So it seems like we have been posting about Closed Captioning issues at least once a month recently, and this month is no exception as word comes now that the FCC is expecting to ratchet up enforcement of its closed captioning rules as it has now become easier for consumers to file complaints directly to the
Last year’s Court of Appeals decision on Internet radio royalties for 2006-2010 remanded one issue to the Copyright Royalty Board for further consideration – the issue of the minimum annual fee to be paid by each webcaster. The Copyright Royalty Judges (“CRJs”) had decided on a $500 per channel minimum fee – a fee that created much concern in the Internet radio community as there was no clear delineation of what a channel was. For services, like Pandora, where there is a unique stream created for each listener, by some definitions there could be an almost infinite number of channels all subject to the $500 minimum fee. Following the CRB’s initial decision, a number of the larger webcasters and SoundExchange entered into a settlement capping the minimum fee obligation at $50,000 per webcaster per year. Thus, services with more than 100 channels would only pay a minimum fee of $50,000 at the beginning of each year. However, this settlement was never extended to all webcasters – it applied only to those webcasters who signed the deal. Following the Court remand, SoundExchange and DiMA (the Digital Media Association which represents many webcasters), submitted the 2007 settlement to the CRB to be codified into the rules that govern webcasters generally. Just before Christmas, the CRJs asked for comments on that settlement. Comments are due by January 22.
In many cases, this settlement has been superseded by subsequent events – namely the settlements with webcasters that were entered into in February and then later in the summer under the provisions of the Webcaster Settlement Acts. Settlements with broadcasters, pureplay webcasters, small commercial webcasters and various noncommercial groups all set their own minimum fees (and, for the most part, cover the periods through 2015), and thus this proceeding is largely irrelevant to these webcasters. If this settlement is approved, the only remaining question before the CRJs on the remand of the 2006-2010 proceeding will be the minimum fee for some noncommercial groups that did not enter into any settlement, as this agreement on minimum fees applies only to commercial webcasters.
Even though the National Association of Broadcasters has been successful in getting about 240 Congressional Representatives (far more than a majority of the House of Representatives) to sign onto a resolution opposing the adoption of a performance royalty for the use of sound recordings by broadcasters in their over-the-air programming, the efforts to enact that legislation have not died. In fact, if anything, these efforts by the recording industry and related associations have intensified – and will be reflected in a hearing to be held by the Senate Judiciary Committee on Tuesday afternoon. While I’ve seen some commentary suggesting that this is a futile effort because of the signatures on the NAB resolution, there are many reasons that broadcasters must continue to be wary of the imposition of the royalty, and why they must keep up efforts to stop it from being enacted if they fear its potential impact.
How can this legislation be enacted if a majority of the House of Representatives have signed the resolution stating their opposition? First, it is important to recognize that the NAB resolution, The Local Radio Freedom Act, is nonbinding. Congressional representatives who have signed on to the resolution can take credit with their local broadcasters for having done so. When the time comes for a vote on proposed legislation, it’s possible that these same Representatives could change their mind, or be pressured by artists and labels in their districts to vote differently from their previously expressed sentiments. With a long way to go in this session of Congress, facing a vote on the royalty and seeing how committed these Representatives are to the positions that they have taken on the resolution is still a real possibility. The legislation imposing the royalty (or the "performance tax" in the words of the NAB) has passed the House Judiciary Committee, and the Speaker of the House has not yet specifically stated that the bill will not come to a full House vote, even though she has been pressed to do so by broadcast interests.
On September 10, 2009, David Oxenford addressed the Christian Music Broadcasters’ Momentum ’09 Conference in Orlando, Florida. Dave’ s presentation was titled 18 Issues in 18 Minutes: What a Broadcaster Should Worry About From Washington DC. In 18 minutes, Dave discussed topics including the FCC’s proposed localism rules, sponsorship identification and noncommercial underwriting issues, contest fines, FCC technical…
SoundExchange has posted on its website this afternoon four press releases announcing new settlements of amounts due for Internet radio music royalties. These settlements were negotiated under the provisions of the Webcaster Settlement Act of 2009. The announcement lists settlements with two noncommercial groups representing College Broadcasters and noncommercial religious broadcasters, as well as a deal with Sirius XM for their streaming of music. The fourth deal is with a group to be named later – a little mystery that sounds like something out of a trade of baseball players done right at the trading deadline. In effect, that is the case here, as yesterday was the final date for deals to be done under the terms of the WSA. These deals join the Pureplay Webcasters settlement announced earlier this month, as well as the deals with the Corporation for Public Broadcasting for NPR affiliates, the NAB for commercial broadcasters, and with microcasters done in February under the terms of the Webcasters Settlement Act of 2008 (links to our description of these deals can be found here).
The press releases do not release detailed terms. For Sirius, the release states that the parties agreed to a per performance rate which is not specified, covering webcasting royalties through 2015. These rates do not apply to Sirius performances that are done by satellite, which are covered by the Copyright Royalty Board rates recently upheld by the US Court of Appeals. Instead, these rates only cover the streaming of Sirius programming done over the Internet or to mobile devices using Internet technology. The Collegiate Broadcasters agreed to a rate that provided the flat $500 fee for the first 159,140 aggregate tuning hours a month set by the CRB decision, and then per performance fees at the NAB rates for all streaming above that amount. The religious broadcasters deal is less defined, discussing a per performance rate, but not providing any more details of the agreement. For both noncommercial groups, there are references to reduced recordkeeping requirements for some webcasters, but again, those have not yet been detailed.
The Pureplay Webcasters settlement agreement, which we summarized here, was published in the Federal Register on Friday, starting the 30 day clock running for the election of the deal by existing webcasters. While this deal offers better per performance rates to large webcasters than offered by the rates established by the Copyright Royalty Board, and higher permissible listening levels to Small Commercial Pureplay webcasters than allowed under the Microcaster deal, this option still is not for everyone. For larger webcasters, there is a minimum fee of 25% of total revenue, so companies with multiple lines of business will not want to opt into the deal. For smaller webcasters, the fees are higher than under the Microcaster deal, including a $25,000 minimum yearly fee, and there are per performance rates that are charged when the webcaster offers services that are "syndicated," i.e. played through a website other than that of the webcaster itself. So electing this deal is right only for larger "small pureplay" webcasters who have revenues over $250,000 (where they will be paying royalties in excess of the $25,000 minimum fee under any deal) and those entities nearing the audience caps of the Microcaster deal. Nevertheless, for those webcasters who fit within the constraints of the deal, it offers benefits over the other existing options. The opt-in date set by the deal is August 17, 2009. The forms to opt into the the Small Pureplay webcasters agreement are here. The forms for larger Pureplay webcasters are here.
Note that this is just one of many options available to webcasters, each tailored to webcasters of specific types. Noncommercial webcasters associated with NPR or the Corporation for Public Broadcasting have their own deal, where essentially CPB pays the royalties. See our description of this deal, here. Streaming done by broadcasters, who would not want to take the "pureplay" deal as their broadcast revenues would be subject to the royalties, have their own settlement agreement, which we described here and here, setting out per performance rates different than those arrived at by the CRB. Small commercial webcasters can elect the "Microcaster" deal, which we described here. And for those entities that don’t fit under any of these categories, they will have to pay the CRB rates, which we described here and here. The Radio and Internet Newsletter recently ran a good, basic summary of these alternatives, here. Note that there still is another two week period where, under the Webcaster Settlement Act of 2009, agreements can be reached with SoundExchange by other webcaster groups to potentially pay rates that are different from any of those agreed to so far.
The US Court of Appeals for the District of Columbia today released its decision for the most part rejecting the appeals of webcasters of the 2007 decision of the Copyright Royalty Board setting Internet Radio royalty rates for the use of sound recordings. The Court generally upheld the Board’s decision, finding that the issues raised by the appealing parties did not show that the decision was "arbitrary and capricious" – a high standard of judicial review that the Courts accord when reviewing supposedly "expert" administrative agency decisions. On only one issue did the Court have concerns with the CRB’s decision – that being the question of the $500 per channel minimum fees that it had required that webcasters pay. The Court found that per channel fee, which could result in astronomical fees for some webcasters regardless of their listenership, was not supported by the record evidence, and remanded that aspect of the case to the CRB for further consideration.
The Court surprised some observers by not reaching the constitutional issue of whether the Copyright Royalty Judges were properly appointed. As we wrote before (see our posts here and here), issues were raised by appellant Royalty Logic, contending that these Judges should be appointed by the President, and not by the Librarian of Congress. In the recent Court decision on the CRB rates for satellite radio, where the issue had not even been raised, one Judge nevertheless wrote that he questioned the constitutionality of the CRB. The Court here decided not to decide the issue – finding that it had been raised too late by Royalty Logic, and raised too many fundamental issues (including whether the Register of Copyrights should herself be appointed by the President, potentially invalidating many copyrights) to be decided on the minimal briefing accorded it by the parties.
The US Court of Appeals for the District of Columbia Circuit today issued a decision basically upholding the royalty rates set by the Copyright Royalty Board due under Section 114 of the Copyright Act by satellite radio operators for the public performance of sound recordings. The CRB decision, setting royalties for the years of 2007 to 2012, established rates that grew from 6% to 8% over the six year term. As we explained in our post, here, the Board looked at the the public interest factors set out by Section 801(b) of the Copyright Act, factors not applicable to Internet Radio royalties, in reaching the determination these royalties. Particularly important was the factor which took into account the potential impact of the royalties on the stability of the businesses that would be subject to the royalty, resulting in a reduction of the perceived fair market value of the royalty from what the board determined to be about 13% of gross revenues to the 6-8% final royalty set by the Board. The Court upheld the Board’s reasoning, rejecting SoundExchange’s challenge to the decision, though the Court did remand the case to the Board to decide the proper allocation of the royalty to the ephemeral rights covered by Section 112 of the Copyright Act.
What was perhaps most interesting about the Court’s decision was the concurring opinion of one of the three Judges, who stated that the fact that the Board’s judges were appointed by the Librarian of Congress, and not by the President, "raises a serious constitutional issue." This was the same issue raised by Royalty Logic in challenging the constitutionality of the CRB in the webcasting proceeding (see our posts here and here). The Judge concurred in the majority decision as none of the parties to the satellite radio case raised the constitutional issue, but this very question was squarely raised in the webcasting proceeding, and thus may well be resolved in the decision on that appeal.
A settlement under the Webcaster Settlement Act of 2009 was signed today by SoundExchange and a group of webcasters that I represented in the Copyright Royalty Board proceeding to determine the royalty rates for the use of sound recordings by Internet Radio stations for the period from 2006-2010. This agreement is for “pureplay” webcasters, i.e. those that are willing to include their entire gross revenue in a percentage of revenue calculation to determine their royalties. As permitted under the terms of the WSA, this agreement not only reaches back to set rates different, and substantially lower, than those that were arrived at by the CRB for the period from 2006-2010, but also resolves the rates for 2011-2015, relieving webcasters who join the deal from having to litigate another CRB proceeding to set the rates for those years.
While no deal arrived at under the circumstances in which these webcasters found themselves (a CRB decision that did not set any percentage of revenue royalty rate and would seemingly put these webcasters out of business, the prospect of a new CRB proceeding that would costs significant sums to litigate with no guarantee of success, and with the only other current option being the “microcasters” deal unilaterally advanced by SoundExchange that severely limited the amount of streaming that a webcaster could do and imposed significant “recapture provisions” in the event of a sale of the webcaster’s business) may not be ideal, the settlement does provide significant benefits over any other existing option for any webcaster who qualifies under its provisions. These deal points are set out below.
The MusicFirst coalition last week asked that the FCC investigate broadcast stations that allegedly cut back on playing the music of artists who back a broadcast performance royalty, and also those stations who have run spots on the air opposing the performance royalty without giving the supporters of the royalty an opportunity to respond. While the NAB and many other observers have suggested that the filing is simply wrong on its facts, pointing for instance to the current chart-topping position of the Black Eyed Peas whose lead singer has been a vocal supporter of the royalty, it seems to me that there is an even more fundamental issue at stake here – the First Amendment rights of broadcasters. What the petition is really saying is that the government should impose a requirement on broadcasters that they not speak out on an issue of fundamental importance to their industry. The petition seems to argue that the rights of performers (and record labels) to seek money from broadcasters is of such importance that the First Amendment rights of broadcasters to speak out against that royalty should be abridged.
While the MusicFirst petition claims that it neither seeks to abridge the First Amendment rights of broadcasters nor to bring back the Fairness Doctrine, it is hard credit that claim. After all, the petition goes directly to the heart of the broadcasters ability to speak out on the topic, and seems to want to mandate that broadcasters present the opposing side of the issue, the very purpose of the Fairness Doctrine. As we’ve written, the Fairness Doctrine was abolished as an unconstitutional abridgment on the broadcaster’s First Amendment rights 20 years ago. As an outgrowth of this decision, FCC and Court decisions concluded that broadcasters have the right to editorialize on controversial issues, free of any obligation to present opposing viewpoints. What is it that makes this case different?