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Webcasting Settlements?

Note: This was written in mid 2007.  Updates are coming.

In the past week, there has been press concerning settlements for webcasters. On Tuesday, select “small” webcasters received an email from SoundExchange with a settlement offer. Read the cover letter or the proposed settlement. Then on Thursday, it was announced that certain parties has reached a settlement concerning per station or per channel minimum fee.

Some may find the events of this past week surprising, but it was really very predictable.

The IREA house sponsors promised to push the legislation forward if progress wasn’t made by labor day. Other members of Congress have repeatedly pushed for the issues to be settled between the parties rather than through Congressional action. In order to avoid intervention and further examination, it is not hard to guess that SoundExchange wanted to demonstrate “progress” before the labor day holiday. Given the pending holiday, which many like to extend into the preceeding week, it is reasonable to assume that this past week was the target for SoundExchange to announce that progress had been made.

Has there really been progress??? Take a look at the first announcement this week in the form of the proposed settlement for small commercial webcasters (SCWs).

From the cover letter…

The attached rates and terms generally track those previously available under the prior agreement negotiated pursuant to the Small Webcaster Settlement Act (SWSA), which allow qualified entities to pay royalties based on a percentage of revenue (10% or 12%) or a percentage of expenses (7%) as
long as their total annual revenue (both direct and affiliated revenue) does not exceed $1.25
million. However, there are certain additional terms:

Many of the SCWs reject the revenue outright as the federal definition of a small business starts at a much higher level. They cite the following figures from the U. S. Small Business Administration Table of Small Business Size Standards

Subsector 515 – Broadcasting (except Internet) (annual average receipts in $MM)
515111 Radio Networks $6.5
515112 Radio Stations $6.5
515120 Television Broadcasting $13.0
515210 Cable and Other Subscription Programming $13.5

Subsector 516 – Internet Publishing and Broadcasting
516110 Internet Publishing and Broadcasting 500 employees

– These rates and terms are available for eligible nonsubscription transmissions for
2006-10, thus effectively extending the rates and terms negotiated pursuant to SWSA for an
additional 5 years.

The problem here lies in the fact that the proposed settlement is nonprecidential (see proposed settlement). That means that the rates agreed to by the parties won’t be admissible as evidence in future rate setting proceedings, such as the one that led to the current situation or the previous situation when rates were set under a different rate setting process. In other words, this is a band-aid intended to offer short term fix to a flawed process. Without reform, the process repeat in 2010 and the results are likely to be just as flawed.

– These attached rates only apply toward each webcaster’s first 5,000,000 aggregate
tuning hours (“ATH”) of usage each month. For any usage in a single month above 5,000,000
ATH, the webcaster must pay the applicable commercial webcaster rates (currently $0.0011 per
performance during 2007.) By way of example, a service would need to have an approximate
average of 6,945 simultaneous listeners, each listening for thirty consecutive days, 24 hours a
day, in order to exceed 5,000,000 ATH of usage.

While these numbers may seem large to some, let’s dissect this a little. Advertising is generaly sold by audience size. This is expressed in the term, cost per thousand or CPM. First we will start by rounding up the average number of simultaneous listeners from 6,945 to 7,000. In order to reach the $1.25 million dollar cap under the ATH cap, a SCW would need to charge $20 per ad if the CPM is under $3 and a has a full inventory of seven ads per hour.

SoundExchange, on the other hand says that at a CPM of $20, webcasters can sell six ads per hour. Simple math shows that 6*1000*7*24*365= $367,920,000.

– If a webcaster’s total annual revenue exceeds $1.25 million, it is no longer
eligible for these offered rates and terms. After the conclusion of a six-month “grace period,”
during which time it may continue to pay under the offered rates and terms, the webcaster must
calculate any subsequent liability using the applicable commercial or noncommercial webcasting
rates, as defined in the Federal Register at 72 Fed. Reg. 24084 (May 1, 2007).
– Webcasters must provide census reporting to SoundExchange and be willing to
work with SoundExchange on implementing technology, developed at SoundExchange’s
expense, to track transmissions and provide the census reporting required under the agreement.
As with SWSA, a condition of this offer is that all parties affirm that this agreement is
non-precedential and does not reflect an agreement between willing buyers and willing sellers in
the marketplace. Rather, this agreement reflects the desires of certain members of Congress that
certain small commercial webcasters receive a below-market rate and as a compromise
motivated by the unique business, economic and political circumstances of small webcasters,
copyright owners, and performers. All parties agree that this agreement (including any rate
structure, fees, terms, conditions, or notice and recordkeeping requirements) may not be
introduced in any proceeding, including those related to the setting of rates and terms for the
licensing of sound recordings.
Please note that SoundExchange is making this offer only on behalf of its copyright
owner members and has no authority to make this offer on behalf of non-members of
SoundExchange. For transmissions of sound recordings owned by non-members of
SoundExchange, webcasters must comply with the rates and terms in the Final Determination of
the CRJs, published in the Federal Register at 72 Fed. Reg. 24084 (May 1, 2007).
SoundExchange is working, however, to implement an industry-wide resolution that would apply
rates and terms similar to the attached for all eligible small commercial webcasters and all sound
recording copyright owners. In the event that industry-wide regulations are adopted by the CRJs
(or other appropriate authority) with rates and terms substantially similar to those contained in
this agreement, this agreement will cease to operate and all parties will be governed by the
industry-wide regulations. Ultimately, an industry-wide resolution will be easier for all parties to
administer, so it is our hope that such a resolution can be obtained.
If you are interested in accepting these rates and terms offered on behalf of
SoundExchange’s members, please sign the attached election form and return the signed form to
SoundExchange by September 14, 2007.

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March 21, 2008 Posted by | Uncategorized | Leave a comment

Webcasting Royalty News

Note: This was written in late November/Early December 2007.  An update is coming.

For those who watch these issues on a daily basis, there are no surprises. Much of what is and is not happening is just what has been expected. But for those who don’t watch the issues on a regular basis, they might be surprised at what is happening. Looking back on what has and has not developed, there has been a lot to report, even when those reports seem to be nothing but more of the same. Let me summarize the events and non-events for you, because, many of the non-events are important.

IREA – The Internet Radio EqualityAct appears stalled in congress. While it has gained a significant number of sponsors (143 as of this writing), no additional sponsors have been added since September to the House version of the bill. The bill was referred to the Subcommittee on Courts, the Internet, and Intellectual Property, and due to the leadership of the committee, the bill is not likely to see a vote.

The Senate version of the bill holds even less hope with only 5 cosponsors and none have been added since June 2007.

The general attitude on the hill has been that the webcasting rates and terms of the CRB should be decided through negotiation. So how has the negotiation process fared to date?

Negotiations

Minimum Fee Cap – Back in August 2007, DiMA, which represents many of the large commercial webcasters reached an agreement with SoundExchange concerning the minimum per channel/per station fee. The two ended up “agreeing that the $500 per channel minimum fee imposed by the Copyright Royalty Board (“CRB”), which might have by itself driven many webcasters like Pandora or Live 365 out of business had it not been resolved, would be capped at $50,000″, according to the David Oxenford Blog. This means nothing to college stations.

When don’t Small Commercial Webcasters=small commercial webcasters? David Oxenford represented a number of “Small Commercial Webcasters” during the hearings to set the rates and terms for webcasting. After the CRB announced its final rate determination and protests arose from many sectors, SoundExchange offered a settlement offer to small commercial webcasters. According to SoundExchange 24 entities agreed to the terms of the settlement offer, but none of them were the parties represented by Oxenford. See his blog for details.

Commercial Broadcasters – The NAB has reached no negotiated settlements with SoundExchange to date.

Noncommercial Broadcasters/Webcasters – This, at least according to the CRB proceeding, includes three areas, lumping Broadcasters and webcast only outlets into the same boat. This includes NPR/CPB stations, Religious Stations and College Stations. Community broadcasters were not represented in the CRB hearing.

NPR – NPR/CPB qualified stations had the sweet heart deal under the old royalty regime. A negotiated settlement, prior to the close of the rate setting process required a payment of approximately $100 per station per year which were covered for the stations. According to many published reports (one example) attributed a statement by John Simson of SoundExchage to say that he was hopeful a settlement would be reached by the end of September. It appears that the continuation of negotiations hinges upon the outcome of a “wide-ranging survey” of listeners. This seems a little odd in that NPR took issue with many portions of the CRB determination, three of which seem central to their objections, including the “average” number of listeners on-line, at which point stations would need to pay the commercial rates and the ability of stations to track the number of listeners and provide reports of use. I say it seems odd because the it appears to be contradictory that the stations can’t report the data concerning listeners, but the survey, at least according to the provided quote appears to hinge on listener data. Further, the reports of use only partially require listener data. The balance of the reports require the logging of specific information concerning the sound recordings transmittd over the Internet.

The following was sent to station managers concerning the status of negotiations on November 19, 2007.

Dear Colleagues,

NPR and CPB continue to press forward on acceptance of a reasonable and affordable negotiated settlement with the recording industry to supplant the May 2007 decision of the Copyright Royalty Board. With tremendous assistance from stations, the Integrated Media Association and the Station Resource Group we have been able for the first time to gather an extensive and accurate snapshot of music webcasting data from stations throughout the system. This information has been shared with the recording industry and forms the basis for our settlement discussions.

We deeply appreciate your cooperation with our requests for information and your responsiveness to our calls for congressional contacts. It’s almost impossible to put a time-frame around this process, but we are working diligently to bring it to a successful conclusion as soon as possible.

Bruce Theriault
Senior Vice President, Radio
Corporation for Public Broadcasting

Dana Davis Rehm
Senior Vice President, Strategy & Partnerships National Public Radio

Greg Schnirring
Vice President, Radio
401 Ninth Street, NW
Washington, DC 20004-2129

So it appears that the lynch pin for future NPR/CPB negotiations is in place, even though September is a memory. Given the holiday season, I don’t expect to hear of a settlement before the end of the year.

NRBNMLC – This entity represented the noncommercial religious broadcasters before the CRB. We have seen little to no public evidence of negotiations. This is likely due to the fact that this group will use the NPR/CPB settlement as a means to negotiate a separate rate or perhaps ride the coat tails of NPR/CPB. The other thought is that they don’t want to propose anything that would hurt the NPR/CPB negotiations.

College Stations – As you might expect, this is the least well funded portion of the noncommercial group. It also potentially represents the ground floor where rates and terms will be negotiated. Neither these stations or those obtaining income from this group are in a hurry to settle as they wait and see what comes from other negotiations. Perhaps the biggest losers in this process are the artists. Under the terms of the SWSA noncommercial settlement, College stations paid a fee in lieu of recordkeeping and the submission of reports of use. For some unexplained reason, SoundExchange has not distributed a single penny collected from these stations to the artists. As the negotiations continue to become extended, the data that SoundExchange so desparetly claims it wants continues, in most instances to be uncollected and therefore undistributed. A true artist representative would have found a reasonable set of terms to collect the available data and find a reasonable proxy for the data that is not obtainable while finding a way to stick a carrot in front of student stations to report more data in the future.

The Appeal of the CRB decision – Statute provides the parties to the CRB hearing process the ability to appeal the decision in the courts. Not surprisingly, the courts don’t move quickly! This RAIN article outlines some of the details of what happens next. In short, it may be 2009 before the court takes any action on the appeal.

The next entry I will post to this blog will concern the likely introduction of a bill that would require FCC licensed broadcast stations to pay a royalty fee for the performance of sound recordings. Remember, this would be in addition to the fees already paid to ASCAP, BMI and SESAC.

March 21, 2008 Posted by | Rates, Recordkeeping, Reports of Use, Webcasting | 4 Comments

Webcasting September 5, 2007 Status Report

Before the Congress went on recess, some members stated their desire for progress in the negotiations between webcasters and SoundExchange concerning the rates and terms for webcasting sound recordings. “In a joint statement, Sens. Ron Wyden (D-Oregon) and Sam Brownback (R-Kansas) said they were “troubled by the lack of negotiating progress” and promised to take action to push the IREA bill forward if agreements are not made by Sept. 3. ” (See http://www.broadcastlawblog.com/archives/internet-radio-congress-to-return-will-internet-radio-royalties-be-on-its-agenda.html).   It appears that SoundExchange has done everything they could to spin “progress” and then some.

On 8-21-2007, SoundExchange sent an offer to some of the “small commercial webcasters (SCWs).  It appears that most of the SCWs are outright rejecting the offer.  The SCWs that participated in the arbitration process before the Copyright Royalty Judges (CRJs) are still in negotiations with SoundExchange, according to their attorney.  The large webcasters, represented by DiMA, have reached a settlement over one of the terms of the webcasting decision by the CRJs, who established a $500 minimum fee per channel or station, with out a cap on the number of stations.  For these large webcasters, some of who offer individualized channels, that would mean a huge increase in the amount of fees paid as there had been a cap in place.  The deal limits the minimum fee to $50,000 per service.  That means that DiMA members would need to only pay the $500 minimum fee for the first 100 channels/stations.  So what did SoundExchange get in return?  DiMA members will provide “census” reporting.  That means that they will report data about each an every song they webcast.  The current regulations only require data to be submitted for two weeks per calendar quarter.  Further, DiMA and SoundExchange have agreed to for a committee to explore the topic of stream ripping  and how technology might be developed to stop the practice.

It is important to note that the DiMA agreement only applies to SoundExchange members.  While SoundExchange collects and purportedly distrubutes royalties on behalf of all copyright owners and performers, it can only negotiate terms on behalf of those copyright owners and performers who are SoundExchange members.  It appears that both sides will ask Congress or the Copyright Royalty Judges to codify the settlement, as it is other wise likely a logistical problem for both sides.  In reading the DiMA and SoundExchange press releases on the settlement, DiMA claims this as an important first step in the negotiation process.  In contrast, SoundExchange makes no references to future negotiations.

Finally, it appears that the effort to add sound recording royalty burdens on traditional broadcasters is about to get a boost in the form of a new bill.  The RIAA has been pushing for these rights for decades and has always been rebuffed.  This will be watched closely.  It is interesting to note the timing of this renewed effort.  Almost immediately after the webcasters started shouting foul over the CRJ webcasting decision and raising the fact that traditional radio doesn’t pay these fees, unless they simulcast a webstream, SoundExchange and others raised the heat on their rhetoric that traditional broadcasters should be paying these fees.  Now that a labor day “deadline” for webcasting  negotations has come and gone, the push new broadcast fees will heat up, perhaps distracting from the fact that the offers and one settlement in the webcasting space is not the relief that most webcasting parties are seeking.  Coincidence? 

Here is a take on the current status of the issues.  As the blog points out, at this time there has been no announced progress in the webcasting arena for educational and other noncommercial webcasters, such as NPR and religous stations.

September 5, 2007 Posted by | Rates, Recordkeeping, Reports of Use, Webcasting | 1 Comment

Stay Denied, Negotiations Continue? HR 3015 Introduced

The US Court of Appeals in Washington, D.C denied the emergency stay requested by webcasters.  The stay would have prevented the new rates from going into effect until the various options concerning changing the rates played out.  These options include an appeal the rates before the same court, which is not likely to be heard for months, congressional intervention and negotiations.

Yesterday, there was a meeting that included congress, representatives from both sides of the webcasting royalty issue (SoundExchange, NPR, RIAA, SCW, AFM, DiMA, NAB and Pandora). There has been some press coming from that meeting. One example is available at Rain.  One interesting item to note is the word choice of Simson when he stated that “Our biggest desire is to have people paying legally and being compliant”.  Given context, the compliance he appears to be seeking is with the reporting requirements, which is one of the primary problems that College stations face.

Negotiations are continuing between webcasters and SoundExchange, but any true compromise would need to be approved by Congress in order for it to be a comprehensive solution that would cover all sound recordings.  The question concerning negotiations is if they are window dressing or if the RIAA representatives (aka SoundExchange) are willing to do the right thing for Educational Stations.

Last night Chairwoman of the Committee on Small Business, Nydia M. Velázquez  and Ranking Member Steve Chabot introduced H.R. 3015 which is intended to suspend the CRB decision by 60 days to allow continued negotiations.

July 13, 2007 Posted by | Rates | Leave a comment

CRB Appeal, Rate Freeze & etc.

I know there are some that are hanging on every development concerning webcasting rates for college and Educational Stations. I too, have been following every twist and turn, but there hasn’t been much to report on. At least not much that could not have been anticipated.

I have already reported on the IREAs. The good news is that house version has a lot of Cosponsors (111 as of this writing). The Senate version is slowly starting to gather some attention from Cosponsors. If the CRB webcasting rates or the recordkeeping/reporting requirement pose a problem to your station, you should visit the CBI or SNR sites and tell your elected representatives!

The rate determination process allows the participants to ask for a rehearing. That topic has already been covered in a previous post. It also allows the participants to appeal the decision of the CRB in court. Many of the participants, including CBI and IBS have filed an appeal. DiMA, NPR and the small commercial webcasters have also file a “stay”, which is a request that the rate determination be set a side until the court hears the appeals. This would not excuse the webcasters from paying royalties, rather it would allow them to continue to pay under the old rates until the appeal of the new rates has been decided.

The parties to the appeal have until early July to file their list of grievances with the court. As you might suspect, the stay must list reasons why the court should not allow the rates determined by the CRB to take effect. These reasons are likely to outline many of the reasons that the petitioners believe the appeal will be succesful and therefore constitute at least some of the arguments that will be brought forth in the appeal. The stay request lists the following arguments…

The minimum fee is inappropriate and potentially will cost webcasters over a Billion $. For the readers of this blog, the first part is is no surprise and the second part could have been predicted. We have already covered how the CRB determination would impose a minimum $500 fee per channel or station, with no cap. For webcasters that offer customized channels, such as AOL, this means that each listener stream will result in a new $500 fee. We have also discussed how the $500 minimum fee is problematic from a legal standpoint and inappropriate.

The lack of a percentage of revenue for Small Commercial webcasters is raised in the request for a stay as they claim it would devastate the entire segment of webcasters. Quick background… under the SWSA, Small Commercial Webcasters negotiated a settlement that allowed them to pay a percentage of revenue. The CRB rate determination offers no such means of calculating a fee, rather these webcasters are required to pay the same “per performance” fee as large entities.

NPR argues that the minimum fee is exorbitant, that the “cap” is arbitrary and that the stations can’t calculate the figures to determine if they are within the cap or even generate reports of use.

The above is a quick synopsis of the stay. Read the full document if you want more information.

So, tell me, do you want more of this information on a day-to-day basis, or is this format of providing updates as required acceptable?

Will R

June 11, 2007 Posted by | Rates, Recordkeeping, Reports of Use, Webcasting | Leave a comment

Internet Radio Equality Act

If you have been following the saga of Internet Radio (webcasting/streaming audio, etc.), you already know about the Internet Radio Equality Act (HR 2060) , which was introduced into the House. It is briefly covered in a previous blog entry. As noted in that entry, I had some reservations about the portion concerning non-profits and in particular Educational Stations that are student operated (College Radio).

For various reasons, which I won’t detail, I didn’t offer more on the topic, except to say that I knew there was a Senate version of the bill soon to be introduced. A week ago Thursday the Senate version of the Internet Radio Equality Act (S 1353).

Both bills have the potential for being very positive for College Radio. They both change the rate setting standard that the Copyright Royalty Board (CRB) must use when setting rates. The current rate setting standard for sound recordings, as used by webcasters is a “willing buyer/willing seller” standard. This is in contrast with the standard used for musical works, which is a test of being “reasonable”. Without delving into the details, the difference is that the “reasonable” standard makes rates accessible to the user and offers a “reasonable” profit margin to the copyright owners, whereas, the willing buyer/willing seller standard compels the CRB to set a higher rate. So, the bottom line for College Radio is that both bills offer this same change.

Similarly, both bills would nullify the rate determination of the CRB. This creates a new problem. The rates for webcasters have already expired. The CRB rate determination (and law) acknowledged that fact and since the CRB rate determination was higher than the old rates, webcasters, according the CRB decision are not only facing new and higher rates going forward, but they, for the most part owe additional money back to when the previous rates expired, even though those webcasters already paid under the old rates. If the CRB decision is nullified, as proposed by both bills, then there must be a rate set for webcasters until new rates can be set under the proposed new standard.

The bills both propose the same rates for commercial webcasters (and broadcast simulcasters) during the interim (I won’t detail those rates here, but they are different from previous rates). For non-commercial stations (including religous, community, NPR and College), the House version proposes a 50% increase over the 2004 rates. For some non-commercial entities, this is not a problem due to the funding sources and the amount of the fees in 2004. To be specific, NPR stations had their fees paid under an agreement with NPR/CPB and the RIAA. The bottom line is that these stations (rather CPB) paid roughly $100 per year. An increase to $150 is not exceptional and apparently not problematic, particularly given the $500 minimum required under the CRB determination and the associated listening cap. For others, this increase, as proposed, could mean a rise from $500 to $750. This increase would be a much larger dollar amount from stations that don’t have their fee paid for them and have the smallest budgets.

The Senate version of the bill handles non-commercials a bit differently. The college stations AND others who participated in the SWSA would pay the same rates they previously paid until new rates are set under the proposed “new” standard. All other non-commercial stations, such as NPR, would see a 5% increase. While this does nothing to change the inequality between NPR/CPB stations and College stations, it does preserve the status quo until new rates can be set and it is much better than the house version for all non-commercial stations.

There had been an effort to include the same SWSA recordkeeping requirements in the Senate version of the IREA, but that language did not make it into the bill, as introduced.

This is what I suggest.

Both bills offer a potential long term benefit. The Senate version of the bill offers this benefit without ANY changes that would cause either the college stations, other non-commercial stations, copyright owners or artists to suffer any measurable loss of income or additional expenses. IF both bills pass, a committee would meet to try to iron out the differences between the bills and I am confident that non-commercials would benefit greatly from the outcome. Therefore, it makes a TON of sense to support both bills.

How? It’s relatively easy and definitely painless. Visit the SOS page or the Save Net Radio page and follow the instructions for calling your representatives. This takes all of 3-5 minutes! Call both your representatives and Senators! Be sure to tell them that you are supporting the Internet Radio Equality Act on behalf of College Radio and that if there are hearings, you want to see College Broadcasters present and that they deserve relief from the recordkeeping requirements.

May 18, 2007 Posted by | Rates, Recordkeeping, Webcasting | 1 Comment

“Final” CRB Rates Issued

As required  a “final” result of the CRB rate setting process was issued today in the CRB Final Determination.  There were no surprises.  In short, the CRB issued their determination following a LENGTHY and costly hearing process which highly favored the record labels who will receive 50% of the net proceeds and the artists who will receive the balance in a manner prescribed by Congress, provided they didn’t sign those rights away.

That determination was subject to petitions for a rehearing.  Numerous parties to the hearing petitioned the CRB for either a rehearing or a clarification of its determination.   The CRB decided to address or perhaps clarify two portions of the petitions.  The CRB decision  concerning the petitions is available here.  This offered nothing significant to most Educational Stations.   We will continue with a discussion of what happens next, but for those interested, the CRB explanation of changes from its determination and final determination will be posted at the bottom of this entry.

The options available to webcasters and participants are fairly clear, although time table is a little vague and subject to interpretation.

Under the statute, the only recourse is to appeal the decision of the CRB to the courts.  The burden required to overturn the CRB decision is rather high by legal standards.

There is another option available.  That option is to convince Congress that the outcome of the CRB decision was flawed by due to the fact that the statute they used to determine rates should be changed.  In other words, the CRB was required to set rates under a “willing buyer/willing seller” standard.  This standard needs to be changed to a “reasonable” rate in order to accommodate the various types of webcasters. This is to say that a willing buyer/willing seller standard inheritently predisposes the CRB to set the rate a the highest possible rate that they could sell the rights, and does not require them to consider the smaller or noncommercial stations.

Along these lines, a bill has been introduced in the U.S. House of Representatives to address this issue and to address the commercial rates in the form of the Internet Radio Equality Act (H.R. 2060).   

The next post to the blog will contain details about  H.R. 2060 and how you can support that initiative, if you so choose.

Will R

 On March 2, 2007, the Copyright Royalty Judges issued the initial Determination of
Rates and Terms. Pursuant to 17 U.S.C. 803(c)(2) and 37 CFR Part 353, the parties filed
Motions for Rehearing. The Judges requested the parties to respond to the motions filed, in
order to know the positions of each party on each of the issues raised in the motions, and ordered
the parties to file written arguments in support of each motion. The parties filed responses and
written arguments. Having reviewed all motions, written arguments and responses, the Judges
denied all the motions for rehearing. Order Denying Motions for Rehearing, In the Matter of
Digital Performance Right in Sound Recordings and Ephemeral Recordings, Docket No. 2005-1
CRB DTRA (April 16,2007). As reviewed in the said Order, none of the grounds in the motions
presented the type of exceptional case where the Determination is not supported by the evidence,
is erroneous, is contrary to legal requirements, or justifies the introduction of new evidence.
17 U.S.C. 803(c)(2)(A); 37 CFR 353.1 and 353.2. The motions did not meet the required
standards set by statute, by regulation and by case law. Nevertheless, the Judges were persuaded
to clarify two issues raised by the parties. This Final Determination includes a transition phase
for 2006 and 2007 to use Aggregate Tuning Hours (“ATH”) to estimate usage as permitted under
the prior fee regime. This limited use of an ATH calculation option should facilitate a smooth
transition to the fee structure adopted in this Final Determination. Next, the regulations are
corrected to refer to “digital audio transmissions” in place of the phrase “Internet transmissions.”

First, they seemed to agree that the requirement to report “per performance” date (i.e. number of listeners to each song regardless of duration of listening) was, perhaps a problem in the short term and granted a reprieve to webcasters.  This took shape in the ability to use ATH, a FAR simpler metric, in 2006 and 2007 before switching to a requirement to per performance metric in 2008.  It is the position of CBI, and perhaps others, that while this data can be produced, it is highly cost-inefficient and further, highly unreliable due to the inherent technical nature of streaming.  The sole reason for SoundExchange to request this level of data is to provide “accurate” means of distributing royal, but the data they will receive is, at best, a proxy for accurate data at an unreasonable cost to the webcaster.

Second, SoundExchange asked the CRB to clarify the definition of use.  In other words, the statute refers only to sound recordings that are digitally transmitted, but exempts certain uses, such as broadcast.  The CRB determination used the term “Internet transmission”

May 2, 2007 Posted by | Rates, Recordkeeping, Reports of Use, Webcasting | Leave a comment

Webcasting Bill Introduced in Congress

A bill has been introduced into Congress that is intended to nullify the CRB rate decision for webcasters and set an interim rate through 2010 and perhaps 2011. The Internet Radio Equality Act has the potential to aid Educational (college and High School) Stations in the future and to some limited extent right away. The bill has much potential, but in the short term it also has the potential to raise the minimum fees for stations that were already paying $500 per year to $750 per year, which would be a higher minimum fee paid than by any other webcaster. That and other portions of the bill need to be changed. A full analysis will be forthcoming along with some suggested actions.

April 26, 2007 Posted by | Rates, Webcasting | Leave a comment

PRO (ASCAP, BMI & SESAC) Rates for 2008

The Copyright Royalty Board has published the music works royalty rates for 2008 for comment.

In short, the musical works are the lyrics and musical compositions, as opposed to sound recordings.  Stations that play music must pay royalties to one of three “Performance Rights Organizations” (PROs).  The rates for the use of these works are subject to negotiation/arbitration every five years.  This is the year that this rate setting process takes place.  The entities involved in the process have reached agreements for the various noncommercial broadcast services (NPR, Educationally Affilated and “Other”) and submitted them to the Copyright Royalty Board (CRB).  The CRB after some changes (as noted in the document linked above), the CRB publishes the outcome for public comment. Any comments and/or objections are due May 17, 2007.  It is unlikely that there will be any changes to what has been proposed.

This post only talks about the broadcast licensing rates for entities licensed to colleges and universities.

For non-NPR stations by public broadcasting entities licensed to colleges and universities the rates have not changed significantly.  Below is a history of the rates for the three PROs, including the proposed 2008 rates (ASCAP, BMI and SESAC), which are adjusted by the CPI annually, except when the rates come up for renewal, or otherwise specified by the CRB (or its predecessor(s)).

ASCAP         BMI          SESAC         Other

2008             $287           $287          $116              $1        *(subject to CPI adjustment)
2007             $277           $277          $90                $1
2006             $273           $273          $89                $1
2005             $262           $262          $85                $1
2004             $254           $254          $82                $1
2003             $249           $249          $80                $1
2002             $244           $244          $66                $1
2001             $239           $228          $65                $1
2000             $231           $231          $63                $1
1999             $225           $225          $61                $1
1998             $217           $217          $60                $1
1997             $217           $217          $50                $1
1996             $211           $211          $49                $1
1995             $205           $205         $48                $1

What is rather significant is the change in the rate structure for the “Other” stations (community and non-educationally affiliated religous stations).  Those stations had a similar, but higher fee structure in the past.  For example, the 2007 “Other” station fees were $535 each for ASCAP and BMI with $106 for SESAC.  The published structure for these stations is now population based, with a range of $550 to $5,000 for EACH ASCAP and BMI and from $120 to $1,000 for SESAC with roughly a 3% bump each year.

For clarification, these fees are for BROADCAST stations.  Fortunately, the blanket campus agreement with colleges and universities covers the webcast fees for musical works (but not sound recordings).

April 18, 2007 Posted by | Other, Rates, Webcasting | 2 Comments

CRB Rejects Rehearing Requests

CRB Denies Rehearing – The Copyright Royalty Board (CRB) rejected the various requests for a rehearing concerning the webcasting rates and terms for 2006-2010 for non-interactive services.  CBI, DiMA, IBS (joint response with WHRB), NPR, Radio Broadcasters, Small Commercial Webcasters, and SoundExchange filed motions in this portion of the proceeding. The complete decision is available here.

From the Order…

On March 2,2007, the Copyright Royalty Judges issued a Determination of Ratesand Terms in this matter (“Initial Determination”). Pursuant to 17 U.S.C. 803(c)(2) and 37 C.F.R. Part 353, the parties in the proceeding filed various motions for rehearing, reconsideration or clarification.’ On March 20,2007, the Judges requested that the parties respond to the motions that had been filed to determine the positions of each party on each of the issues raised in these motions and file written arguments to support those positions. Order on Motions for Rehearing. The parties filed various responses per our request. Having reviewed all motions, responses to those motions, and written arguments, the Judges now deny all such motions. Nevertheless, as discussed below, the Judges have determined that certain areas of the Initial Determination warrant clarification.

Additionally, certain parties request relief from the recordkeeping and reporting

requirements established in the Initial Determination (see, e.g., Joint Motion of IBS and WHRB (FM) for Partial Reconsideration, and CBI’s Memorandum in Support of Motion for Rehearing). These requests are not germane to this proceeding and will be addressed in a future proceeding. See Initial Determination at 98.

Parties to the proceeding also asked the CRB to place a stay (hold) on implementing the new rates until all legal appeals have been exhausted. Citing statute, the CRB denied those motions.

Other parties request that the Judges stay implementation of certain of the rates

and terms established in the Initial Determination until all administrative appeals and judicial review are complete. … Section 803(c)(2)(E)(ii) of the Copyright Act states that “[tlhe pendency of a motion for a rehearing under this paragraph shall not relieve persons obligated to make royalty payments who would be affected by the determination on that motion from providing the statements of account and any reports of use, to the extent required, and paying the royalties required under the relevant determination or regulations.” 17 U.S.C. 803(c)(2)(E)(ii). Finally, Section 803(c)(2)(E)(iii) of the Copyright Act states that “[n]otwithstanding clause (ii), whenever royalties described in clause (ii) are paid to a person other than the Copyright Office, the entity designated by the [Judges] to which such royalties are paid by the copyright user.. .shall, within 60 days after the motion for rehearing is resolved or, if the motion is granted, within 60 days after the rehearing is concluded, return any excess amounts previously paid to the extent necessary to comply with the final determination of royalty rates by the [Judges]. Any underpayment of royalties resulting from a rehearing shall be paid within the same period.” 17 U.S.C. 803(c)(2)(E)(iii). As these sections of the Copyright Act indicate, Congress, not the Judges, determined the effective dates for the royalty rates and terms the Judges established under Copyright Act Sections 1 14 and 1 12. Moreover, Congress determined that these rates would go into effect, notwithstanding any pending motions for rehearing. Finally, Congress set forth the remedy that would apply should those rates later be determined to result in an overpayment or underpayment of royalties. The provisions of these sections are clear and we will follow the statute. As a result, the motions for a stay are DENIED.

Some parties to the proceeding asked whether Aggregate Tuning Hours (ATH) could be used to determine rates. In short the CRB said no.  It did, however, establish a transition period through 2007.

The following ATH usage rate calculation options will be available

for the transition period of 2006 and 2007:

                                                             Broadcast

                            Other                       Simulcast                Non-Music

                       Programming           Programming          Programming

Prior

Fees             $0.01 17 per ATH       $0.0088 per ATH   $0.0008 per ATH

2006            $0.0123 per ATH       $0.0092 per ATH    $0.001 1 per ATH

2007            $0.0169 per ATH       $0.0127 per ATH     $0.0014 per ATH

where “Non-Music Programming” is defined as Broadcaster programming reasonably classified as news, talk, sports or business programming; “Broadcast Simulcast Programming” is defined as Broadcaster simulcast programming not reasonably classified as news, talk, sports or business programming; and “Other Programming” is defined as programming other than either Broadcaster simulcast programming or Broadcaster programming reasonably classified as news, talk, sports or business programming.

The CRB did “clarify” a portion of its initial determination at the request of SoundExcange (SX). SX asked that the CRB replace the term “Internet transmissions” with “digital audio transmissions” to include the transmission by other technologies and services, such as cell phones.

From here, the parties, if they wish to appeal, must file with the courts within 30 days of the publication of the determination in the Federal Register, by the Register of Copyrights (ROC).  The ROC may intervene IF the ROC determines there are legal errors in the CRB decision.  Expect the publication to come around April 30, 2007.

April 16, 2007 Posted by | Rates, Recordkeeping, Reports of Use, Uncategorized, Webcasting | Leave a comment