Parties announce settlement on online "mechanical" royalties; doesn't apply to Internet radio

Thursday, April 12, 2012 - 11:40am

Representatives of the music industry (labels and publishers) announced yesterday the settlement of a Copyright Royalty Board proceeding for "Section 115," or "mechanical" royalties digital music services pay to reproduce a musical work (read more in The Wall Street Journal here).

It is important to note that these are not the "public performance" royalties webcasters pay SoundExchange for the use of copyright sound recordings. Also known as "Section 114" royalties, those rates will be set with a proceeding beginning in 2014 (to settle by late in 2015) for the period from 2016-2020," explains industry attorney David Oxenford in Broadcast Law Blog.

Yesterday's settlement involves digital music services's use of music outside of "non-interactive" webcasting: sales of digital downloads, ringtones, on-demand streaming, "cloud" services, and "conditional" downloads (e.g. listening to Spotify offline).

Moreover, "mechanical royalties" are "payments made to the composers of songs -- those who write the words and music of the songs -- usually represented by a publishing company," Oxenford (pictured) explains.

By the way, satellite radio provider SiriusXM, like Internet radio, also pays Section 114 royalties. They're currently in a rate-setting proceeding for the 2013-2017 term. Oxenford predicts a decision in that case by the end of this year, "which could give some preview of what webcasters can expect in their upcoming case." Read more from Oxenford in Broadcast Law Blog here.

David Oxenford is a Washington, D.C.-based partner at Davis Wright Tremaine, and an expert on broadcast and Internet radio law and royalty matters. He'll sit down for a one-on-one discussion with U.S. Copyright Office general counsel David Carson on Sunday at RAIN Summit West in Las Vegas. More information, and the registration link, is here.

Oxenford: SiriusXM's direct licensing deals could affect future CRB Internet radio rulings

Wednesday, March 28, 2012 - 12:45pm

David OxenfordThe outcome of SiriusXM's lawsuit against SoundExchange and A2IM may be "very important to the future of digital music" -- webcasters included -- according to industry attorney and Davis Wright Tremaine partner David Oxenford (pictured).

The direct licenses SiriusXM has been trying to obtain could impact future CRB rulings, Oxenford writes, as such deals "between music users and rights holders are traditionally the best evidence of the value of music." That's a good reason why SoundExchange and A2IM would oppose such direct deals, says Oxenford.

He writes:

"Were SiriusXM to be successful in its suit, and if it is in fact able to negotiate direct music licenses for substantial catalogs of music at rates lower than what it has paid under previous rate decisions, it would presumably introduce such evidence in proceedings before the Copyright Royalty Board (which is now in the process of setting the rates for the public performance of sound recordings by SiriusXM over its satellite service for the next 5 years), and argue that these direct deals are the best evidence of what a willing buyer and willing seller would agree to in a competitive marketplace."

But direct licensing deals between SiriusXM and rights holders could also impact future Internet radio royalty rate decisions.

"One of the biggest issues in all rate proceedings heard before the CRB has been establishing what a willing buyer and willing seller would agree to pay in a competitive marketplace like the one for which the rates are being set," writes Oxenford. "In most cases, as there are no direct licenses, the CRB has to extrapolate what willing buyers and willing sellers would pay for sound recording performance royalties in a noninteractive market from evidence of what companies pay in other markets...

Davis Wright Tremaine"Lower direct licensing rate could impact not only the rates paid by SiriusXM, but also other proceedings dealing with the sound recording royalty rate, including potentially proceedings for webcasting royalties (proceedings that will also affect the rates that broadcasters pay for streaming their signals)."

The next CRB proceeding for Internet radio begins in 2014 to set royalty rates for 2016-2020.

You can find Oxenford's full analysis of the SiriusXM lawsuit at the Broadcast Law Blog here.

Oxenford will interview U.S. Copyright Office General Counsel David Carson on-stage at RAIN Summit West 2012 in Las Vegas, on Sunday, April 15. You can find out more here.

Educational broadcaster group contends Copyright Royalty Judges weren't properly appointed

Monday, February 13, 2012 - 11:00am

U.S. Court of Appeals D.C.The U.S. Court of Appeals for D.C. is being asked to consider whether the judges who serve on the Copyright Royalty Board, the body that sets the default royalty rates for Internet radio's use of copyright recordings, were appointed in accordance with constitutional law.

Intercollegiate Broadcasting Services, which represents educational institution-based broadcasters and webcasters, is appealing the CRB's final royalty determination for 2011-2015 (specifically, the $500 annual minimum royalty fee). As part of the appeal, the Appeals Court (just a step below the U.S. Supreme Court) this week heard an oral argument on the issue of whether the judges who make up the CRB were properly appointed.

IBSBasically, the Appointments Clause of the Constitution requires "Principal Officers" of the government to be appointed by the president, while inferior officers can be appointed by the head of an executive department. However, the Copyright Royalty Judges were not appointed by the president, but by the Librarian of Congress, who himself is not head of an "executive" department (but a department of Congress).

So, what happens in regards to the CRB's past rulings should they be ruled unconstitutionally-appointed? Industry attorney David Oxenford examines the situation further at here.

Read BroadcastLawBlog's coverage of the Copyright Royalty Board's 2011-2015 webcast royalty determination here, and our run-down of the different specific deals different webcaster groups made with SoundExchange for royalties covering this period here.

Oxenford: "Music community seemed to favor (and expect) such negotiations" in 2005-2006

Tuesday, November 8, 2011 - 11:00am

David Oxenford, partner at Davis Wright TremaineSiriusXM's much-publicized move to obtain direct music licenses and thereby avoid SoundExchange has caused an uproar amongst artist unions and SoundExchange (RAIN coverage here and here).

But industry attorney David Oxenford (pictured) points out that SoundExchange's own witness in the Coypright Royalty Board proceedings of 2005-2006 expected this move.

"If the price is too high," stated SoundExchange witness Michael Pelcovits, an expert economist, "parties can (and are almost certain to) negotiate agreements for rates lower than the statutory standard. Thus, a rate that is set too high is likely to 'self-adjust' because of the sellers' natural incentive to meet the market."

Yesterday, SoundExchange president Michael Huppe told the New York Times (here), "Our mission is to maximize the value of the content...We believe that content is already undervalued."

Writes Oxenford, a partner at Davis Wright Tremaine: "In other words, the music community seemed to favor (and expect) such negotiations, before they were against them it in their statements today." Oxenford even argues such negotiations for lower rates outside of the CRB have already happened: the web radio royalty deals following the Webcaster Settlement Acts (more here).


So why is SoundExchange upset over SiriusXM seeking lower rates? "One possible difference is the loss of control," reasons Oxenford. SoundExchange was able to decide which webcaster deals would be precedential in future CRB proceedings (making most non-precedential, meaning they could not be considered in future CRB arbitration).

"Deals that are marketplace deals" -- including any direct deals SiriusXM is able to get -- "would not be afforded the non-precedential status." Meaning the CRB could consider any (presumably lower) rates SiriusXM reaches outside of SoundExchange.

You can find David Oxenford's full article and analysis at his Broadcast Law Blog here.

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