Déjà Vu All Over Again

Posted on September 19, 2010 by Kevin Goldberg

The Copyright Royalty Board (CRB) has announced that noncommercial webcasters must pay a $500 per channel annual minimum fee to perform copyrighted sound recordings during the 2006-2010 rate term.  Big deal? Not really. Why not? Several reasons:

  1. The 2006-2010 rate term is ending in about three months, with a ratemaking proceeding ongoing to determine the rates applicable to webcasting during 2011-2015 rate term.   So this “new” annual per channel minimum may change sooner rather than later (though we actually doubt it). 
  2. We’ve put “new” in quotation marks above because the original decision of the CRB, adopted back in 2007, set the annual minimum fee for both commercial and noncommercial webcasters at $500 per channel per year – so it’s not like anybody should really be surprised at the concept of such a fee.
  3. When the CRB’s 2007 decision was challenged in federal court, the only aspect of the decision remanded to the CRB for more consideration was the amount of the annual minimum payment – at which point we predicted that the CRB would simply reinstate the $500 per channel annual minimum fee.
  4. Before the CRB could validate our prescience, SoundExchange (representing the copyright owners) entered into settlement agreements with several types of webcasters – and each of those agreements provided for a $500 per channel annual minimum fee. This is important not only because it made the most recent CRB ruling easy to predict but also because it means that, technically, that ruling applies only to those noncommercial webcasters who hadn’t already entered into one of the three noncommercial webcasting settlement agreements.
  5. When the CRB did wrap up the initial phase of its post-remand chores – relative to the fee to be applied to commercial webcasters – it reinstated the $ 500 per channel annual minimum.

So the re-imposition of the $500 fee for noncommercial webcasters is not really an earth-shattering or completely unexpected surprise.  In fact, its actual impact may be extremely limited, since most noncommercial webcasters probably assumed they were on the hook for a $500 annual minimum payment for each channel anyway, budgeted for it accordingly, and made the 2010 payment without a second thought.

Why bother to post about the CRB’s decision then? Because it does provide a couple of points to consider.

First, the decision may be a reliable indicator of the future. It’s clear that the CRB is likely to rely on the current state of affairs in setting rates and terms for webcasters during the years 2011-2015. So when the CRB gets around to establishing  2011-2015 rates, we won’t be surprised if noncommercial (and commercial) webcasters will get tagged again with this same $500 per channel annual minimum.

Second, the CRB’s decision provides a glimpse at some interesting data. According to the decision, SoundExchange claimed that it cost about $803 per channel per year to administer the webcasting statutory license.  If that’s really the case, then SoundExchange is losing money – to the tune of $303 a pop – on the majority of noncommercial stations.  

Interestingly, the CRB’s decision indicates that approximately 730 webcasters paid royalties to SoundExchange in 2009.  Of those, about half (i.e.., 363) were noncommercial.  Yet payments by noncommercial webcasters constituted only about one percent of all royalty payments.  Why?  Because 305 of the 363 reporting noncommercial webcasters – almost 85 percent – paid only the annual minimum of $500 per channel because they never exceed the monthly aggregate tuning hour maximum of 159,140 ATH.  

This fact demonstrates the important practical reality of this particular proceeding. For the vast majority of noncommercial webcasters currently reporting to SoundExchange, the minimum $500 annual per channel fee is the only royalty which they will have to pay to SoundExchange. 

From that perspective, the $500 fee is not merely an interesting but minor component of the royalty obligation. Rather, it appears that for most noncommercial webcasters, it is their royalty obligation. 

Of course, it’s not entirely clear how reliably representative the CRB’s figures are. After all, those figures reflect a total of only 363 noncommercial webcasters, which is not a lot, given the number of licensed noncommercial radio stations in the country – almost ten times that number (3,223) as of June, 2010, according to the FCC. We don’t know why the other stations aren’t accounted for. They may have chosen not to webcast because even the $500 fee was too much; or maybe they ar webcasting, but just not complying with reporting requirements; or maybe they just don’t feel like webcasting, whatever the royalties might be. Still, it’s interesting to contemplate the possibility that noncommercial webcasters’ obligations to SoundExchange may turn out, in practical effect, to be limited to $500 per year per channel.
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Meet The New Fee, Same As The Old Fee

Posted on February 16, 2010 by Kevin Goldberg

As expected (and as we predicted here), the Copyright Royalty Board (CRB) has reinstated the $500 per channel annual minimum fee for both commercial and noncommercial webcasters. The great irony, of course, is that it has taken until the final year of the current five-year royalty term to confirm these annual minimum payments. 

The official reinstatement of the fee is likely to have no more than a minimal effect on many, if not most, broadcasters. The final rule, published by the Copyright Royalty Board on February 8 (but technically not effective until March 10), applies only to those commercial or noncommercial webcasters who elected to continue webcasting under the terms and conditions of the March, 2007, Copyright Royalty Board decision.

Many broadcasters have signed on to one of the webcasting settlement agreements available to commercial or noncommercial webcasters – and, in so doing, they agreed to the same annual minimum fee of $500 per channel. We expect that those who didn’t sign on to one of the settlement agreements probably assumed the $500 per channel annual minimum would be reinstated and went ahead and paid it by January 31 (or at least have already factored it into their webcasting budgets).

If you (a) are webcasting, (b) did not sign on to one of the settlement agreements, (c) did not already make a minimum payment to SoundExchange for 2010, and (d) would like more information about how to make that payment, feel free to get in touch with us.

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Copyright Royalty Board Tries, Tries Again

Posted on January 8, 2010 by Kevin Goldberg

At Court’s insistence, CRB runs the $500 annual minimum payment for non-interactive webcasters back through the rulemaking machine – Comment deadline is January 22, 2010

Today we’re playing “Copyright Jeopardy!”. The category is “Annual Minimum Payments”, and the answer is: $500.

Contestant No. 1: “What is the amount required to be paid by non-interactive webcasters at the beginning of each year for the right to perform sound recordings over the Internet?”

Host: “No, I’m sorry. That would have been the right answer, except the United States Court of Appeals declared that required payment to be arbitrary and capricious earlier this year.”

Contestant No. 2: “What is the amount that will probably soon be required to be paid by non-interactive webcasters at the beginning of each year for the right to perform sound recordings over the Internet?”

Host: “Correct!”

A subtle but important distinction: the $500 fee is not now in effect, but the Copyright Royalty Board (CRB) is working to change that.

We’ve written plenty about the challenge to the March 2, 2007 decision of the Copyright Royalty Board which instituted rates and terms to be paid to owners of sound recordings for the years 2006-2010, including the appeal of that decision by several sectors of the webcasting community to the United States Court of Appeals for the District of Columbia Circuit. 

Our most recent post on the topic summarized the opinion of the Court of Appeals that upheld most aspects of the CRB decision. The only aspect of that decision that the Court tossed back to the CRB: the annual minimum fee to be paid by both commercial and noncommercial webcasters. The Court of Appeals determined that the CRB had provided absolutely no justification supporting this amount. Why $500? Why not $100? Why not $250? The CRB’s inability to justify the $500 requirement violated the Administrative Procedure Act’s requirement that, at a minimum, a new rule have some factual or legal underpinning – i.e., it was not reached in an arbitrary or capricious manner. 

The Court sent the CRB back to the drawing board. On December 23, 2009, the CRB began sketching. It published a Notice of Proposed Rulemaking in which it proposes to require every commercial and noncommercial webcaster to pay an annual minimum fee of – you guessed it –$500 per channel. These webcasters will only pay more at such time as their cumulative webcasting royalties for the year exceed $500.  

Our conversations with clients lead us to believe that the $500 per channel annual minimum payment was one of the least controversial aspects of the March 2007 CRB decision. Most commercial webcasters are going to exceed $500 pretty quickly anyway, so this is merely a down payment applied to later royalty payments. The noncommercial webcasters view the $500 payment as minimally burdensome even if they never exceed the monthly allowed maximum of 159,140 aggregate tuning hours which triggers additional payments. 

As a result, we envision minimal objection or contrary suggestions and expect the $500 annual minimum payments to be reinstated as a matter of law in the near future. But if you do have strong feelings one way or the other, you can submit comments to the CRB by January 22, 2010.
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