The National Association of Broadcasters ("NAB") and SoundExchange, the designated "receiving agent" that collects and distributes copyright royalties paid as part of the statutory license applicable to webcasting, have announced a settlement under the "Webcaster Settlement Act" which sets the royalty rates to be paid by broadcasters streaming music on the Internet during the years 2009-2010. 

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.