.  As set forth below, this settlement sets the stage for the upcoming decision on satellite radio royalty rates – as these two services are both governed by a royalty-setting standard that is different than that used for Internet radio.

The Copyright Royalty Board announced the proceeding to set the royalties for Preexisting Subscription Services at the same time as they initiated the proceeding to set new royalties for Satellite Radio Services – which were also considered to be preexisting services at the time of the adoption of the DMCA – not because they were actually operating, but as their services had been announced and construction permits to construct the satellites had been issued by the FCC.  No settlement has been reached with the satellite radio services (except as to limited "new subscription service" that XM and Sirius provide in conjunction with cable and satellite television packages where, according to the CRB website, a settlement has been reached), and a hearing was held earlier this year to take evidence on what the rates for those services should be.  As we’ve written before, SoundExchange has requested royalties that would reach 23% of a satellite radio operator’s gross revenues.  The satellite radio case has been completed, briefs filed, and oral arguments were held in October.  A decision in the case is expected before the end of the year.Continue Reading Copyright Royalty Board Asks for Comment on Music Choice Royalty – Satellite Radio is Next

On Friday, in a number of publications, a story was carried questioning the claims made by the NAB that the broadcast performance royalty being sought by the music industry could amount to 10-35% of the revenue of the radio industry.  A post on the Wired Listening Post blog seemed to have started the story.  This is the royalty which would be paid to the copyright holders in the sound recording – and would be in addition to the royalties paid to ASCAP, BMI and SESAC for the composers of music (see our post on the topic, here and here) .  Wired quoted a spokesman for the Music First Coalition (the music industry coalition seeking the performance royalty) claiming that the NAB’s claims are overstated – and that any broadcast royalty to be paid to sound recording copyright holders would be similar to those paid in Europe for the use of sound recordings, and similar to the amounts currently paid to ASCAP, BMI and SESAC for the use of the musical compositions, in the range of 3-5% of revenues. Only the Radio and Internet Newsletter seemed to question this statement.  From looking at the history of SoundExchange’s claims made in other royalty proceedings, the questions raised by RAIN seem entirely justified.  SoundExchange has consistently argued in connection with all of the other on-going royalty proceedings that the sound recording royalty is far more valuable than the composition royalty – asking for a royalty over 6 times the amount of the composition royalty – 30% of gross revenues.  How can Music First now contend that the royalty will be only a few percent of revenue, when their representaives have consistently requested royalties many multiples of that amount?

At the House Judiciary Committee hearing on the broadcast performance royalty (see our post, here), when committee members asked how much the royalty would be, Marybeth Peters, the Register of Copyrights, suggested that it could a simple matter of applying the "willing buyer, willing seller" criteria of Section 114 of the Copyright Act to broadcasting.  That standard is exactly the same one that led to the current Internet radio royalties which have been so controversial (see our coverage here).  In that proceeding, SoundExchange had asked for royalties of the greater of the per performance royalty that the Copyright Royalty Board imposed or 30% of gross revenue.  While the Copyright Royalty Board did not adopt a percentage of revenue royalty because they feared that it was too difficult to compute for services that had multiple revenue streams, most observers have estimated that the pe performance royalty exceeds 100% of revenue of the small commercial webcasters, and are close to 100% of revenue even for the Internet radio services provided by the major Internet content companies.  In making their offer of a "special deal" to Small Commercial Webcasters on May 23, with royalties between 10 and 12% of gross revenue, SoundExchange specifically stated that it thought that the 10-12% rate was "a below-market rate to subsidize small webcasters … to help small operators get a stronger foothold" in developing their businesses.  While 10% is suggested to be a "below market" rate in an immature industry still struggling to find a business model, the Music First Coalition now suggests that a royalty less than half that amount is what they would request for broadcast radio.Continue Reading Broadcast Performance Royalty – Getting Fooled Again?

If you are a broadcaster, you know that it’s not going to be a good day when you walk into a hearing on the possible extension of the performance royalty in sound recordings to over-the-air broadcasters and see buttons saying "I Support a Performance Right NOW" on the lapels of every other witness on the panel – including the Register of Copyrights, Marybeth Peters.  But that was the scene in Washington, as the House Judiciary Committee’s subcommittee on Courts, the Internet and Intellectual Property held a hearing as to whether the right to collect a royalty for the public performance of a sound recording (the actual song as sung by a particular artist, as opposed to the underlying musical composition) should be paid by broadcasters.  Broadcasters in the United States have paid only a royalty on the public performance of the composition (to ASCAP, BMI and SESAC), and have never paid a royalty for the public performance of the sound recording.  The lack of a sound recording royalty has always been justified in the past on the theory that the artists and copyright holders in the sound recording benefit more than composers through the airplay of the sound recording, as they receive the bulk of the proceeds from CD sales, and the performers benefit from the promotion of live performances.  As they benefit from the promotion provided by the airplay of the song, there is no need for any sort of performance royalty.  As the music and radio businesses have both thrived in the United States – more so than anywhere else in the world – it seemed that this arrangement was mutually beneficial.

But, in recent years, the consensus over this mutually beneficial arrangement seems to have broken down.  Starting in 1995, a performance right in sound recordings has been imposed on digital services, including the royalty on Internet radio which has recently been so controversial (and about which we have written so much, here).  And, with the recent downturn in the record companies’ business, additional sources of revenue are being sought – thus the RIAA and SoundExchange, the collective that receives sound recording performance royalties, have started a Congressional push to require the collection of royalties from over-the-air radio.  And that push was reflected in the hearing held on Tuesday before a House Committee that seemed clearly to favor the imposition of this royalty on broadcasters.Continue Reading House Judiciary Committee Hearing on Broadcast Performance Right – No Breaks for the Broadcasters

We’ve recently written much about Internet radio, digital radio, digital television and all sorts of new technologies to electronically deliver media content.  But the grandfather of all electronic media – AM radio – still provides significant service.  A recent Petition for Rulemaking suggests certain technical changes to increase the service provided by these stations. In particular, the proposed changes would…

As the clock ticks down to the July 15 effective date of the royalty rates for Internet Radio as determined by the Copyright Royalty Board, webcasters held a Day of Silence today, June 26, to demonstrate to listeners what may well happen if the rates go into effect, and to galvanize their listeners to ask Congress for relief. With the Day of Silence bringing publicity to the Congressional efforts to put the webcasting royalties on hold and to change the standard applied by the Copyright Royalty Board so that it is not focused completely on a hypothetical "willing buyer, willing seller" model, it’s worth looking at some of the other issues that have arisen in the royalty battle in the last few days – including further pleadings filed in connection with the Motion for Stay currently pending in the US Court of Appeals, and the Congressional hearing that will occur on Thursday. 

As we’ve written before, there is currently pending a Motion for Stay of the CRB decision which was submitted jointly by the large and small webcasters and NPR.  Last week, the Department of Justice, acting on behalf of the Copyright Royalty Board to defend the royalty decision, and SoundExchange, each filed oppositions to the Motion for Stay. Each raised many of the same arguments. First, they argued that the large webcasters had procedurally forfeited their rights to challenge the question of the $500 per channel minimum fee by not raising their objection early enough in the CRB proceeding. The DOJ also argued that the damage from the minimum fee was speculative as there was no way to know how that minimum fee would be interpreted. The DOJ contended that, as it was unclear that SoundExchange would prevail on any claim that those Internet Radio services that produced a unique stream for each listener would have to pay $500 for each such stream, the question might end up in a lawsuit – but wouldn’t inevitably lead to the irreparable harm that is necessary for a stay to be issued.Continue Reading A Day of Silence, A Motion for Stay, and A Congressional Hearing – As the Internet Radio Clock Ticks Down

Should artists waive their rights to performance royalties in order to get airplay on broadcast or Internet radio stations? That questions has come to the fore based on a click-through agreement that Clear Channel included on a website set up to allow independent bands to upload their music for consideration for airplay by its stations. While artist groups, including the Future of Music Coalition, condemned that action, there are always two sides to the story, as was made clear in a segment broadcast on NPR’s Morning Edition, in which I offered some comments. As set forth in that segment, artists may be perfectly willing to allow unrestricted use of a song or two in order to secure the promotional value that may result from the airplay that might be received. For the broadcaster or Internet site seeking such permission, getting all rights upfront may well be an important consideration in deciding whether or not to feature a song – especially in the digital media.

Critics of the waiver made much of the fact that the site was set up at least partially to meet Clear Channel’s informal commitment made as part of the FCC payola settlement to feature more independent music, even though that commitment was not a formal part of the settlement agreement.  (See our summary of the payola settlement, here).  Even to the extent that the informal commitments made by the big broadcasters encompassed making time available to more independent musicians, the critics ignore the fact that the companies do not need any waiver of any sound recording performance royalty in connection with the over-the-air broadcast of those songs, as there currently is no public performance right in a sound recording for over the air broadcasting (though artists and record lables are now pushing for such a royalty, see our story here). Thus, the use of the waiver was only for the digital world – which was not covered by the FCC’s jurisdiction over payola promises or the promises to increase the use of independent music. So, effectively, the company is being chastised for trying to minimize their costs on giving the music even greater circulation through their digital platforms than they initially promised.Continue Reading Musicians Trade Waiver of Royalty Rights in Exchange for Exposure – Maybe Not Such a Bad Idea

Just when Internet music companies were starting to understand one set of royalties applicable to the use of music on the Internet through the controversy over the Copyright Royalty board decision on royalties for the public performance of sound recordings in a digital delivery system, the Copyright Office held a hearing on Friday to discuss an entirely different royalty – the "mechanical" royalty for the use of the "musical work" in making a "phonorecord."  In plain English, the copyright holder in the publishing rights in a musical composition (the underlying words and music in a song) is entitled to a royalty when a copy of a song using that composition is made.  While that doesn’t sound too complicated, when copies are made in the digital transmission of music over the Internet (and even in other digital media), all sorts of questions arise.  And in the conversations on Friday, questions were raised as to whether the obligation to pay a royalty for making a digital copy even applied to the streaming of a song on the Internet or possibly even the playing of a song on an HD Radio station.  These stations already pay (to ASCAP, BMI and SESAC) for the public performance of a musical composition, but the mechanical royalty is for a different right, and is collected by a different group, and the question being raised was whether a different royalty is also due when music is used a digital context.  This is also different than the SoundExchange royalty that is paid for the public performance of a sound recording (a particular song as recorded by a particular artist).

The Copyright Office held this Roundtable to update the record in a proceeding begun by a Notice of Inquiry issued in 2001 to try to determine how to apply in a digital world the mechanical royalty and the compulsory license for that royalty under Section 115 of the Copyright Act.  That section applies to the use of a composition in the making of a record or CD.  The artist or record company would have to pay the publishing company a flat fee per copy to obtain the rights to use the underlying song.  That fee is currently about 9 cents per copy, though the Copyright Royalty Board is is in the midst of a proceeding that is to determine whether that royalty should be changed.  When applied to the making of a physical copy, that concept is not hard to understand (though, as set forth below, it is not easy to administer).  But, in a digital world, questions arise as to when the obligation to pay a royalty arises.Continue Reading Copyright Office Holds a Roundtable Discussion of the Mechanical Royalty – Another Confusing Royalty for the Use of Music on the Internet

The battle over performance royalties for broadcast stations seems to have been officially joined. We wrote last week about the rumors of a coalition of record companies and musicians that was reportedly forming to lobby Congress to enact a performance royalty on broadcast radio for the use of sound recordings, and the NAB’s immediate reaction, writing a letter to Congress to oppose the new royalty. Now, the press reports that the pro-royalty group has responded with their own letter to every Congressman, asking that immediate action take place to impose the royalty. Two letters in one week indicate that this summer may be a hot one for broadcasters on Capitol Hill.

The royalty being discussed would be one new to broadcast radio in the United States, but one well known to non-broadcast digital music providers such as Internet radio – as it is the same royalty that has been the subject of so much controversy since the Copyright Royalty Board released its Internet radio royalty decision in early March, more than doubling between 2005 and 2010 the royalty that those stations pay for the use of sound recordings. The royalty on the use of sound recordings (the song as recorded by a particular artist) is in addition to the royalties that are paid to ASCAP, BMI and SESAC for the underlying musical composition. So, if imposed, this would be a new royalty for US terrestrial broadcasters.Continue Reading The Battle is Joined on the Performance Royalty for Over the Air Broadcasting

A story in the Hollywood Reporter indicates that a coalition of record companies and associations representing performing artists are preparing to initiate a Congressional lobbying effort to push for a royalty for performance rights in sound recordings that would apply to broadcasters’ over-the-air transmissions, not just their Internet streams.  Broadcasters currently pay performance royalties  to ASCAP, BMI and SESAC for their over-the-air music programming – royalties that are paid to composers (or music publishing companies) for the use of the underlying musical composition.  Digital operators (satellite radio, Internet radio, digital cable radio) pay royalties for the composition and also pay royalties for the sound recording, i.e. the actual performance as recorded on a record, CD, or digital download.  The copyright for the sound recording is usually held by a record company.  The performance right in a sound recording did not exist in the United States until 1995, and still applies only to digital transmissions.  Obviously, if extended to broadcasting, this could result in huge expenses to broadcasters – amounts for which they probably have not planned.

This is not the first time that such a royalty has been mentioned.  In introducing the PERFORM Act earlier this year, Senator Feinstein of California suggested that this legislation, which makes certain changes in the digital royalty standards that apply to various services as well as to other copyright license provisions, was only a first step in clarifying royalty issues.  In statements made at the time, there were indications that she favored further legislation to adopt a sound recording performance right for broadcasters.  At last week’s Future of Music Conference, David Carson, General Counsel of the Copyright Office, also spoke in favor of such a right – suggesting that if SoundExchange collected money from broadcasters they might not need to seek so much from Internet Radio companies (see our coverage of the Internet radio royalty issues, here).

Continue Reading Lobbying Effort to Make Broadcasters Pay Sound Recording Royalties in the Works?