Webcasting Royalty Decision Developments – Revised Rates and Terms from the CRB, Issues about Performance Complement and Small Webcasters

The actions and reactions in response to the Copyright Royalty Board’s decision from two weeks ago continue to roll in as the ramifications of the decision sink in. In the days before Christmas, two announcements were made that warrant note. One was a decision of the CRB itself, correcting the rates and terms that it released just the week before – with some sighs of relief being heard from certain high school and university stations. The other was the realization that there were many issues covered by Webcaster Settlement Act agreements from 2009 that were not reflected in the CRB decision and may have impact on significant portions of the webcasting industry.

First, the correction. On Christmas Eve, the CRB issued a revised version of the rates and terms that will apply in 2016 (you can find the revision here). It appears that there were some formatting errors that were corrected, and a number of definitions that had been included in the initial release were deleted – apparently as they referred to terms that were no longer used in the current royalty rates. For instance, a number of definitions relating to “broadcasters” and “broadcaster webcasting” were excluded. These were no longer necessary as broadcasters are not treated any differently than other commercial webcasters under the new royalties. One place where the deletion of a definition resulted in a substantive change was what appeared to be an unintentional inclusion in the initial release of the definition of an “educational webcaster.”  The definition seemingly applied only to those webcasters that received CPB funding and transmitted solely noncommercial radio programs from a terrestrial radio station. That definition would have excluded many webcasters affiliated with schools but without an FCC license from a settlement agreement entered into by the Collegiate Broadcasting Association and SoundExchange – a settlement meant to cover school webcasters providing for a $500 a year royalty for streaming of less than 159,140 aggregate tuning hours per month (and record-keeping relief for many webcasters covered by that arrangement). That “educational webcaster” definition was excluded in the revision released last week – leaving the CBI settlement in place covering webcasters affiliated with educational institutions, to the relief of many educational webcasters.

The other issue which has recently arisen across the industry was the realization that the expiration of many of the Webcasters Settlement Act agreements had significance beyond just the change in the rates. While most broadcasters were encouraged by the CRB rates that significantly decreased their per performance liability, on Wednesday, the NAB released a statement noting that the performance complement waivers that the NAB had negotiated in 2009 with the record labels, allowing broadcasters to simulcast their programming without worrying about the webcasting performance complement requirements set out in the Copyright Act for services covered by the statutory license (the license available to noninteractive webcasters at the rates set by the CRB), expire at the end of the this year. We wrote about those waivers when they were initially negotiated here. These waivers were negotiated with the major record labels and the association that represents the major independent labels at the same time as the Webcaster Settlement Act agreement reached between the NAB and SoundExchange back in 2009. The performance complement puts limits on a webcaster, requiring that the webcaster meet certain limits on what it can play – principally to discourage copying of the digital music played by webcasters. The performance complement requires that webcasters not play more than two songs from the same CD in a row, not play more than 3 songs by the same artist in any hour, and not playing more than 4 songs from the same artist in a 3-hour period.

Under these waiver agreements, commercial broadcasters can ignore the performance complement if done in the context of a simulcast of a routine over-the-air broadcast. So common radio broadcast programming practices like playing “6 album sides at six”, or a Beatles Brunch, would be permissible in a simulcast. But, with these waivers expiring this week, the NAB announced that it is attempting to negotiate extensions that will carry through during the next royalty period. Why weren’t these waivers included in the CRB decision? Probably because the CRB does not have the right to waive the statutory obligations of the Copyright Act that set out the performance complement – only the copyright owners themselves (usually the labels) can do so. So these waivers must be negotiated directly with the copyright holders.

Another controversy that is arising as the result of the expiration of agreements entered into in 2009 under the Webcaster Settlement Acts is the expiration of deals governing small commercial webcasters. As we wrote in our description of the CRB decision, as no small webcasters participated in the CRB proceeding, there was no one to argue for a percentage of revenue royalty that had governed the royalties paid by many small webcasters and “hobbyists.” The Small Webcaster Agreement (about which we wrote here) also expires this week. The Webcaster Settlement Act agreements were entered into after the decision in the 2006 CRB webcasting rate proceeding set rates that many small webcasters believed were too high to allow them to operate. That agreement lasted through the end of this year. A similar situation occurred after the first webcasting royalty proceeding in 2001, when the Small Webcasters Settlement Act was arrived at after the decision seemingly would have put many if not all small webcasters out of business. So small webcasters have had percentage of revenue royalties on which they could rely essentially since the royalties were first initiated. Both webcasting groups (see the RAIN newsletter article here) and some music industry groups (see the Future of Music Coalition statement here) worry about the loss of diversity that may result if the percentage-of-revenue royalties disappear, and if that results in many of these small independent webcasters actually going out of business. As after the 2001 and 2006 decisions, it is possible that there can be post-decision settlement agreements, but whether such deals can be negotiated and enacted remains to be seen.

These are but some of the more apparent changes that have occurred with the ending of the Webcaster Settlement Acts – and how these play out in the next few months remain to be seen – but no doubt we have not heard the last of these issues.