Final Piece of the Webcasting Puzzle Settled

Pureplay webcasters nail down royalty rates through 2015

It’s only been a few weeks since the Webcaster Settlement Act was enacted and already it’s working! A settlement agreement reached under that Act covers webcast royalty rates for “pureplay” webcasters for the years 2006-2015. (“Pureplay” webcasters provide non-interactive web-only service. A broadcaster who simulcasts on the Internet is not a pureplay ‘caster.)  This pretty much brings to a close the legislative and litigious efforts to overturn the March, 2007 decision of the Copyright Royalty Board (CRB) that was seen as a harbinger of the Death of Internet Radio – or at least the death of popular sites like Pandora.

As a result of the latest settlement, royalty rates for almost every aspect of the webcasting community are now covered by negotiated agreements. Many (but not all) public radio stations are subject to the terms of the agreement between SoundExchange and the CPB. Commercial broadcasters simulcasting on line are subject to the SoundExchange/NAB agreement. The only major class of webcasters still subject to the terms of the March, 2007 CRB decision consists of noncommercial broadcast stations that are not part of the SoundExchange/CPB deal.

The settlement for pureplay webcasters is retroactive to 2006. Going forward, it covers not only the 2006-2010 period encompassed by the March, 2007 CRB decision, but also the 2011-2015 period that is the subject of a newly-commenced CRB ratemaking proceeding.  Any pureplay webcaster can, but does not have to, choose the terms of this agreement over the terms of the March, 2007 CRB decision.

The terms of the pureplay settlement are as follows:

  • Every pureplay webcaster must make a $25,000 annual minimum payment. This will serve as a deposit against the overall royalty payments for the year if the overall number exceeds $25,000.
     
  • Webcasters are divided into three groups for purposes of calculating overall royalty payments: 
    • Large Webcasters
      • These are defined as entities with at least $1.25 million in annual revenues
         
      • “Large” webcasters must pay the greater of
        • 25% of total revenues; or
           
        • a “per performance” rate that is about half of that established by the March, 2007 CRB decision.  (For instance, under the settlement the 2009 rate is $0.0093 per song per listener, while the rate set in the March, 2007 CRB decision is $0.0018 per song per listener.)
           
      • “Large” webcasters must submit “census” filings of playlist reports. These monthly filings consist of information about every song played as opposed to quarterly reports of songs played during two seven-day periods during the quarter.  These reports must be retained for at least four years
         
    • Small Webcasters
      • These are defined as entities with: 
        • Less than $1.25 million in annual revenues; and
           
        • Less than the maximum allowable "aggregate tuning hours" in the year (which ranges from 8 million to 10 million ATH, depending on the year)
           
      • “Small” webcasters must pay the greater of
        • A percentage of revenues, calculated as follows:
           
          • 2006-2008: 10% of the first $250,000 in revenues and  12 percent for $ 250,000-$ 1, 249,999
             
          • 2009-2015: 12% of the first $250,000 in revenues and 14 percent for $250,000-$1,249,999;

OR

        • 7% of expenses
           
      • “Small” webcasters must submit “census” filings of playlist reports. These monthly filings consist of information about every song played as opposed to quarterly reports of songs played during two seven-day periods during the quarter.  These must be retained for at least four years.  But small webcasters can pay a proxy fee in exchange for relaxed reporting requirements.
    • Pureplay Webcasters who also Offer Subscription Services
      • These are webcasters that offer some form of syndicated or subscription service in addition to a straight music stream.
         
      • They must pay the same rate as paid by broadcasters participating in the SoundExchange/NAB deal.

SoundExchange is pitching this “discounted” rate structure as an experiment. According to SoundExchange, “Time will tell if revenue sharing is the right move for both the recording community and webcasters, but we’re willing to take the risk in the hope that artists, rights holders and webcasters can all benefit.” But then again, SoundExchange maintains that the original rates were fair.

Reviews from the webcaster side are mixed. Pandora founder Tim Westergren calls the new rates “quite high”, but envisions that heavy users of his site will bear the brunt of the cost.  He surmises that free users of Pandora might find themselves limited to 40 free hours per month, with an “opt-in” fee of 99 cents if the user exceeds that limit.  (He notes that that would give the listener unlimited music for an entire month for the same amount he/she would pay for a single song download.)

The settlement will become effective 30 days after it is published in the Federal Register.