royalties

Subscribe to royalties via RSS

As reported in Digital Music News and other publications on Friday, Clear Channel Communications dropped its waiver of music royalties from its on-line agreement signed by musicians submitting songs to the Company in hopes that their music would be played on the Company’s radio stations.  In writing about this decision, most publications attribute the decision to the petition filed with the FCC by the Future of Music Coalition and other public interest groups arguing that the waiver requests constituted a form of payola – the giving of something of value (the waiver of the right to receive a royalty) in exchange for the playing of music.  However, on close inspection, that would appear to be a misunderstanding of the royalty, as there would seem to be no royalty that would be affected by the waiver in connection with the playing of this music by radio stations, and therefore there would be no payola over which the FCC has any jurisdiction.

According to the Future of Music petition, Clear Channel’s promise to play new music was made in connection with the payola settlement that it and other companies entered into with the FCC, and was apparently contained in a side letter filed with the FCC, as it was not spelled out in the settlement agreements themselves. See our analysis of the settlement agreements, here.  The side letter promised that the Company would dedicate a certain amount of radio airplay on the Company’s radio stations to new local music.  However, such play would not implicate any music royalties – so a waiver of royalties would not confer any benefit on the Company.  Broadcast stations pay no royalty for the use of a sound recording – thus the waiver that Clear Channel requested was without any value as there was no royalty to waive.  While broadcast stations do pay a royalty for the composition (the underlying words and music of a song), stations play flat fees to ASCAP and BMI that are a function of the station’s market size and power – not a function of how many songs are played.  Thus, as there is no sound recording royalty and a flat fee for the composition royalty unaffected by any waivers, the waiver did not confer any benefit to the Company in connection with its broadcast operations.  Thus, there where would appear to be no payola issue over which the FCC would have any jurisdiction.Continue Reading Music Waivers Dropped Amid Payola Allegations – What’s the Impact for Future Waivers for Webcasters?

Monday, July 16th is the first business day after the effective date of the new Internet Radio royalties set by the Copyright Royalty Board.  As we wrote earlier this week, the Court of Appeals has denied the requested stay of the effective date.  And, while a bill was introduced in Congress this week to provide for a legislative stay, that will not be acted on by Monday, nor will action occur on the broader Internet Radio Equality Act.  Thus, many webcasters are asking what they should do on July 16.  Some have suggested that they should stop streaming, while others have wondered what will happen if they don’t pay the higher royalties.  This decision is one that each webcaster should make carefully, in consultation with their counsel and business advisers.  But there are some practical considerations that should be taken into account when making the decision as to what should be done on Monday.

First, it should be noted that not all webcasters are equally affected by the royalty rate increase.  Larger commercial webcasters, including most broadcasters who are streaming their signals on the Internet, should have been paying royalties up to now that, while lower than those adopted by the CRB, have increased by "only" about 40%  – from $.00076 per performance (per song per listener) to $.0011 per performance.  These rates will continue to increase between now and 2010 so that they eventually will reach $.0019 per song per listener.  But for now, the increase is relatively modest (as compared with some of the other increases discussed below).  While there are reportedly at least some conversations going on between SoundExchange and groups representing broadcasters and large webcasters about reaching some sort of accommodation on royalties, there is no certainty that any deal will be reached, so these webcasters probably should be paying the higher royalties (and hoping for a credit against future royalties should there be an agreement reached in the future to reduce these royalties, a successful appeal, or future legislative action reducing the royalties). Continue Reading It’s July 15th – What’s a Webcaster to Do?

Yesterday, a three judge panel of the US Court of Appeals in Washington, D.C. denied the Emergency Motion for a Stay of the Internet Radio Royalty rates set earlier this year by the Copyright Royalty Board.  Our coverage of the stay motion can be found here and here.  Coverage of the entire royalty issue and the surrounding controversy can be found in various posts on our blog, here.  The denial of the stay means that, absent Congressional action or some voluntary agreement of the parties, the new rates will go into effect with payments for the period since the CRB decision being due on Monday, July 16.

The Court’s decision was very brief – in essence three sentences which merely stated that the moving parties had not met the high legal burden necessary for the Court to impose a stay.  A stay is an extraordinary legal action, taken by a Court as part of its equitable powers to insure that justice is carried out.  In order to justify a stay, a party must show the Court that there is a likelihood of success on the merits of the case (in other words, it must prove in a 20 page stay motion the likelihood that it will eventually win its appeal after full briefing and oral argument), plus it must prove that there will be irreparable harm if the stay is not issued (more than simply a loss of money – but harm that cannot be remedied if the appeal is eventually successful).  Weighing those factors, and balancing the competing interests of the parties and the public interest, the Court decides whether or not to issue a Stay.  In this case, as there was no more than the pro forma Order, we do not know what shortcomings the Court perceived in the Motion seeking the Stay, but no reasons are required as the Court can merely decide not to exercise its equitable discretion in a case.Continue Reading Court Denies Webcaster Stay

Last week brought more action, and not much in the way of  results, as we count down to the July 15 effective date of the new Internet Radio Royalties.  The actions that received the largest amount of press coverage were the hearing before the US House of Representatives Small Business Committee, and the offer by SoundExchange suggesting that the minimum $500 per channel fee be capped at $2500 per service. While both initially seemed to offer the prospect of some resolution of the dispute over the Internet Radio royalties that were adopted by the Copyright Royalty Board, in fact neither ultimately resulted in much.

The Committee hearing featured webcasters and musicians – equally divided between those who believed that the royalties were fairly decided, and those who believed that the rates were too high.  The one thing on which most of the witnesses seemed to agree was that some rate adjustment was warranted for small webcasters, though no one was able to quantify how such a settlement should be reached.  The Congressional representatives, on the other hand, were cautious to act, asking again and again whether the parties were going to be able to settle the case between themselves.  While Congressman Jay Inslee testified in favor of his Internet Radio Equality Act, the members of the committee seemed hesitant to act while there were judicial avenues of relief still pending, and the possibility of settlement.Continue Reading Minimum Per Channel Fee Offer – Waiting for the Stay?

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

With July 15 now less than a month away, the new Internet Radio music royalties are still scheduled to go into effect.  Congressional legislation is slowly being considered, and a Motion for Stay to put the regulations on hold pending appeal has been filed (see our post here).  Some discussions on settlement have also taken place, though no deals have been done.  Without some action, payments under the new rules will soon be due.  See our memo, here, for more details on the CRB decision, and all of our posts on this issue, here.  While the legal and legislative actions are still proceeding, and the clock is counting down, the coverage in the popular media continues to grow.  In two recent discussions of the issue, SoundExchange spokesmen seem to blame Internet Radio for the current woes of the recording industry and to justify the high royalty rates through comparisons to the illegal pirating of copyrighted music.  All of these issues will be discussed at a seminar that I am moderating later this week at the Digital Media Conference in the Washington DC area.

One example of SoundExchange’s recent claims can be found in a series of articles found on the Los Angeles Times website featuring a "Dust-up" exchange of viewpoints on the Internet radio issue,  between Kurt Hanson, owner of Internet radio broadcaster Accuradio and the publisher of the Radio and Internet newsletter, and Jay Rosenthal, a Board member of SoundExchange.  Mr. Rosenthal, in attacking the value of Internet radio as a promotional tool, said that while webcasters might excite people about new music, most new music is now illegally downloaded so that the promotion doesn’t actually help the artists.  But, as Kurt Hanson points out, that would essentially be an excuse for never promoting any music in any venue – in fact it seemingly would be an excuse for shutting down the recording industry.  If music promotion just leads to illegal file sharing sites, and little or no music is ever to be sold again, why bother?  Does the recording industry really expect to make up for lost sales by receiving royalties from Internet radio?  Yet the same point seems to be made by SoundExchange President John Simson in a piece done by the PBS program NOW.  That program focused on the Internet Radio station Radio Paradise and how its popular, eclectic music mix will be silenced if the new royalties go into effect.  In that story, Simson also points to illegal downloading as causing the woes of the music industry, seemingly implying that this justifies outrageous royalties – yet offers nothing to tie downloading to Internet radio.Continue Reading 30 Days And Counting Down to the New Internet Radio Royalty Rates

The past few days have been eventful ones in the battle over Internet radio royalties.  Appeals from the decision of the Copyright Royalty Board decision (see our memo explaining that decision, as well as our coverage of the history of this case) were submitted by virtually all of the parties to the case.  In addition, the National Association of Broadcasters, which had not previously been a party to the case, filed a request to intervene in the appeal to argue that the CRB decision adversely affects its members.  Also in Court, a Motion for Stay of the decision was submitted, asking that the CRB decision be held in abeyance while the appeal progresses.  The "appeals" that were filed last week are simply notices that parties dispute the legal basis for the decision, and that they are asking that the Court review that decision.  These filings don’t contain any substantive arguments.  Those come later, once the Court sets up a briefing schedule and a date for oral arguments – all of which will occur much later in the year.  As the CRB decision goes into effect on July 15, absent a Stay, the appeal would have no effect on the obligations to begin to pay royalties at the new rates.

The Stay was filed by the large webcasters represented by DiMA, the smaller independent webcasters that I have represented in this case, and NPR.  To be granted a stay, the Court must look at a number of factors.  These include the likelihood that the party seeking the stay will be successful on appeal, the fact that irreparable harm will occur if the stay is not granted, the harm that would be caused by the grant of a stay, and the public interest benefits that would be advanced by the stay.  The Motion filed last week addressed these points.  It raised a number of substantive issues including the minimum per channel fee  set by the CRB decision, the lack of a percentage of revenue fee for smaller webcasters, and issues about the ability of NPR stations to track the metrics necessary to comply with the CRB decision.  The Motion raised the prospect of immediate and irreparable harm that would occur if the decision was not stayed, as several webcasters stated that enforcement of the new rates could put them out of business.Continue Reading NAB Joins the Fray on Internet Radio – Appeals and a Request for Stay are Filed, And a Settlement Offer is Made to Noncommercial Webcasters

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