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The Copyright Royalty Board today released its Determination of Rates for noninteractive webcasting services for the period from 2011-2015. These rates will form the default rates for webcasters who have not opted into one of the many voluntary agreements negotiated last year under the Webcaster Settlement Act (see our summaries of the Pureplay webcaster deal here, the Broadcasters settlement here, the Small Webcasters or "microcaster" settlement here, the noncommercial webcasters settlements here, the Sirius XM settlement here, and the CPB/NPR settlement here).  The Board set the following per performance royalty rates as the default rates for webcasters who are not terrestrial broadcasters:

  • 2011 – $.0019 per performance
  • 2012 – $.0021 per performance
  • 2013 – $.0021 per performance
  • 2014 – $.0023 per performance
  • 2015 – $.0023 per performance

Thus, the rates for this coming year will remain at the same level at which they are now set for 2010, and will increase slightly every other  year.  A performance is one song played to one listener. 

The decision also adopted default rates for noncommercial webcasters, setting those rates at the levels agreed to in a settlement between SoundExchange and certain noncommercial educational webcasters reached last year. Those rates establish a minimum fee of $500 for each individual channel offered by a noncommercial webcaster. If the listening on any channel exceeds 159,140 Aggregate Tuning Hours in any month, the webcaster would pay for such overage on a per performance basis at the following rates:

  • 2011 – $.0017 per performance 
  • 2012 – $.0020 per performance
  • 2013 – $.0022 per performance
  • 2014 – $.0023 per performance
  • 2015 – $.0025 per performance

Continue Reading Copyright Royalty Board Reaches Determination on Royalty Rates for Webcasting for 2011-2015 – For Internet Radio Operators Not Covered by Webcaster Settlement Act Agreements

The Copyright Royalty Board has announced its approval of new sound recording performance royalties for "new subscription services", i.e. music services provided to the customers of cable or satellite television systems by companies not in this business in 1998 at the time of the adoption of the Digital Millennium Copyright Act.   This royalty was adopted after a settlement between Sirius XM Radio, the only music service which filed to participate in this proceeding, and SoundExchange.  The settlement as approved provides for royalties that are the higher of 15% of the revenues of the service (subscription payments plus other revenues such as advertising and sponsorships provided by the service), or a minimum per subscriber fee that increases over the five year course of the royalty period.  The details of this settlement, including the escalating per subscriber royalties, can be found in the Federal Register notice of its approval, here.

This royalty has very limited applicability, governing only the payments due from audio services "transmitted to residential subscribers of a television service through a Provider which is marketed as and is in fact primarily a video service," i.e. music services bundled with a subscription to a cable or DBS service – and only where that service is delivered to residential users.  Given the limited applicability of this service, one might be inclined to ignore its adoption.  However, broadcasters in particular should pay attention to this royalty, as it is again indicative of the value that the music copyright holders and SoundExchange place on the use of their music in an audio service, and thus of what SoundExchange would seek were they to get a performance royalty on over-the-air broadcasting.   Continue Reading Copyright Royalty Board Approves Settlement for Sound Recording Royalty Rates for “New Subscription Services” – Any Hints As to What A Broadcast Performance Royalty Would Be?

In one more indication that the Broadcast Performance Royalty (or "performance tax" as opponents of the legislation call it) is not dead yet is an article in yesterday’s New York Times reviewing the issues at stake in the proceeding.  What was perhaps most interesting about that article was the fact that it appeared only one page away from an article about Internet Radio service Pandora, and a discussion of how that hugely popular service was almost driven out of business by music royalties set by the Copyright Royalty Board in their 2007 royalty decision.  The article about the broadcast performance royalty mentions that one of the difficulties in assessing the impact of the proposed royalty is that no one knows how much it will be, as it would be set by the Copyright Royalty Judges on the CRB.  Yet the Times makes no mention of the controversy over the previous decisions of the Board in the context of the Internet radio royalties, and how such royalties almost impacted services such as Pandora.  

How much would the proposed royalties on broadcasters be?  We have written before on that subject,here.  Under previous decisions using the "willing buyer, willing seller" royalty standard which is set out in the legislation that has passed House and Senate Judiciary committees dealing with this issue, the lowest royalty for the use of music in any case before the CRB has been 15% of gross revenues.  Even using a standard seemingly more favorable to the copyright user (the 801(b) standard that assesses more than the economic value of the music but also looks at the impact that the royalty would have on the stability of the industry on which it is imposed), the royalties have been in the vicinity of 7% of gross revenues for both satellite radio and digital cable radio, the two services that are subject to royalties set using the 801(b) standard.  This is more than broadcasters currently pay to ASCAP, BMI and SESAC – rates which are also currently the subject of proceedings to determine if these rates should be changed (see our posts here and here).   Continue Reading Proposed Broadcast Performance Royalty Back in the News – Where is It Going?

The Senate Judiciary Committee today approved the bill to impose a performance royalty (or the "performance tax" as the NAB had called it) on radio broadcasters for the public performance of sound recordings on their over-the-air stations.  As was the case in the House of Representatives when its Judiciary Committee approved their version of the bill, the Committee acknowledged that there was still work to do before a final bill would be ready for the full Congress.  Nevertheless, this is the first time that the Judiciary Committees in both Houses of Congress have approved the performance royalty, serving as a warning to broadcasters that this issue may well be moving to a showdown before the full House and Senate during the current session of Congress. 

There was only limited debate on the bill at the Committee hearing, yet several open issues were identified.  The Committee made clear that, even though it was approving the bill in the form introduced and amended by its managers, there were still changes that would be made in the future before any legislation was ready to be finalized.  Senator Feinstein of California discussed several of the issues.  First, the bill as amended by the Senate managers (Senators Leahy and Hatch), the bill provided relief for small broadcasters so that any performance royalty would not impose an undue burden on them.  The bill proposed the following royalty structure for small broadcasters:

(I) revenues of less than $50,000 – a royalty fee of $100 per year;

(II) revenues of at least $50,000 but less than $100,000 – a royalty fee of $500 per year;

(III) revenues of at least $100,000 but less than $500,000 – a royalty of $2,500 per year;

(IV) revenues of at least $500,000 but less than $1,250,000 – a royalty of $5,000 per year.

Senator Feinstein, who stated that she favored parity between all music services that pay a royalty, suggested that this same royalty structure should be applied to small webcasters who, under current settlement agreements, can pay almost 30 times the amount that a small broadcaster with the same revenues would pay under this bill – and those settlements were an improvement on the royalties that would have been paid under the decision of the Copyright Royalty Board.  Senator Feinstein stated that "the parties" were working on an agreement that would amend the bill to extend these rates to small webcasters.Continue Reading Senate Judiciary Committee Approves Broadcast Performance Royalty – With Issues Yet to Resolve

One of the fundamental questions that surrounds the proposed broadcast performance royalty for the use of sound recordings by over-the-air (or the "performance tax" as it has been labeled by the NAB) is how much it could it cost a broadcaster?  Right now, that question is difficult to determine, as the pending bills do not themselves provide any details as to what the fees would be, except for noncommercial entities and for small broadcasters for whom fixed yearly fees are proposed.  For a broadcaster with a station having over $1.25 million in yearly revenues, the current Congressional bills leave the amount of the royalty to be determined by the Copyright Royalty Board.  In the current Senate draft of the bill, the amount to be paid would be based on the "willing buyer willing seller" standard that has been so controversial for Internet Radio companies. But the hearing to be held by the Senate Judiciary Committee tomorrow will address, among other issues, the question of "platform parity," i.e whether all companies subject to the sound recording performance royalty should pay a comparable rate, so we may see that proposal change as it did in the House version, to some form of the 801(b) standard (about which we wrote here and here).

We will write about the differing rates paid by differing music services in the next few days, especially as it becomes clear as to what rates for Internet radio royalties were agreed to under the most recent settlements with webcasters pursuant to the Webcaster Settlement Act.   But even without a detailed analysis of all of the rates that have been agreed to, certain trends can be seen as to what SoundExchange, on behalf of the artists and copyright holders, believes to be a fair royalty for the use of their music.  And that number is likely to be a "Substantial" one, as suggested by a recent Congressional Budget Office review of the cost to broadcasters of the proposed performance royalty.Continue Reading Broadcast Performance Royalty – What Would It Cost? The Congressional Budget Office Says A “Substantial” Amount

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.Continue Reading Court Upholds Copyright Royalty Board Decision on Satellite Radio Royalties, But Questions Board’s Constitutionality

The House of Representatives Judiciary Committee today approved a bill that would impose, for the first time, a royalty on radio broadcasters for the public performance of sound recordings in their over-the-air broadcasts.  if this bill were to be adopted by the full House of Representatives and the Senate, and signed by the President, broadcasters would have to pay for the use of sound recordings (the actual recording of a song by a particular musical artist) in addition to the royalties that they already pay to ASCAP, BMI and SESAC for the public performance of the underlying musical composition.  While, from the discussion at the hearing today, the bill is much amended from the original bill (about which we wrote, here) to try to address some of the issue that have been raised by critics, the Committee made clear that there were still issues that needed to be addressed – preferably through negotiations between broadcasters and the recording industry – before the bill would move on to the full House for consideration.  It was, as Representative Shelia Jackson Lee of Texas stated, still a "work in progress."  In fact, the Committee asked that the General Accounting Office conduct an expedited study of the impact of this legislation on radio and on musicians – but it did not wait for that study before approving the bill – despite requests from some royalty opponents that it do so. 

While I have not yet seen a copy of the amended bill that Congressman John Conyers, the Chairman of the Committee, said had been completed only a few hours before the hearing, the statements made at the hearing set out some details of the changes made to the original version of the bill.  First, changes were made to reduce the impact on small broadcasters – reducing royalties to as little as $500 for stations that make less than $100,000 in yearly gross revenues.  Interestingly, Representative Zoe Lofgren pointed out that, in a bill that means to address the perceived inequality in royalties, a small webcaster with $100,000 in revenues would be paying $10,000 in royalties – 20 times what is proposed for the small broadcaster.  And the small broadcaster who would pay $5000 for revenues up to $1.25 million in revenue would be paying 1/30th of the amount paid by a small webcaster making that same amount of revenue.Continue Reading Broadcast Performance Royalty Passes House Judiciary Committee – A Work In Progress

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

The oral argument on the Webcasting appeal of the March 2007 Copyright Royalty Board decision setting Internet radio sound recording royalty rates for 2006-2010 has now been set for March 19.  So, if no settlement under the Webcaster Settlement Act (about which we wrote here) is reached before the February 15 deadline set out…

The Copyright Royalty Board today published a notice in the Federal Register announcing the start of its next proceeding to set the royalties to be paid by Internet radio operators for the performance rights to use "sound recordings" (a particular recording of a song as performed by a particular performer) pursuant to the statutory royalty.  As we’ve written extensively on this blog, the statutory royalty allows an Internet radio station to use any publicly released recording of a song without the permission of the copyright owner (usually the record company) or the artist who is recorded, as long as the station’s owner pays the royalty – currently collected by SoundExchange.  In 2007, the Copyright Royalty Board set the royalties for 2006-2010, a decision which prompted much controversy and is still under appeal.  In the Notice released today, the CRB set February 4 as the deadline for filing a Petition to Participate in the proceeding to set the royalties for the next 5 year period.

The 2006-2010 royalties are currently the subject of negotiations as the parties to the last proceeding attempt to come to a voluntary settlement to set royalties that are different than those established by the CRB decision.  The Webcasting Settlement Act (which we summarized here) gives webcasters until February 15 to reach an agreement as to rates that would become an alternative to the rates that the CRB established.  The Act also permits parties to reach deals that are available not only for the 2006-2010 period, but also allows the deals to cover the period from 2011-2016.  Thus, theoretically, webcasters could all reach agreements with SoundExchange to establish rates that cover the next royalty period, obviating the need for the proceeding of which the CRB just gave notice.  But, as is so often the case, those settlements may not be reached (if they are) until the last minute – so parties may need to file their Petitions to Participate before they know whether a settlement has been achieved.Continue Reading Here We Go Again – Copyright Royalty Board Announces Date for Filing to Particpate in Proceeding to Set Webcasting Royalties for 2011-2015