Copyright Royalty Board's Decision on 2016-2020 Webcasting Rates Hard To Predict Ahead of Ruling
There are few clear indications of how the Copyright Royalty Board will rule on its webcasting rate-setting proceeding, which will determine the statutory royalty rates that Pandora and other non-interactive online radio services will pay between 2016 and 2020, said music licensing stakeholders in interviews. A CRB ruling on the webcasting rate-setting was expected as early as last week and no later than Tuesday. A Friday decision remained possible at our deadline, but Digital Media Association (DiMA) General Counsel Greg Barnes said he believes a Monday or Tuesday decision is more likely since Congress is expected to remain in session for at least part of this week. Several parties told us they're eagerly awaiting the ruling because of its major implications for other royalty rates and the rest of the music industry.
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The CRB has been grappling since last year with a wide range of proposed royalty rates that depart from the current statutory rate of 0.23 cent per performance. Those proposals range from the .0005 cent per performance separately sought by iHeartMedia and NAB up to a graduated rate sought by SoundExchange that would start at 0.25 cent in 2016 before graduating by 0.01 cent per year to a high of 0.29 cent in 2020. Pandora sought a rate of 0.11 cent per performance, while AccuRadio sought 0.1125 cent (see 1410200044). The webcasting rates that CRB sets are “what webcasters will be stuck with for the next five years, and it’s very rare these decisions are overturned on appeal,” said Wilkinson Barker broadcast attorney David Oxenford, who has clients involved in the rate-setting proceeding.
The broadcast industry has been particularly interested in the CRB’s webcasting proceeding, with Fletcher Heald copyright and music licensing lawyer Kevin Goldberg noting his clients “both in the broadcast industry and non-broadcast webcasters have been waiting for this decision for the better part of two years.” The CRB’s upcoming decision “is of considerable importance to Internet radio service providers” particularly because what was once an industry with more than half a dozen key players has “dwindled” to feature Pandora as the dominant entity, Barnes said. “A bad decision could wreak havoc on the industry, erasing many of the financial and other important contributions of online radio.” Apple, Amazon, and Google-owned YouTube are among DiMA's members. “This has been enormously important for the music industry” since webcasting is estimated to represent about 10 percent of all recorded music revenue, an industry executive said. “Webcasting rates aren’t isolated as their own part of the overall puzzle. Whatever the CRB determines the webcasting rates are will have an impact on other parts of the industry, including as a factor in other royalty negotiations.”
Anticipation about the CRB’s ruling prompted several stakeholders to take their arguments to Capitol Hill. Pandora said in an infographic circulated to members of Congress that it wants fair compensation for performing artists along with the freedom to invest in innovation. RIAA CEO Cary Sherman said in a letter that a decrease in webcasting rates would negatively impact the entire music industry. “In the end, the entire music community -- from artists to fans -- would lose,” he said. “Diminishing music’s value means fewer artists signed and less music being made for fans.”
Few stakeholders we spoke with believed they had enough indications based on the CRB’s hearings and other proceeding documents to predict what the rate-setting decision would look like. “It’s all a guessing game from the outside right now,” but “I’m not expecting a huge shift in the landscape” that goes beyond a slight across-the board increase in webcasting rates, Goldberg said. “We tried to read tea leaves based on the questions [the CRB judges] asked, but there’s really no accurate way to predict the direction they’re headed in,” DiMA's Barnes said. The current CRB judges are at least more “intellectually curious” than past boards have been and they “at least raised more questions than they have in the past. That could be a good thing or a bad thing.”
“I don’t think you can draw conclusions” based on what the CRB has said throughout the proceeding, a music industry executive said. The CRB’s three-judge panel didn’t “send signals” during rate-setting hearings, the executive said. “They were clearly engaged with the substance of all parties’ arguments but I don’t think you could tell they were leaning one way or another,” the executive said. “One thing the judges did make clear is that they were revisiting old assumptions” about webcasting’s importance as a music revenue stream but “who knows which way that cuts?” The CRB judges were certainly “interested in the direct deals being negotiated,” but “you can never tell what evidence the judges have keyed in on” during the actual decision-making process, Oxenford said.