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.