The week, Congressman Rick Boucher, a member of both the House of Representatives Commerce and Judiciary Committees, told an audience of broadcasters at the NAB Leadership Conference that they should accept that there will be a performance royalty for sound recordings used in their over-the-air programming and negotiate with the record companies about the amount of a such a royalty.  He suggested that broadcasters negotiate a deal on over-the-air royalties, and get a discount on Internet radio royalties.  Sound recordings are the recordings by a particular recording artist of a particular song.  These royalties would be in addition to the payments to the composers of the music that are already made by broadcasters through the royalties collected by ASCAP, BMI and SESAC.   Congressman Boucher heads the Commerce Committee subcommittee in charge of broadcast regulation, and he has been sympathetic to the concerns of Internet radio operators who have complained about the high royalty rates for the use of sound recordings.  Having the Congressman acknowledge that broadcasters needed to cut a deal demonstrated how seriously this issue is really being considered on Capitol Hill.

The NAB was quick to respond, issuing a press release, highlighting Congressional opposition to the Performance royalty (or performance tax as the NAB calls it) that has been shown by support for the Local Radio Freedom Act – an anti-performance royalty resolution that currently has over 150 Congressional supporters.  The press release also highlights the promotional benefits of radio airplay for musicians, citing many musicians who have thanked radio for launching and promoting their careers.   The controversy was also discussed in an article on Bloomberg.com.  In the article, the central issue of the whole controversy was highlighted.  If adopted, how much would the royalty be?  I was quoted on how the royalty could be very high for the industry (as we’ve written here, using past precedent, the royalty could exceed 20% of revenue for large music-intensive stations).  An RIAA spokesman responded by saying that broadcasters were being alarmists, and the royalty would be "reasonable."  But would it?


Continue Reading Congressman Boucher to NAB – Accept Performance Royalty – How Much Would It Cost?

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

Once again, the extension of the sound recording performance royalty to broadcasters has become a hot topic in Washington. The subcommittee on Courts, the Internet and Intellectual Property of the  House Judiciary Committee yesterday approved the bill introduced by Congressman Berman (about which we first reported here).  That bill would include broadcasters in the Section 114 sound recoding royalty currently applicable to digital music users including Internet radio, satellite radio and cable radio. Under the bill, the Copyright Royalty Board would be charged with the responsibility of determining what a royalty would be using the "willing buyer, willing seller" standard. Following this subcommittee approval, the bill would next be considered by the full committee. To become law, the Committee and the full House of Representatives would have to approve it, and similar legislation would need to be enacted by the Senate. As the NAB has garnered the support of a majority of the members of the House on a non-binding resolution opposing the imposition of the royalty on broadcasters, and as there is not much time remaining in the legislative session before the election and the end of this Congress, the whole process may well have to start fresh in 2009 (bills have to be reintroduced after the end of each two-year Congressional session). Yet, with all of the controversy over the issue in recent weeks, it appears certain that the issue will arise again, so it is important to look at some of the recent action.

Two weeks ago, the House subcommittee held a hearing on the issue. Prior to the hearing, the MusicFirst Coalition (principally supported by the RIAA and the affiliated record companies as 50% of any royalty goes to the copyright holders who are usually the labels) had Nancy Sinatra and the Nitty Gritty Dirt Band making the rounds on Capitol Hill in support of the royalty. These appearances follow the precedent set in earlier Capitol Hill proceedings, where the Coalition has brought in niche or oldies artists to address Congress – not major popular current acts. The artists who have testified (who have included Judy Collins, Sam Moore, Lyle Lovett, and Alice Peacock) have argued that the additional income that they would receive from a performance royalty would supplement their incomes which, in some cases, has either never been great or has declined as the demand or ability to tour has declined. The argument is always made that the royalty will encourage musicians to produce their music – though it is rarely if ever claimed that music wouldn’t be made if the royalty is not adopted, as songs have been written and sung for time immemorial, well before any royalty existed, merely for the pleasure or to fulfill the need for self-expression. The question is not one of ensuring the availability of music, but instead it is one about who should get how much of whatever money is made, directly or indirectly, from the use of that music. 


Continue Reading Broadcast Performance Royalty Passes House Subcommittee – But It’s Not Done Yet

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