SoundExchange Public Performance Rates Too High, Webcasters Tell CRB
Webcasters pushed back against SoundExchange’s previously negotiated public performance royalty rates, in comments to the Copyright Royalty Board (CRB) made public Friday. The comments (http://1.usa.gov/11FkBPc), due Oct. 7 (see 1410090034), are meant to influence the decision of CRB judges in setting statutory licenses for webcasting fees for Jan. 1, 2016, to Dec. 31, 2020. There's growing debate over whether public performance royalties, including pre-1972 sound recordings, should be extended to terrestrial radio (see 1410090092).
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“In a capitalist society, it’s generally taken for granted that you get paid for your work,” said House Judiciary IP ranking member Jerrold Nadler, D-N.Y., at a New York music event last week (http://bit.ly/1rYl4RG). “The only place I know … where that is controversial is terrestrial radio.” Some believe performers shouldn’t receive royalties because of terrestrial radio’s promotional value, he said. “That’s just wrong." It’s "got to be a willing buyer, willing seller [standard] and not a détente that you give away your services for nothing,” said Nadler. Music licensing experts have told us they expect Nadler’s forthcoming MusicBus legislation to address public performance royalties.
“As reflected by the various submissions, music services and SoundExchange have entered the current rate-setting process with vastly different perspectives," emailed Gregory Barnes, Digital Media Association (DiMA) general counsel. "Hopefully, the Copyright Royalty Board will be able to comb through the various proposals and eventually establish a rate that benefits all relevant stakeholders -- digital music services, creators and consumers, alike.” Amazon, Apple and Google-owned YouTube are among DiMA's members.
SoundExchange suggested that commercial webcasters either pay the larger of an escalating rate per performance or 55 percent of webcasters’ revenue (http://1.usa.gov/1sHo8FH). SoundExchange suggested that such webcasters pay 0.25 cents per performance in 2016; 0.26 cents in 2017; 0.27 cents in 2018; 0.28 for 2019; and 0.29 cents for 2020.
SoundExchange’s webcaster settlement agreement in 2009 “resulted in an above fair market value royalty rate,” said SiriusXM (http://1.usa.gov/1wQILjh). That agreement increased public performance rates from 0.07 cents to 0.18 cents, which forced SiriusXM to eliminate free streaming, it said. “The escalating rates of the Agreement are not within the zone of reasonableness because of their arbitrary nature and the circumstances surrounding the negotiation of the Agreement.”
NAB asked for a public performance rate of 0.05 cents (http://1.usa.gov/1x1ovvp). The current rates are “principally a legacy” of rates set by the CRB in 2007 or “Web II,” it said. “Those rates were established based on flawed evidence and analysis of selected licenses in a market that was decidedly not effectively competitive -- the licenses granted by the major record labels to interactive on-demand services.” In the Web II negotiation, SoundExchange “failed to take into account the huge and persisting disparities in revenue per play between the exclusively subscription-based interactive services in the purported benchmark market and the overwhelmingly nonsubscription (advertising supported) services in the target market,” it said.
It’s “plain that the current rates are too high,” said iHeartMedia (http://1.usa.gov/1t5FK0w), seeking a rate of 0.05 cents per public performance. “The current rate is higher than the rate that would maintain full compensation for copyright owners if webcasting eliminated all their other revenues,” it said. “Current rates pay those owners as if internet radio were a complete substitute for purchasing music, attending concerts, and all other sources of revenue for the labels,” said iHeartMedia. “Exposure through ‘spins’ is the critical element that drives music sales, and artists and record labels exert enormous energy to place their works before the public on iHeartMedia’s stations for that reason,” it said. “Copyright holders want to have their cake and eat it too: the indisputable promotional benefits of spins and the highest possible payment rate they can gain.”