Congress to Return – Will Internet Radio Royalties Be on Its Agenda

http://www.broadcastlawblog.com/archives/internet-radio-congress-to-return-will-internet-radio-royalties-be-on-its-agenda.html

With summer and the August Congressional recess drawing to a close, will consideration of the Internet Radio controversy over royalties be on the agenda when the September legislative session begins?  In recent weeks, there has been a settlement between the Digital Media Association (DiMA), representing the largest webcasters, and SoundExchange on the issue of the minimum royalty fee – agreeing that the $500 per channel minimum fee imposed by the Copyright Royalty Board (“CRB”), which might have by itself driven many webcasters like Pandora or Live 365 out of business had it not been resolved, would be capped at $50,000.  SoundExchange has also extended a unilateral offer to small commercial webcasters allowing them to continue to pay a percentage of revenue royalty of 10-12% for use of the music produced by SoundExchange members – but limiting the offer to webcasters with under $1.2 million in annual revenue, and requiring that any webcaster with over 5,000,000 tuning hours in any month to pay at the CRB rates for all listening in excess of that limit.  We wrote about that deal, and some of the concerns that larger small webcasters have, here.  These adjustments to the CRB rates may resolve some issues for some webcasters, but they leave open many other issues as set forth below – but will these tweaks to the CRB decision be enough to take the Congressional heat, in the form of the Internet Radio Equality Act, off of SoundExchange?

What issues remain?  There are still many.  These include:

  • The issues of the larger independent webcasters who may currently fit under the Small Webcaster Settlement (“SWSA”) Act caps – but may well go over those caps before 2010, and could not afford to pay royalties at the CRB-mandated rates if they exceed the SWSA limits.
  • The CRB mandated rates are themselves problematic for virtually all commercial webcasters – and DiMA made clear that the settlement of the minimum fee issue was the first step in resolving the issues that preclude a vibrant webcasting industry under the CRB rates (see the DiMA press release on the settlement, here)
  • Noncommercial webcasters have not announced any settlement with SoundExchange – even though many expressed concerns over the fees for large noncommercial webcasters  which will, by the end of the royalty period, increase about 9 times over the rates that they had been paying (and more for larger NPR affiliates), and over recordkeeping and reporting requirements.
  • Broadcasters who stream their over-the-air signal over the Internet have not been involved in any of the tweaks to the CRB decision, nor has SoundExchange responded to the NAB’s settlement offer made in June (according to the clock on the NAB homepage, the NAB settlement offer has been outstanding without response for 84 days at the time this post is being written). 

And what avenues remain open to resolve these issues?  In addition to the potential for renewed Congressional action in September, the webcasters are still pursuing their appeal of the decision in the US Court of Appeals for the District of Columbia (while the stay of the effective date of the CRB decision was denied by the Court, that does not affect the underlying appeal – see our post, here, for details) , and most of the webcasting groups are still in settlement discussions with SoundExchange over possible settlements.  We will see if any of these avenues lead to resolution of some or all of the remaining issues.

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