CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

A.        Noncommercial Webcasters Who HAVE NOT Elected to Participate in any major Webcaster Settlement Agreement

If you are a noncommercial webcaster – and are not eligible for or have chosen not to participate in any of the settlement agreements applicable to noncommercial webcasters – then you are still governed by the March, 2007 decision of the Copyright Royalty Board. You must:

File your annual minimum fee of $500 per channel by January 31, 2010 using the 2010 Noncommercial Webcaster Annual Minimum Statement of Account form found here.

File any fees incurred for exceeding the 159,140 aggregate tuning hour maximum with the 2010 Noncommercial Webcaster Monthly Usage Statement of Account form found here. You must file this form even if no fees have been incurred, marking “zero” for the amount to be paid.

File playlist reports of use on a monthly basis.

B.        Noncommercial Webcasters Who HAVE Elected to Participate in the Webcaster Settlement Agreement between PUBLIC RADIO STATIONS and SoundExchange

Stations that are CPB-supported, NPR members, National Federation of Community Broadcasters members; or part of American Public Media, the Public Radio Exchange or Public Radio International do not have to file forms with SoundExchange. Under the terms of their settlement agreement, NPR’s Public Radio Interactive is making those payments. These stations will be contacted by Public Radio Interactive with regard to their obligations.

C.        Noncommercial Webcasters Who HAVE Elected to Participate in the GENERAL NONCOMMERCIAL WEBCASTER SETTLEMENT AGREEMENT and are not considered Microcasters because they have an average of at least 44,000 aggregate tuning hours per year

There are two settlement agreements that apply to noncommercial webcasters simulcasting an over-the-air broadcast station. The first applies to any noncommercial webcaster, whether affiliated with an educational institution or not. These noncommercial webcasters must re-elect this status every year, or be covered by the CRB decision of March, 2007 as described in Section A, above.   They must:

File an annual minimum fee of $500 per channel by January 31, 2010 using the 2010 Noncommercial Webcaster Annual Minimum Statement of Account form found here.

File a Notice of Election by January 31, 2010 on the 2010 Noncommercial Webcasters Statement of Election Form found here.

File any fees incurred for exceeding the 159,140 aggregate tuning hour maximum with the 2010 Noncommercial Webcaster Monthly Usage Statement of Account form found here. You must file this form even if no fees have been incurred, marking “zero” for the amount to be paid.

File playlist reports of use on a quarterly basis (monthly if the webcaster exceeded 159,140 aggregate tuning hours in any month in 2009 or in any month in 2010).

D.        Noncommercial Webcasters Who HAVE Elected to Participate in the GENERAL NONCOMMERCIAL WEBCASTER SETTLEMENT AGREEMENT and ARE considered Microcasters because they had fewer 44,000 aggregate tuning hours last year

These are extremely small noncommercial webcasters who can be exempted from the playlist reporting requirement and, by definition, will not be paying royalties because they will never exceed 159,140 aggregate tuning hours in any given month.  They must:

File an annual minimum fee of $500 per channel by January 31, 2010 using the 2010 Noncommercial Microcaster Annual Minimum Statement of Account form found here.

File an additional $100 “proxy fee” in exchange for the exemption from playlist reporting obligations, which occurs with the filing of the “Notice of Election” form found here. 

These webcasters do not have to file any Statement of Account forms for 2010 since, by definition, they will not be paying royalties. If, for some reason, they have miscalculated and exceed 159,140 aggregate tuning hours in a month, they will “true up” their payments for 2010 in January 2011.   

There is no requirement to file playlist reports of use.

E.        Noncommercial Educational Webcasters Who Have Elected to Participate in the NONCOMMERCIAL EDUCATIONAL WEBCASTER SETTLEMENT AGREEMENT [Blogmeister Note: This portion of this post was revised on January 19, 2010 in response to the reader comment found below. See our explanation and further clarification in our responsive comment, below.]

Noncommercial webcasters affiliated with an educational institution whose operations are substantially staffed by students are eligible for the Noncommercial Educational Webcaster Settlement Agreement. They must:

File a Notice of Election by January 31, 2010 on the 2010 Noncommercial Educational Webcaster Statement of Election Form found here. They must certify as to whether they have remained below an average of 55,000 aggregate tuning hours per month (and thus can pay a $100 proxy fee in exchange for the right to be exempted from playlist reporting or go ahead and engage in playlist reporting covering two seven day periods per quarter) or whether they have exceeded 159,140 aggregate tuning hours in any given month (and thus must engage in monthly reporting of all songs played). Stations that exceed 55,000 aggregate tuning hours in a given month but do not exceed 159,140 aggregate tuning hours in a given month will engage in playlist reporting covering two seven day periods per quarter. In any event, there does not have to be any reporting of aggregate tuning hour or actual total performance data, whereas stations that do not participate in this Noncommercial Educational Webcaster Statement must engage in full out, monthly “census” reporting of all songs played during the month that includes actual total performance data.

File a Notice of Election by January 31, 2010 on the 2010 Noncommercial Educational Webcaster Statement of Election Form found here. They must certify as to whether they have remained below an average of 55,000 aggregate tuning hours per month (and thus will pay a $100 proxy fee to be exempted from playlist reporting) or whether they have exceeded 159,140 aggregate tuning hours in any given month (and thus must engage in monthly reporting of all songs played).

File any fees incurred for exceeding the 159,140 aggregate tuning hour maximum with the 2010 Noncommercial Webcaster Monthly Usage Statement of Account form found here.   They must file this form even if no fees have been incurred, marking “zero” for the amount to be paid.

File playlist reports of use on a quarterly basis (monthly if the webcaster exceeded 159,140 aggregate tuning hours in any month in 2009 or in any month in 2010 or not at all if the webcaster stayed below an average of 55,000 aggregate tuning hours per month and chooses to pay a $100 proxy fee instead of filing these reports). 

Again, these forms and payments are due by January 31, 2010. Because that is a Sunday, SoundExchange will accept the forms on Monday, February 1, 2010. However, you cannot electronically file these forms and there is a penalty for late payment (or worse in terms of late-filing a Notice of Election), so we suggest you get started now. Please do not hesitate to contact a Fletcher, Heald & Hildreth, P.L.C. attorney if you have any questions.

A.        Commercial Webcasters Who Have NOT Elected to Participate in the Webcaster Settlement Agreement Between the NAB and SoundExchange (or any other potentially applicable settlement agreement):

If you (a) are a commercial webcaster and (b) either are not eligible for or have chosen not to participate in the settlement agreement between the National Association of Broadcasters and SoundExchange, then you are still governed by the March, 2007 decision of the Copyright Royalty Board. You must:

File your annual minimum fee of $500 per channel by January 31, 2010 using the 2010 Commercial Webcaster Annual Minimum Statement of Account form found here; AND

File annual fees calculated using the per performance rate of $0.0019 for 2010 and using the 2010 Commercial Webcaster Monthly Usage Statement of Account form found here; AND

File playlist reports of use on a monthly basis. 

B.        Commercial Broadcasters Who HAVE Elected to Participate in the Webcaster Settlement Agreement Between the NAB and SoundExchange: 

Commercial webcasters who are simulcasting an over-the-air signal are eligible to participate in the Webcaster Settlement Agreement between the National Association of Broadcasters and SoundExchange. However, eligibility rests on whether you elected to participate by April 2, 2009. If you did not file this election form, you canNOT now choose to participate in this settlement agreement; instead, you must follow the procedures set forth in Section A, above.  

If you did make the proper election before September 15, 2009, you must:

File your annual minimum fee of $500 per channel by January 31, 2010 using the 2010 Broadcaster Annual Minimum Statement of Account form found here; AND

File annual fees calculated using the per performance rate of $0.0016 for 2010 and using the 2010 Broadcaster Monthly Usage Statement of Account form found here; AND

File playlist reports of use on a monthly basis.

C.        SMALL Commercial Broadcasters Who HAVE Elected to Participate in the Webcaster Settlement Agreement Between the NAB and SoundExchange:  

A select few broadcasters who are simulcasting on the web also qualify as “Small Commercial Broadcasters” and are exempt from filing playlist reports of use. These broadcasters elected to participate in the agreement between the NAB and SoundExchange and had fewer than 27,777 aggregate tuning hours in the previous year.   These Small Commercial Broadcasters have one additional step to complete before January 31 but, as we have already noted, will save a lot of time in the future because they do not have to file playlist reports of use on a monthly or even quarterly basis. They must: 

File your annual minimum fee of $ 500 per channel by January 31, 2010 using the 2010 Small Broadcaster Annual Minimum Statement of Account form found here; AND

File an additional $ 100 "proxy fee" in exchange for the exemption from playlist reporting obligations, which occurs with the filing of the "Notice of Election" form found here; AND

File a 2010 Small Broadcaster Monthly Usage Statement of Account form found here. By definition, a station with fewer than 27,777 aggregate tuning hours will never have its cumulative royalties for the year exceed $ 500, but you must file this form certifying your listenership and marking a “zero” in the line indicating how much to be paid that month.

Again, these forms and payments are due by January 31, 2010. Because that is a Sunday, SoundExchange will accept the forms on Monday, February 1, 2010. However, you canNOT electronically file these forms and there is a penalty for late payment (or worse consequences, for  late-filing a Notice of Election), so we suggest you get started now. Please do not hesitate to contact a Fletcher, Heald & Hildreth, P.L.C. attorney if you have any questions.

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.

As we’ve discussed in the past, primarily in relation to webcasting, there exist two copyrights in any publicly-performed song.  One is the copyright in the underlying “musical work”, i.e., the song itself (consisting of the music and lyrics). That copyright is generally owned by the songwriter (although it may be transferred to, e.g., a publishing company).  The other – which is not at issue here – is the copyright in the “sound recording”, i.e., the particular version, or performance, being transmitted at any particular time. That copyright, which is sometimes referred to as the “performance right”, is generally owned by the recording artist performing that particular version (although, again, ownership of the copyright may be transferred to, e.g., the record company). 

Songwriters – the folks who own the rights in the underlying “musical work” – are for the most part represented by agencies which collect and distribute royalties for the broadcast (or webcast) of their works. These agencies include ASCAP, BMI and SESAC (the Society of European Stage Authors & Composers).

Because of prior antitrust actions taken against them, ASCAP and BMI are covered by a “consent decree” administered by a United States District Court. Every few years, RMLC – a voluntary organization of individuals representing a broad range of the radio industry – renegotiates a new rate structure for payment of royalties by radio broadcasters to ASCAP and BMI.  (SESAC was not a part of the earlier antitrust action and, therefore, has separate negotiations with RMLC). The current rate structure applicable to the ASCAP- and BMI-administered copyrights expires on December 31, 2009. It is not certain that a new rate agreement will be reached and approved by the federal court prior to that expiration date.

Stations that have already given authorization to RMLC to negotiate on their behalf are automatically covered by any rate agreement that is reached for January 1, 2010 and beyond, as well as the rate agreed upon to “bridge” the period between December 31, 2009 and the commencement of that new term. 

Any radio broadcaster that has not yet given such authorization to the RMLC can still do so, in which case any agreements will automatically apply to that broadcaster as well. Broadcasters who, for whatever reason, would prefer not to authorize RMLC to negotiate on their behalf may also sign a direct agreement with ASCAP and/or BMI in which the broadcasters agree to be bound by any new, post-January 1, 2010 terms and the terms of the “bridge period”. 

The letters which many broadcasters have been receiving in recent weeks are intended to make it easy for anyone still interested in signing up (whether with RMLC or ASCAP or BMI) to do so.  

We cannot provide general advice via this blog, but radio broadcasters who receive such a letter from RMLC, ASCAP or BMI should feel free to contact us if you have any questions.

The reporting rules are part of the system established by the CRB for assuring collection and payment of appropriate royalties to copyright holders. Using webcaster-supplied playlists reflecting the frequency with which songs are played on the web, SoundExchange can fairly distribute the royalties it collects. When the CRB first finalized the playlist reporting requirements in 2006, all webcasters were required to file quarterly reports with SoundExchange listing every song played by the webcaster during two seven day periods in that quarter. In December 2008, the CRB proposed to change those quarterly filings to “census” filings – i.e., monthly filings containing information about every song played during the month. The recently-published rules formally adopt that census filing approach.

Under the “new” rules,  census reporting – that is, reporting within 45 days of the end of each month the required information about all songs played during that month – is required for all webcasters except

• broadcasters simulcasting an over-the-air broadcast on the Internet which have such a small listenership that they do not exceed the $500 annual minimum payment per year (in other words, any very small commercial webcasters and noncommercial webcasters that do not exceed 159,140 aggregate tuning hours in any month); and
• preexisting satellite digital audio radio services, new subscription services or business establishment services who cannot accurately measure listenership for technological reasons. (These folks must still report their playlists, but can do so on a modified “aggregate tuning hour” basis.)

Of course webcasters who elected to participate in one of the several settlement agreements reached in the past couple of years are bound by the playlist reporting requirements in the applicable agreement. These webcasters should review their particular settlement agreement, and let us know if you have any questions about your reporting requirements.

The song-related information which must be filed has not markedly changed, though there is one key exception applicable to broadcasters. The reportable information still consists of:

• The name of the webcasting service
• The category transmission code, although this has changed slightly, with broadcasters now using one of the following category codes:
  • Eligible nonsubscription transmissions of broadcast simulcast programming not reasonably classified as news, talk, sports or business programming (essentially, simulcast of a broadcast station’s music programming);
  • Eligible nonsubscription transmissions of non-music programming reasonably classified as news, talk, sports or business programming (essentially, a broadcast station’s news, talk, sports or business programming); and
  • Transmissions of broadcast simulcast programming not reasonably classified as news, talk, sports or business programming made by an eligible new subscription service (this category involves subscription-only simulcast of music programming by a broadcast station)
• The featured artists
• The sound recording title
• The International Standard Recording Code, or a combination of (a) album title and (b) marketing label
• Actual total performances of the song, or a combination of (a) aggregate tuning hours and (b) channel or program name and (c) number of times the song was played during the relevant period

For the last category (actual total performances of the song or the listed combination), the “combination” alternative is applicable only to a preexisting satellite digital audio radio service, a new subscription service, a business establishment service and broadcasters who do not exceed the annual minimum payment required for a given channel (currently $500). 

The new rules have been purged of unnecessary references to prior license terms, obsolete categories (e.g., “small webcaster”) and the like. And illustrating the March of Technology, the CRB has deleted the option of filing the reports on floppy diskettes.

Notably, the Copyright Royalty Board did not adopt the following proposed changes: 

• Any form of “proxy fee” or other exemption from filing altogether, even for the smallest webcasters;
• Imposition of a late fee for tardy or non-filed playlist reports; or
• An exemption from playlist reporting of songs played during syndicated radio programming

While we have focused here on the applicability of these rules to broadcasters who are also webcasting, a section of the newly final rules applies slightly different standards to “preexisting subscription services”. Please contact us if you believe you qualify as a “preexisting subscription service” and require guidance as to how the new rules apply to you. 

Again, the CRB’s changes go into effect on November 12, 2009.

The decision was issued in a case pitting a number of record companies (think BMG, Arista, Bad Boy, Zomba) against the popular LAUNCHcast service. The record companies claimed LAUNCHcast was interactive. The court disagreed. 

The Copyright Act defines an interactive service as one which “enables a member of the public to receive a transmission of a program specifically created for the recipient, or on request, a transmission of a particular sound recording . . . , which is selected by or on behalf of the recipient.”  The parties agreed that LAUNCHcast, in some form, generated a list of songs to be performed based on the initial song or artist choice by the listener.  But was that enough to make it “interactive”? Nope.

The Court engaged in a searching review of the factors leading to the creation of the interactivity/non-interactivity distinction in the Digital Performance Right in Sound Recordings Act of 1995 and its refinement in the 1998 Digital Millennium Copyright Act – two seminal laws intended to protect sound recording copyright holders. The competing goals of the law are: (1) to increase the number of distribution channels for music and (2) to discourage rampant copying of music without compensation to the copyright holder.

The Court concluded that a major consideration – perhaps the major consideration – is the ability of a digital listener to capture and save a high quality copy of a sound recording with little to no effort if he or she knows it is about to be played. That is, if a listener can manipulate the webcast service in a way which permits him/her to snag his/her own digital copy of a song of his/her choosing, then it’s likely an “interactive” service. Stated another way, the Court focused on whether the webcasting service offers listeners an opportunity to steal music they would otherwise purchase.

Analytically, the Court reviewed factors which the Copyright Office had deemed relevant over the years. Although asked to clarify the “interactive/non-interactive” distinction, the Copyright Office has declined to take the bait, explaining that technology changes too rapidly to allow for a hard and fast rule. But it did indicate that some level of listener influence is permitted within the definition of non-interactive. In particular, the Copyright Office had even indicated that LAUNCHcast itself would qualify as “non-interactive”.

How exactly does LAUNCHcast work? The short strokes are that users:  

• Must log in with a unique username/password;
• Must enter basic information about preferences unrelated to music;
• Must enter information regarding the user's favorite artists;
• Must identify the user's favorite musical genres and rating them in order of preference; and
• Are able to rate songs or artists they hear (or even instantly purchase a song they like).

That final step (i.e., the rating process) continually refines and changes the individual stream offered to the individual listener.  Based on all these preferences and refinements, the LAUNCHcast software creates a playlist of 50 songs every time the listener logs on. The listener has no idea what those songs will be or which artists will be featured.

There is actually much more to the software, involving ratios, quotients and other mathematical formulas that aid in the refinement and ordering of the playlists. The Court of Appeals spent a good ten pages describing the process in impressive detail. Though we’re glossing over the particulars, we’ll note that it is this very level of detail which led the Court to conclude that LAUNCHcast is not an interactive service.  As the Court saw it, the LAUNCHcast system does not allow a user either to pick a song and then immediately hear that song, or to predict whether (much less when) any particular song may be played, and or (most definitely) to engage in music piracy. (Indeed, the instant-purchase function probably promotes the legal purchase of copyrighted music).

While LAUNCHcast may be more complex than some other few music services, the Court’s discussion does highlight some key characteristics which webcasters can take note of in determining whether their services may be deemed interactive: 

• In defining “interactive”, Congress “intended to include bodies of pre-packaged material, such as groups of songs or playlists specifically created for the user”;
• About 60 percent of the various factors used in the LAUNCHcast programming to create and modify a user’s playlist are out of the listener’s control (the only absolutely certain control available to a user is the “zero” rating: by giving a song a “zero” rating, the user guarantees that he or she will not hear it again);
• A new playlist of 50 songs is created every time the listener logs in, which prevents any ability to predict what will be heard during any particular session.

Emphasizing the limited involvement of the listener in the LAUNCHcast song selection process, the Court contrasted listening to LAUNCHcast to listening to radio back in the halcyon days. According to the Court, LAUNCHcast listeners do not enjoy even the “limited predictability that once graced the AM airwaves on weekends in America when ‘special requests’ graced lovestruck adolescents’ attempts to communicate their feelings to ‘that special friend’”. Ah yes, the good old days. But the Court’s comparison prompts this reminder to broadcasters who stream their over-the-air programming: be careful about inviting “special requests” from listeners, since granting such requests could lead the webcasting element of your operation to be deemed “interactive”, with all that that entails.

Recall that, for webcasting royalty purposes, the term “noncommercial” is defined by tax code (Section 501) considerations, not by the conventional FCC definition of the term. That is, a noncommercial webcaster is an entity which either (a) is already tax-exempt under Section 501 or (b) has applied for tax-exempt status or (c) is a government entity acting within its public purpose. As a general default matter, noncommercial webcasters must comply with the royalty rates set out in the March 2, 2007 decision of the Copyright Royalty Board (CRB) and other applicable regulations, which require:

a $500 annual minimum fee per channel (though a recent Court of Appeals decision has raised questions about the continued validity of this fee);

commercial per performance rates, for listenership above 159,140 aggregate tuning hours in any given month (about 220 simultaneous listeners at every moment in the month);

reporting of information about all songs played for two seven-day periods per quarter

compliance with the "performance complement" elements of the statutory license limiting, among other things, the number of songs played from the same album or artists in a given time period.

Noncommercial entities can avoid these default requirements in a variety of ways. For example, some entities are covered by the agreement (which was recently extended) between SoundExchange and the Corporation for Public Broadcasting. 

The two new agreements now provide still more ways of opting out of the default CRB regs. Here is how those new agreements work.

The General Agreement

The General Agreement is available to any noncommercial webcaster, not covered by the CPB/SoundExchange agreement, which simulcasts an over-the-air signal (though it can also have other streams). The terms of the General Agreement apply to the years 2006-2015.

To take advantage of the General Agreement, the eligible noncommercial webcaster must file a notice of election by September 15, 2009 or within 30 days of commencing webcasting, whichever is later. (The notice forms are available on the SoundExchange website.)This will cover the webcaster for every subsequent year unless the webcaster revokes its participation by January 31 in any future year. The noncommercial webcaster must also make good on all unpaid royalties owed for the period 2006-2009 before September 15, 2009. 

The General Agreement calls for participating noncommercial webcasters to pay only a $500 annual minimum fee per channel by January 31 of each year as long as the webcaster does not exceed 159,140 aggregate tuning hours (ATH) in a given month. This is essentially the same requirement imposed by the CRB default regs, except that under the new General Agreement the webcaster must file a Statement of Account each month, whether or not it exceeds the ATH max.

However, if the webcaster exceeds 159,140 ATH, it must pay royalties at the following rates and time periods:

2006-10:    $0.0002176 per performance or $0.00251 per ATH for a music channel or $0.0002 per ATH for news/talk/business/sports channels)

2011:         $0.00057 per performance

2012:         $0.00067 per performance

2013:         $0.00073 per performance

2014:         $0.00077 per performance

2015:         $0.00083 per performance

(For comparison purposes, the CRB-imposed per performance rates range from $0.0008 to $0.00019 over the period 2006-2010. No CRB rates have been set for 2011-2015.)

Royalties for the excess transmissions can be calculated on the ATH basis by multiplying twelve songs per hour (a permitted approximation) by the number of listeners in each hour. 

The General Agreement imposes reporting requirements on participating webcasters. Specifically, they must file quarterly reports (due within 45 days of the end of each quarter) listing all songs played during two seven-day periods during the quarter. While a similar reporting obligation was previously in place, the new deal permits webcasters to report simply the number of times each song was played and the number of listeners per hour, rather than the specific number of listeners for each song.

During the period 2011-2015, if the webcaster exceeds a monthly average 159, 140 aggregate tuning hours in any given year, it must engage in “census reporting” for the entire following year. That means that it will have to report every song played during the year – although the ATH reporting method (i.e., number of times each song is played, along with the total number of listeners per hour) can be used instead of the more specific (and onerous) reporting of the number of listeners to each particular song.

Additionally, if a webcaster certifies that it had fewer than 44,000 ATH in the previous year (about five-six simultaneous listeners at every moment in the year) and that it reasonably expects to stay below that number in the coming year, it can avoid the reporting requirement altogether by filing a $100 “proxy fee”.  This certification must be made by September 15, 2009 or within 30 days of commencing webcasting, whichever is later, and again by January 31 of every year in which the webcaster is eligible for, and chooses, this “microcaster” status. The noncommercial webcaster can exceed the 44,000 ATH level one year in this time period and still retain this "microcaster" status as long as it implements technological measures to ensure it does not exceed the limit again. 

Noncommercial Educational Webcasters

Any noncommercial educational webcaster not covered by the CPB/SoundExchange agreement can choose to be covered by the terms of this second new agreement for the years 2011-2015 (or, for reporting purposes only, 2009-2010 as well). To be eligible, the noncommercial webcaster must: (a) be directly operated by, or affiliated with and officially sanctioned by, a domestically-accredited primary or secondary school, college, university or other post-secondary degree granting institution; (b) staff its webcasting operations substantially by students; and (c) not have exceeded 159,140 ATH in any month during the preceding year.

To take advantage of the educational webcaster agreement, a noncommercial educational webcaster must elect this status by January 31 of EACH YEAR or 45 days after the end of the month in which it begins webcasting operations, whichever is later. In other words, this does not automatically renew, unlike the General Agreement). 

Any noncommercial educational webcaster choosing to participate in this agreement must pay a $500 annual minimum fee per channel by January 31 of each year.  

If an educational webcaster exceeds 159,140 aggregate tuning hours in a given month, then the overage will be subject to the following royalty rates, depending on the year in which the overage occurs:

2006-10:    The current CRB-mandated commercial rates

2011:         $ 0.0017 per performance

2012:         $0.0020 per performance

2013:         $0.0022 per performance

2014:         $0.0023 per performance

2015:         $0.0025 per performance

In the event that the 159,140 ATH level is exceeded, royalties can be calculated on the ATH basis by multiplying twelve songs per hour (a permitted approximation) by the number of listeners in each hour.

The educational webcasting agreement imposes reporting requirements on participating webcasters. Specifically, they must file quarterly reports (due within 45 days of the end of each quarter) listing all songs played during two seven-day periods during the quarter. While a similar reporting obligation was previously in place, the new deal permits webcasters to report simply the number of times each song was played and the number of listeners per hour, rather than the specific number of listeners for each song.

If a webcaster certifies that it had fewer than 55,000 ATH for all but one month in the previous year (that would amount to about 75 simultaneous listeners at every moment in the month) and that it reasonably expects to stay below that number in the coming year, it can avoid the reporting requirement by filing a $100 “proxy fee”.  (The educational webcaster may exceed the limit for one month, once, without losing its eligibility as an “educational webcaster” as long as it implements certain technical measures to ensure compliance going forward.) This alternative to the reporting requirement is available not only for 2011-2015, but also for 2009-2010. A webcaster choosing the option for 2009-2010 should file the required certification along with the $500 annual minimum fee due January 31, 2010.

If an educational webcaster exceeds 159,140 average monthly ATH in a given year, then for the entire following year it must engage in “census reporting”, i.e., every song played during the year (but it can simply report the number of times the song was performed, rather than the full listenership for each performance).

Finally, every noncommercial educational webcaster must keep, for a period of at least three calendar years, "server logs sufficient to substantiate all information relevant to eligibility, rate calculation and reporting". So hastily deleting files to save server space may cost you more in the end.

That’s right.  SoundExchange, representing the holders of performance copyrights (held by artists, record labels and others), has announced that it has agreed to terms governing the payment of royalties by four more groups of webcasters.   Despite the plethora of earlier settlement agreements, there remained one category of folks not covered by any royalty agreement: noncommercial entities with FCC licenses that are not part of the public radio system. 

The good news is that, with the completion of the settlement agreements recently announced by SoundExchange, most of these should now be covered in one of the agreements summarized below. 

We won’t have the final details until the full terms of each settlement are published in the Federal Register.   (Note: The agreements won’t become effective until 30 days following Federal Register publication.)  Still, from the information that SoundExchange has released, we know the following.

Religious and Non-Commercial Webcasters

A large subset of “noncommercial entities with FCC licenses that are not part of the public radio system” consists of religious broadcasters. To those of you in that group we say: your prayers have been answered. 

According to the press release issued by SoundExchange, an agreement was reached with the National Religious Broadcasters Music Committee governing royalty rates for the years 2006-2015. 

Webcasters choosing to participate will pay a per performance rate that begins slightly lower than those set by the CRB but will increase through the term.  Fees will be calculated by multiplying the applicable annual royalty rate times the number of songs played times the number of listeners.  “Small stations” – not defined in the press release – may be able to pay a “proxy fee” (as do small commercial broadcasters) to avoid filing records containing information of all songs played. 

This agreement establishes rates through 2015.  In other words, it supplants not only the rates which the CRB set in March, 2007, but also those that the CRB still has under consideration for upcoming years.

College Radio

Many, though not all, college broadcasters also fall into the population of “noncommercial entities with FCC licenses that are not part of the public radio system”.  To those of you in that group we say: it’s time to graduate to a new royalty scheme.

These folks will pay an annual set fee of $500.00 as long as they do not exceed 159,140 “aggregate tuning hours” in a given month.  (If they exceed that ATH level, they will be subject to the royalty scheme set up for commercial per-performance rates in the agreement between SoundExchange and the National Association of Broadcasters earlier this year.)  

Sound Exchange’s press release on this agreement indicates that “college stations and other noncommercial educational webcasters” will pay only a minimum annual fee and will have relaxed recordkeeping requirements. 

XM-Sirius

Thought this one was already resolved, did you? Well, we discussed the rates paid by XM-Sirius a few weeks ago, but that was for the performance of the sound recordings via their satellite feed. This one is for performance via their website.

Again, all we have to work from is a barebones press release, but the terms appear to involve payment on a per performance basis through 2015, though the specific rate has not yet been publicly disclosed.

The Mysterious Fourth Agreement???

While SoundExchange reported that a total of four new agreements had been reached, it didn’t release any details about the final agreement.   Why the mystery?  Who knows?  It could be that this last agreement is the coolest of them all.  We’ll just have to wait and see.

You can be sure that we’ll pass on the full details of each agreement – including who is eligible for which agreements and what steps those eligible parties must take to participate – when publication in the Federal Register occurs.  Once that happens, we’ll also be in a position to update the step-by-step guide to webcasting royalties (which we posted several months ago) to include a breakdown of the latest agreements. Check back here at www.CommLawBlog.com for more information as it comes available.

March 2, 2007:  Copyright Royalty Judges (CRJs) reach a decision regarding the rates and terms applicable to digital performances of sound recordings and making ephemeral recordings for the years 2006-2010. (Rehearing was denied on April 16, 2007.)

April 26, 2007: The Internet Radio Equality, the first of several attempts to overturn the ruling by legislation, is introduced in the House of Representatives (neither this nor any ensuing bill is enacted into law). 

May 30, 2007:  Several webcasters appeal the CRJs' decision to the United States Court of Appeals for the District of Columbia Circuit; these are eventually consolidated into one case.

July 12, 2007: The Court of Appeals denies the webcasters' request to stay the implementation of the new rates and terms, as a result of which the new rates and terms go into effect on July 15, 2007. 

. . . LOTS of time passes . . .

January 15, 2009: The Corporation for Public Broadcasting and SoundExchange, Inc., reach a deal for payment of royalties by eligible public radio stations for the years 2006-2010. This moots any concern about the CRJs’ decision as far as parties to this deal are concerned.

February 16, 2009:  The National Association of Broadcasters and SoundExchange reach a similar deal covering over-the-air broadcasters for the years 2006-2015. This moots any concern about the CRJs’ decision as far as parties to this deal are concerned.

July 7, 2009:  So-called "pureplay" webcasters and Sound Exchange reach a deal for payment of royalties for the years 2006-2010 by these web-only radio stations. This moots any concern about the CRJs’ decision as far as parties to this deal are concerned.

. . . VERY LITTLE time passes . . .

July 10, 2009: The United States Court of Appeals issues its ruling in the appeal of the March 2, 2007 CRJs’ decision.

In other words, more than two years after the CRJs’ decision was issued, the Court finally got around to resolving the appeals – and only after virtually every one of the major parties affected by that decision had already taken matters into their own hands and reached private deals obviating the royalty payment structure established by the CRJs.

The Court of Appeals by and large ruled against the webcasting community, finding the majority of the CRJs’ decision to be valid under the Administrative Procedure Act.  The Court remanded one portion of the case to the Copyright Royalty Judges: the $500 annual minimum fee paid by both commercial and noncommercial webcasters. 

In a move that will be analyzed by close readers of this blog and constitutional scholars alike – and that's not to imply that these groups are mutually exclusive – the Court declined, for the second time in as many weeks, to rule on the constitutionality of the Copyright Royalty Judges themselves.

Let's start with what is easily the most interesting part of the case:  the claim by Royalty Logic, Inc. that the Copyright Royalty Judges themselves have been unconstitutionally appointed to their positions.  (FYI – Royalty Logic is a SoundExchange wannabe seeking to be designated as a "receiving agent" allowed to collect webcaster royalties and distribute them to the copyright owners.) 

Does that claim of unconstitutionality ring a bell?  Yeah, we discussed a similar claim last week, when Judge Kavanaugh raised the issue in his concurring opinion in an appeal of a separate CRJ royalty decision (involving satellite radio).  Judge Kavanaugh concluded that the CRJs “appear to be” "principal officers" of the government, whose appointment constitutionally requires Senate confirmation. Since CRJ appointments don’t include any Senate OK, then the current appointment mechanism is unconstitutional, he suggested.

Royalty Logic used a different tack, something along the following lines. The Constitution authorizes Congress to delegate the power to appoint “inferior officers”, but that power can be given only to the President, the courts, or “Heads of Departments”. Everyone agrees that: (a) CRJs – who are appointed by the Librarian of Congress – are “inferior officers”; and (b) the Librarian of Congress is neither the President nor a court. Royalty Logic argued that the Librarian was also not a “head of department” and, therefore, the CRJ appointments were unconstitutional. 

While that latter point was disputed by SoundExchange and the Department of Justice, the Court chose not to resolve the issue. Instead, the Court observed that Royalty Logic hadn’t bothered to raise the issue of constitutionality in its initial brief, and had thrown in the argument only as a supplement several months later. The Courts don’t look kindly on such piecemeal presentation, especially when the issue raised supplementally has potentially “far-reaching consequences” which should not be resolved on the basis of “hasty, inadequate, and untimely briefing”. So the Court politely declined to consider that question further.

Under either Judge Kavanaugh's or Royalty Logic's formulation of the constitutionality argument, the result is the same: the entire underpinning of the CRJs’ operation (including every rate they have set) is called into question.  But despite the seemingly crucial importance of this point, the Court chose not to resolve it in either the satellite case or the webcaster case.  

Having sidestepped the constitutionality conundrum, the Court methodically plowed through the substantive challenges to the CRJs' decision. The Court found in each instance that the CRJs had not exceeded their authority.  A reviewing court, in determining whether an agency has acted in an "arbitrary and capricious manner", generally accords a rather large degree of deference to the forum whose decision is being reviewed.  The Court applied that generous standard of review to the "willing buyer/willing seller" standard applicable to this statutory license in one magnificent summary: 

The statute does not require that the market assumed by the [CRJs] achieve metaphyiscal perfection in competitiveness.  

Given this wide and forgiving scope of statutory authority, the CRJs got it right, for the most part.  The lone exception was the annual minimum payment of $500 required to be paid per channel (or station) by commercial and noncommercial webcasters alike.  This figure – which actually serves as more of a "deposit" with regard to most commercial webcasters, who can count this against amounts paid throughout the year – was supposedly chosen as a reasonable reflection of the administrative costs incurred by SoundExchange in receiving and distributing the royalties incurred by each webcaster. 

However, after combing through the 13, 288 pages of testimony and 192 exhibits introduced through 39 witnesses over 48 days of trial, the Court found absolutely no evidence supporting this $500 annual minimum payment.  With regard to commercial stations, the imposition of this annual minimum payment without a cap on the overall stations to which it applies constituted an unexplained departure from two voluntary agreements that had been in place.  That, my friends, is the epitome of arbitrary and capricious. 

The Court remanded this issue to the CRB for further consideration.  We wonder whether proceedings will actually continue.  Not only are most of these matters already settled, but this is one area where most webcasters really haven't raised much of a complaint. It's been our experience that commercial webcasters invariably exceed that $500 figure anyway and – though this isn't to say they're happy with the amount or wouldn't mind paying less – most noncommercial webcasters pay their $ 500 per year and don't complain if it ends there.

If that's the case – and it's indeed the end to this case – was this decision ultimately nothing more than "too little, too late"?  Perhaps with respect to the narrow issue of webcast royalties, but obviously not with respect to the much more fundamental issue of the constitutionality of the CRJs. Having shone a bright light on that issue twice in two weeks, but having left it undecided, the Court has effectively invited future parties to litigate it properly. That’s when the fireworks may begin.

• 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.

In order to be covered by the settlement, a webcaster must: 

• Be Licensed by the Federal Communications Commission;
• Originate programming (not be solely a repeater station);
• Be a member or affiliate of:
  
  • NPR
  • American Public Media
  • Public Radio International,
  • Public Radio Exchange, 
  • the  National Federation of Community Broadcasters, or
  • or be a public radio station that is qualified to receive funding from CPB.
    
• Qualify as a "noncommercial broadcaster" under the statutory licensing rules; and
• Webcast as part of the mission that entitles the owner to be exempt from taxation under Section 501 of the Internal Revenue Code, or, if it is owned by a government entity, operate for a public purpose. 

The 450 or so qualifying stations agreed to make a $1.85 million lump sum payment to SoundExchange covering the years 2006-2010.  We now understand that individual stations covered by this settlement will be making their payments to NPR Public Interactive.

So, public radio licensees, keep an eye out for correspondence from NPR Public Interactive.  If you believe yourself to be covered by this settlement and don't hear something from NPR Public Interactive in the very near future, please let us know, as first reports to SoundExchange will be made in mid-July.

At issue is a patent (No. 6,577,716, if you’re into that kind of thing) which covers methods for (a) “replacing a portion of the content of a radio broadcast that is to be distributed over the Internet” and (b) distributing a portion of the content of a radio station broadcast over the Internet.” To folks not steeped in the technical intricacies of patent descriptions (i.e., us), the overall description of the “methods” is not a model of specificity and detail. It refers, without much elaboration, to the use of content-related “markers” to trigger the identification of “local” programming (e.g., ads, news, weather, sports, traffic) and the replacement of such programming with programming “applicable to individuals located outside the geographical range of the radio broadcast”. 

Exactly what (if any) specific hardware and/or software might be necessary to implement these “methods” does not appear to be identified in the patent itself.

If successful, Aldav could potentially receive millions in both “actual” and “enhanced” damages, and could obtain a permanent injunction preventing these stations from using the patented process without Aldav's permission.

Of course, broadcasters might want to yank local programming from their Internet stream and replace it with wider- interest material for a number of reasons. Replacement of local spots often makes sense, since the advertiser presumably is not expecting business from a global audience, and, conversely, a global audience presumably isn’t interested in hearing about some local business. Also, a station’s right to transmit some content, including locally-produced spots and even some music, may not include Internet transmission – in which case the station could subject itself to claims by the content’s producer, talent and/or copyright holder for additional compensation if that content were to be included in the stream. (While the station may be indemnified by the commercial producer or broker in the event that the talent sues to recoup the extra compensation he or she believes is owed for this extra performance of the commercial, the station and the station alone will be on the hook for the sound recordings performed but not reported to SoundExchange.)

So it's no surprise that content substitution may be standard operating procedure among many, if not most, streamers.

The big question raised by the Aldav suit is whether Aldav’s patent really does give it a monopolistic (or near-monopolistic) lock on any such program-replacement activity. Presumably Aldav thinks so, and is looking to establish that principle by dipping into some of the deepest pockets in the business. In view of the potentially astronomical stakes on the table, though, it is not likely that anybody’s going to be conceding liability in the early rounds.

Meanwhile, streaming stations not targeted by Aldav’s suit should take a close look at their own program-substitution practices, with an eye to trying to dodge any litigation bullets that might get shot in their direction as this situation develops.

The CRB received 43 comments in response to its initial proposal to increase the two-seven-day-per-quarter filing requirement to full "census" reporting.  These comments could be divided into four basic categories: 

• Copyright Owners  (including SoundExchange) who support the move to census reporting as a means of accurately distributing copyright royalty payments. 
   
• Educational and Commercial Radio broadcasters who oppose the proposed change as unduly burdensome, if not impossible.  
  
  
  • Some comments stated outright that increased reporting requirements would result in the commenter ceasing its webcasting altogether, due to a lack of "finances, staff' and technology" to engage in monthly reporting. 
     
  • Other comments noted the particular hurdle facing educational broadcasters, many of whom still allow disc jockeys to freely choose their songs rather than relying on an automated playlist.  These commenters urged the CRB to exempt from any increased reporting requirement those educational broadcasters who pay only the $ 500 annual minimum royalty fee per channel and never exceed the 159,140 aggregate tuning hour maxiumum in a given month.
     
• A Service that Simulcasts the Over-the-Air Broadcasts of Mainly Noncommercial Stations on the Internet
  
• Commercial Providers of Software that Allows Radio Stations and Webcasters to Automate Their Playlist Reporting, two of whom opposthe increased census reporting because of concerns over cost and technology burdens.

The Notice of Inquiry hones in on this particular issue of cost and administrative burden.  Noting that the Copyright Act requires the CRB to establish a method of notifying copyright owners that their sound recordings are being publicly performed under the statutory license, the Notice of Inquiry provides only two alternatives:  the current quarterly reporting requirement and the proposed monthly requirement.  In addition to seeking suggestions as to a possible third alternative that can be both informative and cost-effective, it also asks the following questions (among others): 

• How many small webcasting entities will be adversely impacted by the proposed monthly census reporting? 
   
• What percentage of broadcasters use automated playlists?  What is the cost of preparing a report using the automated playlist and how would that cost increase if census reporting is instituted? For those not using automated playlists, how are reports generated and filed?
   
• Specific to SoundExchange: 
  
  
  • What is the current methodology used to allocate and distribute royalties to copyright owners? 
  • How would that methodology change with census reporting and, in particular,  how would it increase accurate and efficient royalty distribution?
  • What cost savings or additional burdens can copyright owners expect through census reporting?
     
• Who, if anyone, should be exempted from the proposed census reporting?   Possibilities include:
   
  • A revenue-based cut-off (with comment sought on the proper amount for the cut-off)
  • Strictly along the lines of the royalties paid (such as those who do not exceed the $ 500 annual minimum payment)
  • Commercial  vs. Noncommercial
  • Based on the webcaster's physical size or number of employees

We're assuming that the NAB will again file comments on behalf of broadcasters, but you should feel free to provide your tales of horror and woe (or any other information) to the CRB in written comments due May 26, 2009, with reply comments due on June 8, 2009.  

We have prepared a series of interlinked informational slides to guide you along the path. By clicking on the links that apply to your own situation, you can wend your way through the Webcast Royalty Maze. (Don’t worry about making a mistake: you can go back at any time if you think you've answered a question wrong or if you think that you'd like to take advantage of some other available option.)

NOTE: This was created prior to the execution of settlement agreements in August 2009 that cover noncommercial webcasters and noncommercial educational webcasters.  If you are a noncommercial webcaster who might be eligible for one of these agreements, please look for an updated version of this step-by-step guide or contact us for more information.

So, let's begin with an easy one: If you are engaged in the non-interactive public performance of sound recordings by means of a digital audio transmission, click here. 

If you are not engaged in the non-interactive public performance of sound recordings by means of a digital audio transmission, then the statutory license for webcasting does not even apply to you.

The full terms of this settlement have not been released, but here's what we already know:
 

• The terms of this settlement apply to broadcast stations, whether they are simulcasting an over-the-air signal on the Internet, streaming original program on the Internet, or doing both; there is an emphasis on "this" because SoundExchange has one other settlement in place, with CPB-Member stations, NPR, NPR Members, National Federation of Community Broadcasters members, American Public Media, Public Radio Exchange, and Public Radio International.   
   
• While we have heard rumors that other segments of the webcasting community may be close to similar settlements, these are the only two settlements to date. So any webcaster outside of the categories listed above (college radio stations not covered by the NAB or CPB deals, and nonbroadcast -- web-only -- webcasters, especially smaller webcasters, and religious broadcasters stand out at this point) are still subject to the 2006-2010 rates set by the CRB 2007 and the result of the upcoming ratemaking proceeding.  
   
• Broadcasters do not have to accept the terms of this settlement, but if they do, they will lock in their royalty rates for 2009-2010 (regardless of the outcome of the pending appeal of the highly contentious 2007 Copyright Royalty Board decision) and for 2011-2015 (regardless of the outcome of the upcoming ratemaking proceeding).  The "per performance" method of calculation will remain in place, meaning stations will pay royalties calculated according to the number of songs played multiplied by the number of listeners who hear each song multiplied by the applicable royalty rate for the year:  $ 0.0015 in 2009 (down from $ 0.0018), with a gradual increase to $ 0.0025 in 2015.
   
• In addtion to the change in royalty rates, the NAB settled another aspect of the statutory license with four major record labels in a way that will clearly benefit broadcasters simulcasting on the Internet.  The "sound performance complement" section of the statutory license restricted webcasters' playlists in certain ways and, thus, in the case of a broadcaster simulcasting on the Internet, often required adaptation of the over-the-air broadcast to the webcasting rules.  Broadcasters simulcasting on the Internet will no longer be bound by certain rules (it has not been stated exactly which) that restrict among other things: 
  
  
  • The number of songs by a single artist or from a single album that could be played in a certain time period
     
  • The archiving of certain programs for more than a defined period of time or if the program is not of sufficient duration
     
  • The "preannouncing" of a specific upcoming song (while at the same time requiring the contemporaneous display of information about a song as it is being played)

More information about this and any other settlements should be available soon. In fact, the February 15, 2009 deadline set forth in the Webcaster Settlement Act has now passed and outstanding negotiations should have ended. 

But we know enough to say this: the settlement is not "landmark" by any means.  In fact, the biggest surprise may be that the status quo continues despite the efforts of the NAB and others to overturn the 2007 Copyright Royalty Board decision that sharply increased rates. This may bring a measure of certainty to broadcasters who are, or are considering, webcasting;  however,  the continued increase in rates after an initial decline.combined with other administrative requirements that may also increase in the near future, may mean the result is "we're certainly not going to stream". 

We've talked to plenty of broadcasters who are still shying away from what is clearly a mainstream method of delivering their signal because the costs and regulatory compliance efforts are too excessive to justify the additional revenues.   A short term dip in royalty fees combined with relief from playlist restrictions that, frankly, many broadcasters weren't even aware of, are unlikely to change that mindset.

The annual minimum royalty fee can be paid using forms available on the SoundExchange Inc. website.  To access the correct minimum payment form (if the direct links to the forms provided below do not work): 

1. Access the website at http://www.soundexchange.com
   
2. Select the “Download Forms” Option from the column on the right of the page
   
3. Select “For Digital Music Services” from the four options which appear after selecting “Download Forms
   
4. Choose the Relevant Form from the “2009” list:

a.     Commercial Webcasters should click the preferred format under “2009 COMMERCIAL WEBCASTER/SIMULCASTER MINIMUM FEE STATEMENT OF ACCOUNT FORMS”:

Commercial Webcaster/Simulcaster - Statement of Account - Minimum Fee (Excel)

Commercial Webcaster/Simulcaster - Statement of Account - Minimum Fee (PDF)

b.    Noncommercial Webcasters should click the preferred format under “2009 NONCOMMERCIAL WEBCASTER/SIMULCASTER MINIMUM FEE STATEMENT OF ACCOUNT FORMS”:

Noncommercial Webcaster/Simulcaster - Statement of Account - Minimum Fee (Excel)

Noncommercial Webcaster/Simulcaster - Statement of Account - Minimum Fee (PDF)

This $ 500 annual minimum payment acts as a deposit against the royalty fees incurred through all of 2009. In fact, the relevant Statement of Account form that must be filed within 45 days after each month for which it applies (for example: the January form is due by March 16, 2009) takes into account this $ 500 annual minimum payment by including a line on which the filer subtracts $ 500 from the overall amount calculated (each form after the first month provides for subtraction of all amounts previously paid).  For noncommercial stations, of course, there will be no further payments (and no need to file any forms at all) for the rest of the year as long as the noncommercial webcaster does not exceed the maximum allowable limit of 159,140 aggregate tuning hours is exceeded in a given month.  Should a noncommercial webcaster exceed that the monthly allowable minimum, it will use the form available below to pay the excess at the commercial webcaster rate, which is $ .0018 per listener per song for 2009.

These Statement of Account forms are available on SoundExchange’s website. To access the correct Statement of Account form (if the direct links to the forms provided below do not work):

1. Access the website at http://www.soundexchange.com
    
2. Select the “Download Forms” Option from the column on the right of the page
   
3. Select “For Digital Music Services” from the four options which appear after selecting “Download Forms
   
4. Choose the Relevant Form from the “2009” list:

a.     Commercial Webcasters should click the preferred format under “2009 COMMERCIAL WEBCASTER/SIMULCASTER MONTHLY USAGE STATEMENT OF ACCOUNT FORMS”:

Commercial Webcaster/Simulcaster - Statement of Account - Monthly Usage (Excel)

Commercial Webcaster/Simulcaster - Statement of Account - Monthly Usage (PDF)

b.    Noncommercial Webcasters should click the preferred format under “2009 NONCOMMERCIAL WEBCASTER/SIMULCASTER EXCESS USAGE STATEMENT OF ACCOUNT FORMS”:

Noncommercial Webcaster/Simulcaster - Statement of Account - Excess Usage (Excel)

Noncommercial Webcaster/Simulcaster - Statement of Account - Excess Usage (PDF)

Please remember that there is a 1.25 percent late fee for any missed deadlines.  You should not hesitate to contact a Fletcher, Heald & Hildreth, P.L.C. attorney if you have any questions.

The ratemaking proceeding is a trial-type process whereby interested parties present detailed statistical and economic evidence designed to assist the CRB in determining the value of a non-interactive performance of a sound recording (that particular version of a musical work that you hear over the Internet) under a "willing buyer/willing seller" standard. 

Anyone can participate, though the extended and intensive proceeding often deters individual webcasters from joining in the fun, especially if they believe that one or more trade associations will represent their interests.  Still, it only costs $ 150.00 and the time required to file an original and five copies of a  Petition to Participate with the Copyright Royalty Board by February 4, 2009 to reserve your right to participate.  More information regarding the details of how and where to file the Petition are available in the January 5, 2009 Federal Register  notice of this proceeding.   The substantive aspects of the Petition are remarkably simple, requiring just: 

• The petitioner's full name, address, telephone number, facsimile number (if any), and e-mail address (if any); and
   
• A description of the petitioner's significant interest in the subject matter of the proceeding.

You can also join up with some friends and jointly file a Petition with the following information: 

• The full name, address, telephone number, facsimile number (if any), and e-mail address (if any) of the person filing the petition;
   
• A list identifying all participants to the joint petition;
   
• A description of the participants' significant interest in the subject matter of the proceeding; and
   
• If the joint petition is filed by counsel or a representative of one or more of the participants that are named in the joint petition, a statement from such counsel or representative certifying that, as of the date of submission of the joint petition, such counsel or representative has the authority and consent of the participants to represent them in the royalty rate proceeding.

If you are webcasting and interested in participating, but have further questions about the Petition or the entire proceeding, please contact a Fletcher, Heald & Hildreth, P.L.C attorney.

SoundExchange and the Corporation for Public Broadcasting have announced that a settlement has been reached that will alter the way in which these stations pay royalties and report webcasting performances through 2010. 

The current royalty rates have been the subject of significant discussion in the broadcasting community, including  several  informative  articles  in  this  very blog.  The sharp increase in rates for the period 2006-2010 was especially feared by noncommercial stations with a large web audience, as those noncommercial stations would pay at commercial rates anytime their internet listenership exceeded 159,140 "aggregate tuning hours" in a given month, as opposed to the flat fee these stations (and small webcasters) had paid prior to the institution of new rates.

Pursuant to the Webcaster Settlement Act of 2008, this settlement agreement can go into effect immediately, with the following applicable terms: 

• Any eligible radio station which chooses to participate will not have to make any further royalty payments until December 31, 2010, as CPB will make a single, up front payment of $ 1.85 million to SoundExchange on behalf of public radio staitons. 
   
• SoundExchange will also create a consolidated playlist reporting system for use by all stations which choose to become a part of this program; those stations will be responsible for providing playlist information to CPB.
   
• Stations wishing to participate must register their intent with CPB on a designted website; CPB will provide details regarding that registration website in the near future.
   
• This agreement does not affect the "sound performance complement" portion of the statutory license (the restrictions on the number of songs that can be played from a certain CD or by a certain artist within a given time frame, the length of time for which a program can be archived, etc), meaning even participating stations must follow those rules.
   
• As a condition of the settlement, NPR will withdraw its appeal of the Copyright Royalty Board decision (we see this as an indication that more settlement discussions continue between SoundExchange and those segments of the webcasting community that are part of the pending court appeal).

No station is required to participate in this settlement. Thus, a station that is certain it will never exceed the aggregate tuning hour limitation in any given month may simply decide to ride out the next two years until the new rates are determined for 2011 and beyond in a proceeding that will commence in the near future (more on that soon).  Still, if you believe you may be eligible and wish to participate, keep an eye out for further communications from CPB or contact a Fletcher, Heald & Hildreth attorney.

While the webcasting community's anger toward the CRB predictably stems from the royalty decision, we often find that the attendant administrative requirement of filing information  with SoundExchange concerning all the songs played on your Internet stream for two seven day periods of each quarter is an effective barrier to entry for those radio stations who are not already on the Internet.  This is especially true for smaller stations or those that allow their DJs to engage in a more free flowing format which increases the breadth of songs played. 

Our instruction to clients that the regulations formally known as "Notice and Use of Sound Recordings Under Statutory License" require that they compile information about each song played  (including song name, artist name, IRSC code or album title and lable and the frequency of play) in ASCII format and either: (a) in Microsoft Excel or (b) Corel Quattro Pro format AND send it to SoundExchange, Inc via: (a) File Transfer Protocol, (b) E-mail, (c) CD-Rom or (d) on a floppy disc each quarter has been met with a pretty standard response of "that will require me to hire at new staff person -- or at least a part timer".   

The December 30, 2008 NPRM proposes one significant rule change and several smaller ones.  The really bad news, especially for smaller broadcasters, is that the CRB is proposing to make this quarterly report an actual "census filing", which means it would cover the entirety of every quarter, instead of just being a "representative filing" consisting of two weeks of the quarter (it likely will also require all webcasters to engage in precise performance counts, which could bring the added expense of updating your streaming software).  The CRB explains that this change is needed to ensure that royalties are paid out to copyright holders based on the actual use of their works, not just the estimated use.  The CRB does, however, exempt three services from this year-round reporting requirement: 

• Pre-existing satellite digital audio radio services (Sirius XM);
• New subscription services; and
• Business establishment services.

The CRB also seeks answers to the following questions as a means to improving the technological delivery of these records to SoundExchange: 

• Has any commercially available software become available since 2006 that would allow for this information to be delivered in a spreadsheet format other than Microsoft Excel or Corel Quattro Pro? Woudl they be compatible with SoundExchange's software format? What would be the associated cost? 
   
• Have there been technological developments, including improvements to security, that would allow web-based delivery to be added as a fifth accepted method of sending quarterly reports to SoundExchange? Would web-based delivery be more efficient and cost
  effective? 
   
• Are there any other improvements to the reporting system that can be made in light of the technological developments of the past two years? 

The last question seems to be an open invitation to let the CRB know just how onerous the recordkeeping requirement can be and enlighten them as to the deterrent effect it is having on small radio stations that wish to have an online presence.  Whether you want to make a bold, far-reaching statement or simply let the powers that be know that two weeks of playlists per quarter is plenty, your comments must be filed by January 29, 2009.