SoundExchange Petitions for Review of CRB 2016-20 Noninteractive Webcast Rates
SoundExchange confirmed it petitioned the U.S. Court of Appeals for the D.C. Circuit to review the Copyright Royalty Board's 2016-20 noninteractive webcasting rate-setting (Web IV) ruling, as expected (see 1605050055). At least two other parties to the Web IV proceeding also expressed an interest in appealing the CRB's rate-setting ruling, said Wilkinson Barker broadcast attorney David Oxenford, who represented NAB and the Educational Media Foundation in the proceeding. CRB published a final version of its 2016-2020 noninteractive webcasting royalty rates May 2, starting a 30-day clock for parties proceeding to appeal to the D.C. Circuit. CRB set the noninteractive webcasting royalty rates at 0.17 cent per performance on nonsubscription services and 0.22 cent per performance on subscription services (see 1605020058).
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SoundExchange didn't detail its argument against the CRB's published royalty rates in the company's initial petition. It seeks review “on the grounds that the Determination is contrary to law, clearly erroneous, arbitrary and capricious, an abuse of discretion, and not supported by substantial evidence.” The royalty rates set by CRB “do not reflect a fair market price for music and will erode the value of music in our economy,” SoundExchange said in a statement Tuesday. “This is a lengthy, deliberate process and we are our unwavering in our position that all creators deserve fair compensation each and every time their music is used on any platform.”
The substance of SoundExchange's likely argument in its appeal of the Web IV ruling will probably be how the CRB judges applied economic theory in examining the evidence submitted during the rate-setting proceeding, said Jay Rosenthal, a Mitchell Silberberg lawyer who represents music industry content owners. SoundExchange is likely to focus on the CRB's use of Pandora’s past direct licensing deals with independent music label rights consortium Merlin and independent label Naxos as benchmarks for the Web IV rate-setting, he said in an interview. SoundExchange could argue that CRB abused its discretion by failing to adequately consider the steerage agreement included in Pandora's Merlin deal, Rosenthal said.
“It’s not clear what arguments SoundExchange plans to raise on appeal but hopefully they will be more credible than the ones expressed during their motion for a rehearing” of the proceeding, emailed Digital Media Association General Counsel Greg Barnes. Any appeal of the Web IV decision is inherently “a bit of an uphill climb” because the D.C. Circuit will need to determine that the entire record of evidence included in the proceeding doesn't include a “rational basis” to justify the CRB's ruling, Oxenford said in an interview. “That's a high standard” for SoundExchange or any other party to reach, he said. Oxenford said there are few cases in which an appeals court has struck down CRB rulings beyond reversing “minor points.”
SoundExchange's chances of successfully overturning the CRB's 2016-2020 rates are “less than 50-50,” said Rosenthal, who has said the CRB's ruling was wrong. “I think the bar is high for SoundExchange,” though it's possible the D.C. Circuit could remand the Web IV proceeding to the CRB to reconsider some factors. “It's tough for SoundExchange to argue that the CRB exceeded its discretion since current law gives the CRB a good amount of leeway to determine these rates on their own,” Rosenthal said: “SoundExchange may have to just wait for the next” noninteractive webcasting rate-setting or seek legislation to raise the royalty rates.