webcasting royalties: where do we go from here? matthew j. astle attorney, wiley rein llp

Webcasting Royalties:Where do we go from here?

Matthew J. Astle

Attorney, Wiley Rein LLP

Two Different CopyrightsThe Musical Work is the composition as written by the songwriter.

The Sound Recording is the recording as made by the performer.

Sound Recording Performance Right

• Right to perform a sound recording by means of digital transmission

• Statutory license requires the copyright holders to allow use of sound recordings upon payment of a royalty

Who has to pay the royalties?

• Internet-only webcasters

• Radio simulcasters

• Satellite radio

• Cable/satellite music services

• Others

Who does not have to pay the royalties?

• Terrestrial Radio

• HD Radio

• Television

Who gets the royalties?

50.0%45.0%

2.5%

2.5%

Labels

Featured Artists

Backup Singers

BackupInstrumentalists

SoundExchange

• Spin-off of RIAA

• Collects and distributes royalties

• Governed by Board of artists and labels

• Administrative and legal expenses come out of royalties

Previous Rates

• 0.0762¢ per performance OR

• Per ATH: 1. 0.0762¢ per ATH for

news, talk, sports2. 0.88¢ per ATH for

music broadcast simulcasts

3. 1.17¢ per ATH for Internet-only music

• 0.07¢ per performance• Performances per hour

estimated:1. 1 for news, talk, sports

(=0.07¢ per ATH)2. 12 for music broadcast

simulcasts (=0.84¢ per ATH)

3. 15 for Internet-only music (=1.05¢ per ATH)

Commercial Rates Non-commercial Rates

Who makes the decision?

• The Copyright Royalty Judges were instituted by Congress in 2004

• This is the third incarnation of an adjudicatory body for copyright royalties

• This is the first case they ever heard

The Webcasting Case

• Initial statements filed October 31, 2005

• Trial during Summer 2006

• Rebuttal statements and trial in Fall 2006

• Final decision issued March 2, 2007

Parties to the proceeding• SoundExchange• Digital Media Association

(including Yahoo!, AOL, Microsoft, Live365)

• Radio Broadcasters (including Clear Channel, Bonneville, Susquehanna)

• NPR• Noncommercial radio

broadcasters• Small commercial webcasters

Rates for Commercial Webcasters

Minimum fee: $500 per channel or per station

2006 0.08¢ per listener per song 0.11¢ per ATH for non-music0.92¢ per ATH for broadcast simulcast1.23¢ per ATH for Internet-only

2007 0.11¢ per listener per song 0.14¢ per ATH for non-music1.27¢ per ATH for broadcast simulcast1.69¢ per ATH for Internet-only

2008 0.14¢ per listener per song



Rates for Noncommercial Webcasters

• Annual flat fee of $500 per station or per channel for the first 159,140 aggregate tuning hours (ATH) per month. (~ 218 average concurrent listeners).

• Commercial usage rates apply to all performances beyond the ATH limit.

Payment Due Dates

• Payments for Jan. 1, 2006 – May 31, 2007 are due July 15, 2007

• Monthly payments going forward are due 45 days after the end of the month in which the performances occurred (i.e., payments for performances made in July 2007 will be due 45 days after the end of July, or on September 14, 2007

What does it mean?

• Rates for 2010 are about 2 ½ times the old rates

• $500 per channel fee could hit certain webcasters very hard

• Noncommercial stations have incentive to cap audience

Where do we go from here?

• Rehearing

• Appeal

• Legislation

• Negotiation

Rehearing

• All parties petitioned for rehearing in April 2007.

• Judges denied rehearing motions, but did clarify ATH option for 2006 and 2007

Appeal

• All services have appealed to the D.C. Circuit

• Process is uncertain and will take months

• Also filed for stay of Judges’ rates

Legislation• Commercial rates: 7.5%

of revenue related to webcasting or 0.33 ¢ per ATH, at the webcaster’s choice

• Noncommercial rates: 1.05 times the rates paid in 2004

SoundExchange Offer

• SoundExchange has offered to many noncommercial services an extension of SWSA rates (percent of revenue rate for services with small income)

• Other terms are not so favorable for noncommercial webcasters

The End

webcasting royalties: where do we go from here? matthew j. astle attorney, wiley rein llp

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