What should SoundExchange do with money that it collects for the performance of sound recordings, when it does not know what sound recordings were played by a particular service?  As we’ve written many times on this blog, SoundExchange collects royalties from digital music services , including satellite radio, cable radio and webcasters, for the performance of sound recordings (i.e. a recording of a song by a particular artist).  It is charged with the obligation to distribute these royalties one-half to those who hold of the copyright to the sound recording and one-half to the artists who perform on those recordings.  However, SoundExchange, according to a filing recently made with the Copyright Royalty Board, does not always know which songs were played by a particular music service.  Thus, it has had difficulty distributing all of the money it collects – currently holding $28 Million in royalties from the period 2004 to 2009 that have not been distributed.  Why?  According to SoundExchange much of the problem is that not all services report what they played and how often, and other information that is submitted is sometimes inaccurate or otherwise does not adequately identify the music that was played.  To deal with this problem, SoundExchange has asked that the Copyright Royalty Board authorize it to use proxy information to distribute these funds from 2004-2009.  The CRB has asked for comments on that proposal.  Comments are due on May 19.

What is proxy information?  Basically, SoundExchange plans to infer from the information that it does have what music was played by the services for which it has no information.  According to the SoundExchange filing, they would make these assumptions based on the type of service.  Thus, information from webcasters would be used to estimate what other webcasters were playing.  Information from background music services who did report would be used to determine what other background music services played, and so on.  The CRB, in its request for comments, asks if the proxy should be further broken down so that, for instance, noncommercial webcasters would serve as a proxy for other noncommercial webcasters, and commercial webcasters would serve as a proxy for other commercial webcasters.  The Copyright Royalty Judges are also seeking to assess whether SoundExchange has done all that it can do to get the required information, and if the proxy system is a fair way of determining distributions for the money that has not yet been awarded to rightsholders and artists. 

Does this proposal have any impact on the services themselves?  Apparently not, as SoundExchange is at this point only looking for this authority in order to distribute money collected for royalties that came in from 2004 to 2009.  It does not appear to be looking at imposing any new restrictions on webcasters or other digital music services.  Instead, it is only looking for the authority to distribute the money that it has already collected based on the information that it has available.  What should music services take away from this request?


Continue Reading SoundExchange Seeks Permission to Distribute Royalties Based on Proxy Information

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.


Continue Reading SoundExchange Announces 4 More Settlements Under Webcaster Settlement Act – Sirius, College and Religious Noncommercial Broadcasters and a Group to be Named Later

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, hereStreaming 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.


Continue Reading Pureplay Webcasters Settlement Agreement Published In Federal Register – 30 Days for Webcasters to Make a Choice

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.


Continue Reading Court Rejects Webcaster Challenge to Copyright Royalty Board Decision on Internet Radio Royalties – And Does Not Rule on Constitutional Issue of CRB Appointment

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.


Continue Reading Pureplay Webcasters and SoundExchange Enter Into Deal Under Webcaster Settlement Act to Offer Internet Radio Royalty Rate Alternative for 2006-2015

The US Senate yesterday passed the Webcaster Settlement Act of 2009, following House passage 10 days ago.  Once the Act receives the signature of President Obama, the law will go into effect, and give webcasting groups and the recording industry 30 days to reach a settlement (or settlements) on Internet radio music royalties for the

We recently wrote about the agreements between SoundExchange and various groups of webcasters, which became effective under the terms of the Webcasters Settlement Act.  These rates act as a substitute for the rates set by the 2007 Copyright Royalty Board decision  setting Internet radio royalties for the use of sound recordings in the period from 2006-2010.  The deal with broadcasters set lower rates than the CRB for 2009 and 2010, and also waived certain requirements otherwise applicable to webcasters, limiting the number of songs from the same artist that can be played in a given period of time (see our posts here and here).  There is also a deal that SoundExchange unilaterally advanced to certain small webcasters which allows for a percentage of revenue royalty, but limits the amount of listening to these webcasters allowed at these rates, and imposes significant recapture fees if a webcaster sells its service to another company that would not qualify as a small webcaster (see our post here).  April 30 is an important date under both deals, as it is the date by which small webcasters must elect the deal, and the date by which all broadcasters who elected the broadcaster deal earlier this month are to pay any back royalties which they owe for streaming from 2006 through the date of the agreement.

In talking to Internet radio operators, both broadcasters and small webcasters, many seem to be unaware of the records that need to be maintained to remain in compliance with the requirements of the deals.  Both the small webcasters agreement and the NAB-SoundExchange settlement require "full census" reporting of  all songs played by the service, which will include information for every song – including the name of the song that was played, the featured artist who performed the song, the album on which the song appeared, and the label on which the album was released.  In addition, the webcaster must report on the number of times each song was played, and how many people heard each transmission of the song.  Only very small broadcasters and "microcasters" under the small commercial webcaster deal, are totally exempt from these requirements.  Under their deal, broadcasters need not provide all the information for up to 20% of their programming, but this percentage of the broadcast week that can avoid full reporting will shrink every year (see our post here for details).


Continue Reading Internet Radio Royalty Reminders – April 30 is the Last Date to Elect Small Webcaster Agreement and for Broadcasters to Pay Past Fees, and Don’t Forget the Recordkeeping Obligations

In January, the Copyright Royalty Board asked for comments as to whether it should require "census reporting" of all sound recordings that are used by a digital service subject to the statutory royalty.  This would replace the current requirement that services need only report on the sound recordings used for two weeks every calender quarter.  Most of the comments that were filed dealt with the difficulties of certain classes of webcasters – particularly small webcasters and certain broadcasters – in keeping full census reports of every song that is played by a service, and how many people heard each song.  In a Notice of Inquiry published in the Federal Register today, the CRB asked for further information about the cost and difficulties of such reporting.  Comments on the Notice are due on May 26, 2009, and replies on June 8.

The real issues, as identified by the CRB, were raised by smaller entities that argued that they do not have the ability to track performances.  Especially problematic are stations that have on-air announcers who pick the music that they want to play in real time, and don’t run their programming through any sort of automation system or music scheduling software.  Live DJs playing music that they want is a hallmark of college radio, but one that creates problems for tracking performances.  How can a DJ’s on-the-fly selection of music be converted to the nice, neat computer spreadsheets required by SoundExchange for the Reports of Use of music played?


Continue Reading Copyright Royalty Board Asks for Further Comments on Costs of Census Recordkeeping for Internet Radio Services

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

In the last 5 days, the US Court of Appeals in Washington, DC has held two oral arguments on appeals from decisions of the Copyright Royalty Board – one from the Board’s decision on Internet Radio Royalties and the other on the royalties applicable to satellite radio.  The decisions were different in that, in the Internet Radio decision, the appellants (including the group known as the "Small Commercial Webcasters" that I represented in the case) challenged the Board’s decision, arguing that the rates that were arrived at were too high.  In contrast, at the second argument, SoundExchange was the appellant, arguing that the Board’s decision set royalties for satellite radio  that were too low.  But, in both arguments, an overriding question was whether the Judges on the CRB were constitutionally appointed and thus whether any decisions of the Board had any validity.  While the question was expected and specifically raised in the webcasting proceeding (see our post here when that issue was first raised), the discussion at the satellite radio argument was somewhat of a surprise, as the issue had not been raised by either party, and the Appeals Court judges were not even the same judges who had heard the Internet radio argument.  Yet one of the Judges raised the issue, unprompted by any party, by asking if the Copyright Royalty Judges were properly appointed and indirectly asking if their decision would have any validity if the constitutional issue was found to exist.

Will the Court decide the constitutionality issue, and what would it mean?  No one knows for sure.  One of the issues raised by the Court in the Internet radio case was whether the issue had been raised in a timely fashion.  In both cases, the possibility of requiring additional briefing on the issue was also raised by the Court, though no such briefing has been ordered – yet.  Even if the Court was to find that the Board was not properly appointed, there are questions as to whether the existing decisions should nevertheless be allowed to stand, while blocking new decisions until a new appointment scheme is found.  Alternatively, Congress might have to intervene to resolve the whole issue and, if it was to do that, would Congress simply ratify the current decision, or would there be new considerations that would affect any Congressional resolution?  The issue raises many questions, and we’ll just have to wait to see what the resolution will be.


Continue Reading Two Court of Appeals Arguments on Sound Recording Music Royalty Rates – And the Real Question is Whether the Copyright Royalty Board is Constitutional