RAIN's Internet radio royalty round-up
RATES, RULES AND REGULATIONS: SORTING THROUGH THE WEBCASTER ROYALTY DEALSSince Congress passed the first of two Webcaster Settlement Acts in October of last year, various classes of webcasters have successfully reached settlements with SoundExchange that allow them to pay royalties at rates different than the nearly universally-criticized Copyright Royalty Board rates. The elapsed time and number of players can make the entire situation a little difficult to follow. So, here’s a run-down of the royalty deals negotiated so far for each group of non-interactive webcasters.
PUBLIC RADIOANNOUNCED: January 2009.
COVERED PARTIES: Approximately 450 public radio webcasters, including CPB-supported stations, NPR and its members, National Federation of Community Broadcasters members, American Public Media, Public Radio Exchange and Public Radio International.
IN EFFECT: 2006-2010
TERMS: Included webcasters pay a flat mass fee of $1.85 million for royalties (an average per-year, per-station cost of about $822). The included stations must also supply SoundExchange with a consolidated “usage report” detailing song and artist play for all of public radio.
OTHER NOTES: Industry attorney David Oxenford pointed out (here) that the CPB deal does not cover royalties from 2011-2015, as the Webcaster Settlement Act allowed, thus meaning public radio stations “will be right back in a [Copyright Royalty Board] proceeding to determine royalties almost immediately.”
COMMERCIAL BROADCASTERSANNOUNCED: February 2009
COVERED PARTIES: Commercial broadcasters’ simulcasts and Internet-only online streams. Deal negotiated between SoundExchange and the National Association of Broadcasters.
IN EFFECT: 2006-2015
TERMS: Deal laid out new “per performance” rates (that is, rate paid on a per-song, per-listener basis) that were slightly lower than those set by the CRB in 2007. The rates start at $0.0008 for 2006 and increase to $0.0025 by 2015. There is a minimum fee of $500 “per channel” (“either the stream of a single station, or an Internet-only subchannel, or any other unique on-line stream,” according to Oxenford) with an annual minimum fee cap of $50,000. The agreement also requires “census reporting” of the music broadcasters stream, though there are exceptions made for smaller stations. More details can be found at Oxenford’s Broadcast Law Blog here.
STATUS: CLOSED: Broadcasters who were already streaming must have filed a notice of Intent to Rely on this settlement with SoundExchange by April 2, 2009.
OTHER NOTES: As part of this agreement, the NAB negotiated with the four major music labels to waive limits on music use imposed by the Digital Millennium Copyright Act, known as the “sound performance complement.” These limits included pre-announcing song plays, playing no more than 3 songs by the same artist in a row and identifying the song and artist on a website while the song is playing. More on that can be found here.
SOUNDEXCHANGE OFFER TO VERY SMALL WEBCASTERSANNOUNCED: February 2009
COVERED PARTIES: Small webcasters and “microcasters.” Attention Span Radio, Blogmusik (Deezer.com), Born Again Radio, Christmas Music 24/7, Club 80’s Internet Radio, Dark Horse Productions, Edgewater Radio, Forever Cool (Forevercool.us), Indiwaves (SetYourMusicFree.com), Ludlow Media (MandarinRadio.com), Musical Justice, My Jazz Network, PartiRadio, Playa Cofi Jukebox (Tropicalglen.com), Soulsville Online, taintradio, Voice of Country, and Window To The World Communications (WFMT.com) agreed to the deal.
SoundExchange called this group “Small Webcasters,” not to be confused with such “Small Commercial Webcasters” as RadioIO, Digitally Imported and AccuRadio which had nothing to do with this agreement.
IN EFFECT: 2006-2015
TERMS: Webcasters pay 10% of total revenues up to $250,000 and 12% up until $1.25 million. After this point, webcasters must pay the CRB per-performance rates, though a 6-month grace period in which they can continue paying a percentage of revenue is included. Also, any streaming above 5 million monthly ATH would have to be paid using the CRB rates. Microcasters — “defined as those who make less than $5000 annually and stream less than 18,067 ATH per year (essentially an audience averaging just over 2 concurrent listeners, 24 hours a day 7 days a week),” according to Oxenford — pay $500 a year and can be exempted from all record keeping for another $100.
STATUS: CLOSED: Webcasters wishing to be included in this deal must have filed a notice with SoundExchange by April 30, 2009.
OTHER NOTES: SoundExchange unilaterally offered these terms to webcasters; they were not the product of a negotiation. The offer was based on terms similar to those in the 2002 Small Webcasters Settlement Act, in that it allowed very small webcasters to pay on a percentage-of-revenue basis, but included revenue and listening caps.
Any company buying a webcaster that had agreed to this deal must pay SoundExchange the full CRB rates for all music the webcaster played since 2006. The agreement “raises questions about fairness and equality as, if the performance royalty that SoundExchange seeks to impose on broadcasters gets Congressional traction, small webcasters under this deal would be paying more than twenty times the amount that small broadcasters with a similar amount of revenue would pay,” Oxenford writes (here).
Live365 recently argued (here) that microcasters need a new deal in spite of this offer from SoundExchange.
“PUREPLAY” WEBCASTERSANNOUNCED: July 2009 (under the Webcaster Settlement Act of 2009).
COVERED PARTIES: Any webcaster. Recommended for companies making most of their revenue from streaming. AccuRadio, Digitally Imported and radioIO negotiated the agreement with SoundExchange.
IN EFFECT: 2006-2015 (2014 for small webcasters).
TERMS: This deal split webcasters into three groups: Large webcasters, small webcasters and webcasters with subscription plans. Large webcasters (those with over $1.25 million in annual revenues and surpassing a monthly listener-hour cap) pay the greater of 25% of total revenues or a per-performance rate. The per-performance rates under this deal are significantly less than those from the CRB, starting at $0.0008 in 2006 and growing to $0.0014 by 2015.
Small webcasters pay the greater of a percentage of total revenues or a percentage of total expenses. For 2006 to 2008, the percentage of total revenue is 10% of the first $250,000 and 12% for revenues over that. The percentages increase for 2009 to 2014: 12% for first $250,000 and 14% after that. The percentage for expenses stays constant at 7%.
Webcasters with subscription plans pay the same rates as those agreed upon with the NAB (see above).
STATUS: OPEN: Webcasters can elect to join this agreement until 30 days after SoundExchange publishes the deal in the Federal Register.
OTHER NOTES: Webcasters agreeing to this deal must provide SoundExchange with census reports (“actual recordings played and total listenership”) and retain server logs for at least 4 years. Small webcasters can opt for less stringent reporting in exchange for a “proxy fee.” More on this agreement can be found here.
COPYRIGHT ROYALTY BOARD DETERMINATION OF 2007ANNOUNCED: March 2007
COVERED PARTIES: Any non-interactive webcaster agreeing to adhere to the terms of usage of the DMCA and reporting requirements that has not agreed to any of the above negotiated settlements.
IN EFFECT: 2006-2010
TERMS: Webcasters pay a per-perfomance rate, which increases each year. This rate rises from $0.0008 in 2006 to $0.0019 in 2010. There is a minimum per-channel fee of $500 (though SoundExchange later settled on an annual cap of $50,000).
STATUS: OPEN: These rates apply until the end of 2010. Webcasters (not already in deals) and SoundExchange can negotiate new rates for the 2011-2015 term. If they cannot settle on agreeable rates, however, the CRB will arbitrate the rates as they did in 2007. This determination began in February with filings of Notices of Intent to Participate.
OTHER NOTES: The CRB decision was met with uproar from the Internet radio community. Many webcasters — Pandora most prominently — said they simply could not survive under these rates. Webcasters tried, but failed, to appeal the rates.
The CRB decision was made using the “willing buyer / willing seller” method of determining royalty rates. This does not take into consideration the possible damage to the copyright user (in this case, Internet radio). By contrast, the 801(b) system does. It was used in determining satellite radio royalty rates, which are between 6-8% of annual revenues. Some have said that the difference in these standards is the reason Internet radio was handed such high royalty rates.
Additionally, the legality of the CRB has been challenged recently in the appeals of the Board’s royalty decisions. The three judges were appointed by the Librarian of Congress, which some say violates the Appointment Clause which states that only the Executive Branch can make appointments.
WEBCASTERS LEFT OUTSome groups, including religious and educational webcasters, still have not reached agreements with SoundExchange. Until they do, webcasters without deals are subject to pay the full CRB-set rates. The Webcaster Settlement Act of 2009 allows 3 more weeks for such webcasters to forge deals with SoundExchange.
Industry attorney David Oxenford has been an excellent source of information throughout the royalty negotiation process. Without his informative explanations and analyses, a summation like this would simply not be possible. Follow Oxenford at his Broadcast Law Blog here.
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