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The Copyright Royalty Board this week published notice in the Federal Register that SoundExchange is auditing two broadcast companies who are streaming their signals online to assess compliance with the statutory music licenses provided by Sections 112 and 114 of the Copyright Act for the public performance of sound recordings and ephemeral copies made in the digital transmission process by commercial webcasters. A notice was published last month indicating an audit of five other broadcast companies.  Notices of audits are annual events.  But, as the number of broadcasters selected for audits this year is higher than in past years, we thought that we should republish some of the observations that we have made in the past about these audits. 

SoundExchange may conduct an audit of any licensee operating under the statutory licenses for which it collects royalties.  Such audits cover the prior three calendar years in order to verify that the correct royalty payments have been made (the notice issued this week audits the named broadcasters for 2022-2024, while the audits announced last month were filed in late 2024 and are for the years 2021-2023). The decision to audit a company is not necessarily any indication that SoundExchange considers something amiss with that company’s royalty payments – instead SoundExchange audits a cross-section of services each year (see our past articles about audits covering the spectrum of digital music companies who have been subject to these audits – here, here, here, here and here).  Continue Reading Copyright Royalty Board Announces SoundExchange Audits of Broadcast Companies Streaming Their Signals – How Do These Audits Work?

Update (January 24, 2024) – The Copyright Royalty Board issued a Federal Register Notice correcting the deadline for Petitions to Participate in the WEB VI proceeding – making clear that the deadline is February 5, 2024, not February 6 as previously reported. This article has been updated with the corrected deadline. For more information, see our article here).

The Copyright Royalty Board on Friday published in the Federal Register a call for interested parties to file Petitions to Participate in the proceeding to set the royalty rates to be paid by webcasters (including broadcasters who simulcast their programming through internet-delivered channels) in the period 2026-2030.  These royalties are paid by webcasters to SoundExchange for the noninteractive streaming of sound recordings.  The CRB is required to review these rates every five years.  These proceedings are lengthy and include extensive discovery and a trial-like hearing to determine what royalty a “willing buyer and a willing seller” would agree to in a marketplace transaction.  Because of the complexity of the process, the CRB starts the proceeding early in the year before the year in which the current royalty rate expires.  So, as the current rates expire at the end of 2025, parties will need to sign up to participate in the proceeding to determine 2026-2030 rates by February 5, 2024 by filing a Petition to Participate.  The Petition must describe the party’s interest in the proceeding and be accompanied by a filing fee of $150.  The Federal Register notice provides other procedural details for filing these Petitions.

Once the Petitions to Participate are filed, the CRB will set out the rules and procedures to be followed in the proceeding.  Initially, there is a 90 day period in which the parties can try to settle the case.  While parties can settle at any time (subject to approval of the terms by the CRB), this initial 90-day period occurs before any litigation begins and offers parties the opportunity to avoid much of the cost of litigation.  Once that period ends without a settlement, the litigation begins.  Initial stages of the litigation (including the identification of witnesses, submission of the rate proposals and the evidence supporting those proposals, and the initial discovery) will likely all take place in 2024, with the hearing itself conducted in 2025, followed by final briefs summarizing the evidence and arguing about the conclusions to be drawn from that evidence. There are usually oral arguments held after the briefs are submitted.  At that point, the three Copyright Royalty Judges will consider the evidence and the arguments and release their decisions late in 2025, so that parties know the new rates as of January 1, 2026. While there may be appeals of the decision that are argued well beyond the effective date of the new rates, the rates become effective while those appeals are pending.Continue Reading Copyright Royalty Board Starts WEB VI Proceeding to Set Webcasting Royalties Paid to SoundExchange for 2026-2030: Petitions to Participate Due February 5

We are waiting on the Copyright Royalty Board to release its decision setting the royalties that webcasters (including broadcasters who simulcast their over-the-air programming on the Internet) will pay to SoundExhange for the public performance of sound recordings in the period 2021 through the end of 2025.  As we wrote here, that decision would normally have been released in December but, as the trial to establish those rates was delayed by the pandemic and held virtually over the summer, the decision on rates could come as late as this April, though once effective it will be retroactive to all streaming that has occurred since January 1 of this year.  While we await the announcement of the new rates, as I’ve recently received several questions about the rules that apply to streaming under the statutory license, I thought that I would take a quick look at the “performance complement” and other rules that apply to companies that rely on this license.

Note that the rules set out below are slightly different for certain broadcasters, as the NAB in 2016 entered into agreements with Sony and Warner Music Groups to waive certain of the statutory requirements for broadcasters who stream their over-the-air signals on the Internet.  These agreements allow broadcasters to stream their normal over-the-air programming featuring music from these labels without having to observe all of the obligations set out below.  We summarized those waivers here, and hope that they will be further extended to cover the new royalty term.  Also, some big webcasters have negotiated relief from these requirements (see our article here).  But for those not subject to a waiver, let’s look at some of the rules that webcasters relying on the statutory license are to observe.
Continue Reading Looking at the Performance Complement and Other Rules that Apply to Webcasting Companies Relying on the Sound Recording Statutory License

In the last month, there have been two bills introduced in the US House of Representatives seeking to impose a performance royalty for sound recordings on broadcast radio stations in the US. The bill introduced yesterday, The PROMOTE Act (standing for the Performance Royalty Owners of Music Opportunity to Earn Act – whatever that may mean, can be found here), seems to have garnered more attention, perhaps as it was promoted by its principal sponsor, California Congressman Darrell Issa, as giving performing artists the right to decide whether or not their music is played by radio stations. In fact, it does not do that, instead merely setting up a royalty system similar to that in place for Internet radio operators, allowing broadcasters to play music only if they pay royalties on “identical” rates and terms as do webcasters.

The PROMOTE Act proposes to add to the Copyright Act’s Section 106 enumeration of the “exclusive rights” given to copyright holders a provision stating that sound recording copyright holders (for most popular releases, that is usually the record company) have the exclusive right to authorize the performance of recorded songs by broadcast radio stations. That is in addition to the existing right to authorize the playing of these songs by digital audio transmissions (e.g. webcasters, satellite radio and digital cable services). But, like with the right to play music by digital services, that right to prohibit the playing of recorded songs is not absolute. Instead, like for the digital services, through a proposed amendment to Section 114 of the Copyright Act, broadcasters will have the right to play the songs if they pay a royalty set by the proposed legislation at “rates and terms” “identical” to those paid by webcasters. Let’s look at these issues more closely.
Continue Reading New Congressional Attempts to Impose a Performance Royalty for Sound Recordings on Broadcast Radio, Including the PROMOTE Act – What Do They Provide?

In tomorrow’s Federal Register, the Copyright Royalty Board will announce the commencement of three new proceedings to set music royalties for the 2018-2022 five-year period – each involving a different music right. The Board will begin a proceeding dealing with the digital public performances of sound recordings by satellite radio and “pre-existing subscription services” – the royalty that Sirius XM pays to record labels and performing artists for its performance of their songs on their satellite service, and the rates that cable radio pays for those same uses (see the draft notice here). Our summary of the last proceeding for satellite radio and pre-existing subscription services can be found here. Sirius XM was also a participant in the recent webcasting case, but only for its streaming service.  The statutory royalties at issue here are set by Sections 112 and 114 of the Copyright Act, the same sections that govern the webcasting royalty.

The second proceeding deals with the “mechanical royalty” or the making and distribution of “phonorecords.” That is the proceeding to establish what publishers and songwriters receive when there is a reproduction of their song. Traditionally, that was the royalty paid by a record company to the publisher or songwriter when a “cover version” of a song was made – a flat fee per copy of the song (whether a physical record or CD or a digital download). In recent years, the proceeding has expanded to include royalties paid by on-demand streaming services for their use of music. This is the royalty that has recently been much in the news in connection with the David Lowry lawsuit against Spotify. The CRB pre-publication version of that order is here (and our articles discussing the last decision on that royalty are here and here). This is one proceeding where the record labels and the digital music services are actually more or less on the same side – litigating against the publishing companies and songwriters over how much is paid for the use of the words and music of a particular song.  This proceeding is under Section 115 of the Copyright Act. 
Continue Reading Copyright Royalty Board Set to Begin 3 New Royalty Proceedings – Mechanical Royalty, Sirius XM Satellite Royalty, and Noncommercial Broadcasting Over-the-Air Royalties

In discussing music royalties, the controversy that usually makes the news is the dispute between music services and copyright holders – with services arguing that the royalties are too high and rightsholders contending that they are underpaid. The introduction of the Songwriters Equity Act in Congress earlier this year seems to point toward a new area of dispute – one between the various rightsholders themselves.  This issue was one that was much discussed on a panel that I moderated last week at the RAIN Summit West (audio of that panel is available here).  What is this conflict?

The Songwriters Equity Act, while not explicit in identifying the controversy, does point to the dispute. As we have written many times before, in any piece of recorded music, there are two copyrights – the sound recording copyright (also known as the “master recording,” the recording of a particular song by a particular artist, rights usually held by the record label), and the right to the musical work (or “musical composition,” the words and music to a song, usually held by a publishing company).  The proposed legislation suggests that the amount of the royalties for the public performance of sound recordings can be taken into account in setting the royalties that are payable to songwriters for the public performance of the songs that they have written.  This would amend Section 114(i) of the Copyright Act, which currently prohibits the consideration of the sound recording royalty in determining the rates to be paid for the public performance of musical works.  The proposed legislation would also substitute the “willing buyer, willing seller” standard for the 801(b) standard in setting rates under Section 115 of the Copyright Act, the mechanical royalty (see our discussion of the difference between these standards, here).  While this does not sound like a big deal, it may have a significant impact.
Continue Reading Raising the Royalties for Musical Works? A Discussion of the Potential Dispute between Music Rights Holders over the Value of Their Rights

The broadcast and music trade press brought news of a settlement between music companies and digital media services regrading digital music royalties.  Some press reports jumped to the conclusion that the decision had something to do with the royalty rates that Internet radio companies pay SoundExchange for streaming their music on the Internet.  Others expressed disappointment that it did not seem to address that issue at all.  In fact, the reason that the settlement had nothing to do with webcasting was because it was a settlement of a Copyright Royalty Board proceeding involving a totally different right – essentially the right to reproduce a the musical work, i.e. the words and music to a song – not any public performance right that is involved in Internet radio streaming.

As we have written before (including the last time a similar settlement was announced), webcasters pay their royalties principally under Section 114 of the Copyright Act, which sets up a "statutory license" requiring that all copyright holders in a "sound recording" (a recording of a song by a particular artist) make their songs available for public performance to any digital music service that meets certain criteria – including principally that their service is a non-interactive one, where listeners cannot pick the particular song that they want to hear.  In exchange for this right, digital music services pay a fee set by the Copyright Royalty Board.  These fees cover liabilities for music use in a process where a service generates a product that goes from the service to many people, much like radio does in the traditional world, without making any sort of lasting digital copy that would be akin, in the physical world, to a CD or record.  The settlement that was just announced deals with rights that like those paid, in the physical world, by a record company to a music publisher for using a musical composition in a record or CD that the record company is recording with a particular artist, not with the public performance right.Continue Reading Music Royalty Settlement Announced on Mechanical Royalties – Not A Decision on Webcasting Rates

The Copyright Office has just released a Notice of Inquiry asking whether Federal protection should be extended to sound recordings recorded prior to 1972.  A sound recording is a song as recorded by a particular artist.  Sound recordings were first protected under Federal law in 1972.  Prior to that, unauthorized recordings or reproductions of an artist’s recoding were policed under various state criminal and civil law.  While the Copyright Act has provided for the protection of pre-1972 sound recordings first registered in other countries, US sound recordings recorded prior to 1972, have not received Federal copyright protections.  Many have assumed that this also exempts pre-1972 sound recordings from royalty requirements under Section 114 of the Copyright Act – i.e. the royalties paid by Internet and satellite radio and other digital music providers under the statutory license.  How would a change in the law affect Internet radio operators?

That is one of the questions that is asked by the Notice of Inquiry.  Many Internet radio operators have not excluded pre-1972 recordings from royalty payments based on any exception that may exist for pre-1972 sound recordings, as the possibility has not been widely publicized.  Moreover, some copyright holders have suggested that the digitization of older songs may somehow bring pre-1972 recordings under the coverage of the Copyright Act, or that there may be state remedies that are somehow the equivalent of the Federal public performance right.  Others may just not want to go to the trouble of determining which copyrighted songs are subject to the Uruguay Round Agreements Act (making the non-US pre-1972 sound recordings subject to US Federal law).  The Copyright Office’s Notice of Inquiry asks what impact the inclusion of pre-1972 sound recordings would have on many undertakings – including the archiving and restoration of sound recordings, and on the current benefits that copyright holders and others enjoy under state laws.  In addition, it asks about the benefits and issues that would arise under Section 114 of the Copyright Act – the section that sets out the statutory license under which most Internet radio companies operate.Continue Reading Copyright Office Asks if Federal Protection Should be Extended to Pre-1972 Sound Recordings – What’s the Impact on Internet Radio?

As we have written, by April 2, broadcasters who are streaming need to file with SoundExchange a written election in order to take advantage of the SoundExchange-NAB settlement.  For broadcasters who make the election, the settlement agreement will set Internet radio royalty rates through 2015.  One aspect of this agreement that has not received much attention is the waiver from the major record labels of certain aspects of the performance complement that dictates how webcasters can use music and remain within the limits of the statutory license.  When Section 114 of the Copyright Act, the section that created the performance royalty in sound recordings, was first written in the 1990s, there were limits placed on the number of songs from the same CD that could be played in a row, or within a three hour period, as well as limits on the pre-announcing of when songs were played.  These limits were placed seemingly to make it more difficult for listeners to copy songs, or for Internet radio stations to become a substitute for music sales.  In conjunction with the NAB-SoundExchange settlement, certain aspects of these rules were waived by the 4 major record labels and by A2IM, the association representing most of the major independent labels.  These waivers which, for antitrust reasons, were entered into with each label independently, have not been published in the Federal Register or elsewhere.  But I have had the opportunity to review these agreements and, as broadcasters will get the benefit of the agreements, I can provide some information about the provisions of those agreements.

First, it is important to note that each of the 5 agreements is slightly different.  In particular, one has slightly more restrictive terms on a few issues.  To prevent having to review each song that a station is playing to determine which label it is on, and which restrictions apply, it seems to me that a station has to live up to the most restrictive of the terms.  In particular, the agreements generally provide for a waiver of the requirement that stations have in text, on their website, the name of the song, album and artist of a song that is being streamed, so that the listener can easily identify the song.  While most of the labels have agreed to waive that requirement for broadcasters – one label has agreed to waive only the requirement that the album name be identified in text – thus still requiring that the song and artist name be provided.  To me, no station is going to go to the trouble of providing that information for only the songs of one label – so effectively this sets the floor for identifying all songs played by the station and streamed on the Internet.Continue Reading With April 2 Webcasting Election Due for Broadcasters – A Look at the Record Label Waivers of the Performance Complement