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:
- 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).
- 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.
- 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.
- 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.
- 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.