Determination of Rates and Terms (final) 2016-2020 (Web IV) - 1
UNITED STATES COPYRIGHT ROYALTY JUDGES The Library of Congress
In re
DETERMINATION OF ROYALTY RATES AND TERMS FOR EPHEMERAL RECORDING AND WEBCASTING DIGITAL PERFORMANCE OF SOUND RECORDINGS (Web IV) Docket No. 14-CRB-0001-WR (2016-2020) DETERMINATION
The Copyright Royalty Judges (Judges) hereby issue their written determination of royalty rates and terms to apply from January 1, 2016, through December 31, 2020, to digital performance of sound recordings over the Internet by nonexempt, noninteractive transmission services and to the making of ephemeral recordings to facilitate those performances. The rate for commercial subscription services in 2016 is $0.0022 per performance. The rate for commercial nonsubscription services in 2016 is $0.0017 per performance. The rates for the period 2017 through 2020 for both subscription and nonsubscription services shall be adjusted to reflect the increases or decreases, if any, in the general price level, as measured by the Consumer Price Index applicable to that rate year, as set forth in the regulations adopted by this determination. The rates for noncommercial webcasters are: $500 annually for each station or channel for all webcast transmissions totaling not more than 159,140 Aggregate Tuning Hours (ATH) in a month, for each year in the rate term. In addition, if, in any month, a noncommercial webcaster makes total transmissions in excess of 159,140 ATH on any individual channel or station, the noncommercial webcaster shall pay per-performance royalty fees for the transmissions it makes on that channel or station in excess of 159,140 ATH at the rate of $0.0017 per performance. The rates for transmissions over 159,140 ATH per month for the period 2017 through 2020 shall be adjusted to reflect the increases or decreases, if any, in the general price level, as measured by the Consumer Price Index applicable to that rate year, as set forth in the regulations adopted by this determination. The Judges also determine herein details relating to the rates for each category of webcasting service, such as minimum fee and administrative terms, in the following analysis.
Determination of Rates and Terms (final) 2016-2020 (Web IV) - 2
“Exhibit A”
1
to this determination contains the regulatory language codifying the terms of the Judges’ determination.
I.
Background A.
Purpose of the Proceeding
The licenses at issue in the captioned proceeding,
viz.,
licenses for commercial and noncommercial noninteractive webcasting, are compulsory. Title 17, United States Code (Copyright Act or Act), establishes exclusive rights reserved to copyright owners, including the right to “perform the copyrighted work publicly by means of a digital audio transmission.”
See
17 U.S.C. § 106(6). The digital performance right is limited, however, by section 114 of the Act, which grants a statutory license for nonexempt noninteractive Internet transmissions of protected works. 17 U.S.C. § 114(d). Eligible webcasters are entitled to perform sound recordings without an individual license from the copyright owner, provided they pay the statutory royalty rates for the performance of the sound recordings and for the ephemeral copy of the sound recording necessary to transmit it. 17 U.S.C §§ 114(f) and 112(e). Licensee webcasters pay the royalties to a Collective, which distributes the funds to copyright owners. The statutory rates and terms apply for a period of five years. The Act requires that the Judges “shall establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller.” 17 U.S.C. § 114(f)(2)(B). The marketplace the Judges look to is a hypothetical marketplace, free of the influence of compulsory, statutory licenses.
Web II
, 72 Fed Reg. 24084, 24087 (May 1, 2007).
The Judges “
shall
base their decision on economic, competitive[,] and programming information presented by the parties….” 17 U.S.C. §§ 114(f)(2)(B) and 112(e)(4) (emphasis added)
.
Within these categories, the Judges’ determination shall account for (1) whether the Internet service substitutes for or promotes
the copyright owner’s other streams of revenue from the sound recording, and (2) the relative roles and contributions of the copyright owner and the service, including creative, technological, and financial contributions, and risk assumption.
Id.
The Judges
may
consider rates and terms of comparable services and comparable circumstances under voluntary, negotiated license agreements.
Id.
The rates and terms established by the Judges “
shall
distinguish” among the types of services and “
shall
include” a minimum fee for each type of service.
Id.
(emphasis added).
B.
Procedural Posture
Following the timeline prescribed by the Act, the Judges published notice of commencement of this proceeding in the
Federal Register
.
2
79 Fed. Reg
.
412 (Jan. 3, 2014).
1
The Judges proposed to the parties a reorganization of the regulations. Only one party’s (Pandora’s) proposed regulations followed the proposed new format. The other parties submitted proposed new subparts for each type of entity. One party (SoundExchange) specifically opposed the reorganization. The Judges find that reducing the amount of repetition in the regulations is not prejudicial to SoundExchange, and in the interests of plain language have used the new format.
Determination of Rates and Terms (final) 2016-2020 (Web IV) - 3
Twenty-nine parties in interest filed petitions to participate in the proceeding.
3
Ten of those petitioners subsequently withdrew from the proceeding, the Judges rejected the petitions of three petitioners because the Judges determined they lacked the requisite substantial interest in the proceeding, and the Judges dismissed the Petition to Participate of another party due to a procedural default.
4
1.
Negotiated Settlements a.
Educational Webcasters
The Judges published notice of the CBI-SoundExchange settlement in November 2014.
5
The Judges received approximately 60 comments in response to the Notice. The Judges considered the comments, some of which supported and others of which opposed the proposed settlement, and concluded that the CBI-SoundExchange agreement provides a reasonable basis to adopt its proposed rates and terms. On September 28, 2015, the Judges published amended regulations substantially in conformity with the proposal.
6
b.
Public Broadcasters
The NPR-CPB settlement with SoundExchange proposed creation of a new Subpart D to part 380 of the Regulations entitled Certain Transmissions by Public Broadcasting Entities. IBS was the only commenting party. IBS made procedural and substantive objections to the settlement. Notwithstanding, the Judges concluded that, as the proposed settlement would bind
2
Contemporaneously, the Judges commenced a proceeding to establish rates and terms for ephemeral recording and digital performance of sound recordings by “New Subscription Services” (NSS).
See
79 Fed. Reg. 410 (Jan. 3, 2014). The NSS at issue in that companion proceeding were limited to NSS transmitting to residential subscribers through a cable television provider.
See
37 C.F.R. § 383.2(h). That proceeding was resolved by negotiated agreement and the Judges published rates and terms for new subscription licensees at 80 Fed. Reg. 36927 (Jun. 29, 2015). Settlement of the cable NSS did not have any effect on the Internet subscription services at issue in this proceeding.
3
The 29 parties that filed Petitions to Participate were: 8tracks, Inc.; AccuRadio, LLC; Amazon.com, Inc.; Apple Inc.; Beats Music, LLC; Clear Channel (nka iHeartMedia, Inc.); CMN, Inc.; College Broadcasters, Inc. (CBI); CustomChannels.net, LLC; Digital Media Association (DiMA); Digitally Imported, Inc.; Educational Media Foundation; Feed Media, Inc.; Geo Music Group; Harvard Radio Broadcasting Inc. (WHRB); idobi Network; Intercollegiate Broadcasting System, Inc. (IBS); Music Reports Inc.; National Association of Broadcasters (NAB); National Music Publishers Association (NMPA); National Public Radio (NPR); National Religious Broadcasters Noncommercial Music License Committee (NRBNMLC); Pandora Media Inc.; Rhapsody International, Inc.; Sirius XM Radio Inc.; SomaFM.com LLC; SoundExchange, Inc. (SX or SoundExchange); Spotify USA Inc.; and Triton Digital, Inc.
4
The ten parties that withdrew their Petitions to Participate were: 8tracks, Inc.; Amazon.com, Inc.; CMN, Inc.; CustomChannels.net, LLC; Digitally Imported, Inc.; Feed Media, Inc.; idobi Network; Rhapsody International, Inc.; SomaFM.com LLC; and Spotify USA Inc. The three parties whose Petitions to Participate were dismissed for lacking a substantial interest in the proceeding were: Music Reports Inc., NMPA, and Triton Digital. The Petition to Participate of AccuRadio was dismissed by the Judges due to a procedural default. Although they did not formally withdraw from the proceeding, Apple, Beats, and DiMA did not file Written Direct Statements and did not participate in the hearing. Educational Media Foundation joined with NAB and appeared by and through NAB and its counsel.
5
79 Fed. Reg
.
65609 (Nov. 5, 2014).
6
80 Fed. Reg
.
58201 (Sept. 28, 2015).