Broadcasters beware - podcasts with music may be dangerous to your economic health.  In recent weeks, I've come upon more than one incident where a broadcaster was providing podcasts containing music on their website, or allowing listeners to download or stream on-demand some new, hot song.  I've even seen certain articles in the trade press advocating that stations do podcasts of their morning shows, or otherwise provide some sort of programming containing music on their websites in a manner in which the listener can listen over and over again to the same program or song.  Broadcasters need to know that they are asking for trouble when they provide services like podcasts, downloads and on-demand streams containing music without getting specific permission from copyright holders to do so, as these uses are not covered by the SoundExchange royalties paid for webcasting, nor (in most cases) by your ASCAP, BMI and SESAC royalties.  

The royalties paid to SoundExchange are for the right to publicly perform sound recordings in a noninteractive manner.  In other words, they only cover streams where the user cannot get a specific song when they want it, and where listeners do not know the order in which songs will be played.  ASCAP, BMI and SESAC (the "PROs") also cover public performances, but of the underlying musical compositions (the words and music of the song, as opposed to its recording by a particular singer or band).  By contrast, “podcasts,” ( and here I mean an on-demand program that can be downloaded onto a digital device for later replay, and which can also usually be played immediately on someone’s computer) are much like downloads - and involve a different right in music - the right to reproduce and distribute the music.  The rights of reproduction and distribution are different from the public performance right, and the permission to make reproductions and distributions are granted by different groups than are the public performance right.  SoundExchange and the PROs have nothing to do with granting this reproduction and distribution right (with the limited exception of ephemeral rights in streaming granted through the SoundExchange royalty - a concept too technical to be discussed here, and one that does not affect this warning.  But, if you are interested in these rights, you can see our article that discussed ephemeral rights in a bit more detail, here).  Podcasts, downloads and on-demand streams require a specific grant of rights from the copyright holders of the sound recordings and the musical compositions for each piece of music that is being used. 

Rights to the sound recording of most popular recorded music will typically come from the record label. And, for these sorts of on-demand uses, the rights to most recorded music will not be cheap and easy to obtain. It will come easily only for specific songs that the labels want to promote – sometimes referred to as “podcast safe” music.  This music is usually a song from a new artist, or an alternate take of a new song by an established artist, meant to be used to promote a new release.  Getting rights to the full catalog of music typically played by a music intensive radio station will require a negotiation with each record label and the payment of significant money - the kind of negotiation that has delayed the introduction of services like Spotify in the US for so long.

Rights to reproduction and distribution of the musical composition typically come from the music publishing company (or sometimes music publishing companies where there is more than one writer of a song).  These licenses—known as “mechanical licenses”— can be obtained through a statutory license, setting out payments to the copyright holders of any musical work that has been publicly released, but only if some strict procedures set out by law are followed.   These rights can also be obtained directly from the publishers or songwriters or, in many instances, through the Harry Fox Agency, which licenses compositions on behalf of many copyright holders. There are also a number of private companies that will help in getting the necessary licenses to use the musical composition.   Depending on the use that you have in mind, the record companies may themselves have already cleared the right to the musical composition, and that right will come with the right to the sound recording when you negotiate for that right.  But needless to say, it is not an easy process that will allow routine podcasts or downloads of music programming. 

Even the podcast of the performance of a local artist, with his permission, may require a mechanical license from the songwriter or music publisher if the artist has been singing “cover” songs.  So be careful when recording local artists - you may think that you are getting their music royalty free, and you may be avoiding the sound recording royalty and a negotiation with a record label, but you may still have the musical composition to deal with if the local performer has not written their own songs.

There are lots of other caveats and exceptions that may apply in certain circumstances.  But these don't allow the routine podcast of music programs or the other types of uses described above.   So be careful - or you may have the music industry knocking at your door demanding an unexpected payment.  For more information about these topics, check out our Advisory on the Basics of Music Licensing in Digital Media. 

Just as webcasters thought that they had their royalty obligations figured out, there comes news that the already complicated world of digital media royalties may well become more complicated.  Last week, EMI, which in addition to being a record label is a significant music publishing company, has reportedly decided to withdraw portions of its publishing catalog from ASCAP - which had been licensing the public performance of these songs. The withdrawal from ASCAP applies only to "New Media" licensing.  What is the impact?  As of today, webcasters pay ASCAP, BMI and SESAC for the rights to play virtually the entire universe of "musical compositions" or "musical works" (the words and musics of the song).  By withdrawing from ASCAP, EMI will now license its musical compositions itself, adding one more place that webcasters will need to go to get all the rights necessary to play music on an Internet radio type of service.  In addition to royalties paid for the musical composition, webcasters also pay SoundExchange for public performance rights to the sound recordings (the song as recorded by a particular singer or band) - and by paying this one organization, they get rights to perform all sound recordings legally released in the US.   But any Internet radio operation needs both the musical composition (except for those compositions that have fallen into the public domain) and the sound recording performance rights cleared before they can legally play the music.

The news reports quote EMI as talking about the efficiencies that will be created by its licensing the musical compositions directly - in conjunction with the licensing of other rights - like the rights to make reproductions of its compositions, or the rights to publicly perform sound recordings to which its record label holds the copyright. But the whole idea of a performing rights organization with collective licensing is that it provides to digital music services the efficiencies offered by a one-stop shop for the purchase of rights to all a very large set of musical compositions.  Up to now, a digital music service knew that, by entering into licensing agreements with ASCAP, BMI and SESAC (the "performing rights organizations, or "PROs"), it had rights to virtually all the musical compositions that it would normally use (i.e. they received a "blanket license").  If these rights are balkanized, so that each significant publisher licenses their own music, the webcaster will have to make multiple stops to license all the music they need - which always leads to confusion.  The more places they have to go to license music, the more possibility that they will overlook a necessary rightsholder.  But there is even a bigger potential issue for webcasters - price.

ASCAP and BMI, which are the largest of the performing rights organizations - together controlling an estimated 85 or 90 per cent of the musical compositions - are subject to antitrust consent decrees.  They can't discriminate between music rights holders, and must offer the same licenses to similarly situated services, i.e. they must charge all webcasters according to set formulas - they can't cut deals with individual webcasters and offer them better deals, unless such deals are open to all that have similar qualifications.  Moreover, the rates that they charge are subject to government oversight by a "rate court" - a Federal District Court judge who can hold a trial to determine the reasonableness of any proposed rate.  This oversight is required by the antitrust consent decrees that govern both ASCAP and BMI.

As we have written before, SESAC, the smallest of the current PROs, is not subject to rate court review for its rates, nor is it restricted from "cutting deals" on the rates that it charges.  It is a private company, not subject to any antitrust consent decree.  Some music users have, from time to time, suggested that SESAC be brought under such decrees - including a group of TV stations that filed a lawsuit a year ago seeking to impose antitrust scrutiny on SESAC.  As SESAC is often able to require royalties from users that seem higher than those that would be due to it if it was paid on a strictly pro rata basis, these kinds of concerns arise from time to time.

But SESAC is still a fairly large organization, in business for a long time, and most media companies are accustomed to dealing with it.  EMI, and any other publisher that follows its lead, would seemingly be in a position similar to that of SESAC, and not be covered by the antitrust consent decrees.  Thus, any such publisher could charge what it wanted for the public performance right to the compositions that it controls, and even charge different services different amounts.  And it may be difficult for licensees to realize that they have to deal with a new organization or organizations to license music, and it will make it harder to determine which songs a music service has licensed or which ones it already has the rights to use.  Some webcasters are still are surprised that they have to pay SoundExchange, which has been around in one form or another for a decade, so how will they get the word that they now can't rely on ASCAP, BMI and SESAC for all their public performance needs for musical compositions?  While ASCAP's amended regulations (see Section 1.12 of those regulations dealing with this New Media opt-out) provide that ASCAP will must notify all New Media services when any publisher decides to avail itself of this New Media opt-out, and what songs will be licensed directly, as SoundExchange has itself found out, such notices often don't command the attention that one might think that they would. 

Collective licensing was developed to provide a one-stop shop to clear vast catalogs of music.  Many feel that it is necessary for those users - like a webcaster - who needs acceess to a broad array of music in order to operate its business.  When the sound recording performance royalty was first established in the 1990s, it came with a mandatory collective licensing approach (the "statutory license"), so that all users could easily determine how to pay for the music that they use, without needing to deal with every rights holder - perhaps having to negotiate a different deal with each one.  As we wrote here, that is why Internet radio has had the Beatles catalog for so long, even though interactive digital music services, which don't have a compulsory collective license only recently have been able to obtain such licenses.

If music publishers associated with record labels generally start to exercise their rights to withdraw their catalog from the PROs, it's possible that they could even exert more control over the use of the sound recordings.  If, for instance, they control both the publishing and the master recording (the sound recording) rights to a particular band's music, and they feel that the statutory sound recording performance royalties set by the Copyright Royalty Board are too low for a particular recording, they can effectively block the use of that sound recording by extracting a higher price for the musical composition the next time the license for that composition becomes due.  One could even see different prices being charged for the rights to different musical compositions (in fact, most Beatles compositions are held by EMI - so it is possible that every Internet radio operator will not have access to their recordings if this combined licensing scheme goes into effect).   While the efficiencies claimed by the publisher might exist in the case of some interactive services, or in cases where you are dealing with a very limited number of songs (e.g. negotiations to use the music in video productions), for traditional Internet radio services, the efficiencies seem to diminish, not increase.

Just what digital services are affected by this move?  Broadcasters do not seem to have to worry about this development, as the amendment to ASCAP's regulations allowing this partial withdrawal from its licensing system excluded them (and the definition of "broadcaster" under the antitrust conset decree (see Section II(f)), seems to exclude cable and direct broadcast satellite as well, as indicated in ASCAP's press release on the matter.  This exclusion would seemingly include broadcaster's Internet simulcast's of their over-the-air programming.  But other digital music services that are subject to Sections 114 (webcasters), 115 ("DPD", or "digital phonorecord deliveries", i.e. copies or reproductions of musical compositions made digitally) and 106(1) (other digital reproductions by audio services), are all covered. 

This is an evolving story.  There are many questions that remain.  One unanswered question is exactly which songs are covered by this opt-out.  Another is how it will affect the rates charged by ASCAP.  Finally, the practical effect remains to be seen.  It may well be that this new system will in fact prove more efficient, or will provide benefits to users and composers - or it may impose some of the burdens that I describe above.  Until this is all sorted out, music companies will need to watch carefully to ensure that they license the music they need - from the proper places.  More on some of the other issues involved in digital music licensing can be found in our advisory - The Basics of Music Licensing in a Digital World. 

NOTE:  Corrected 5/10/2011 to note that ASCAP, and not the music publishing company, sends out the notices to the services of a New Media opt out when a publisher decides to exercise it right to opt out of the normal ASCAP licensing scheme. 

What should SoundExchange do with money that it collects for the performance of sound recordings, when it does not know what sound recordings were played by a particular service?  As we've written many times on this blog, SoundExchange collects royalties from digital music services , including satellite radio, cable radio and webcasters, for the performance of sound recordings (i.e. a recording of a song by a particular artist).  It is charged with the obligation to distribute these royalties one-half to those who hold of the copyright to the sound recording and one-half to the artists who perform on those recordings.  However, SoundExchange, according to a filing recently made with the Copyright Royalty Board, does not always know which songs were played by a particular music service.  Thus, it has had difficulty distributing all of the money it collects - currently holding $28 Million in royalties from the period 2004 to 2009 that have not been distributed.  Why?  According to SoundExchange much of the problem is that not all services report what they played and how often, and other information that is submitted is sometimes inaccurate or otherwise does not adequately identify the music that was played.  To deal with this problem, SoundExchange has asked that the Copyright Royalty Board authorize it to use proxy information to distribute these funds from 2004-2009.  The CRB has asked for comments on that proposal.  Comments are due on May 19.

What is proxy information?  Basically, SoundExchange plans to infer from the information that it does have what music was played by the services for which it has no information.  According to the SoundExchange filing, they would make these assumptions based on the type of service.  Thus, information from webcasters would be used to estimate what other webcasters were playing.  Information from background music services who did report would be used to determine what other background music services played, and so on.  The CRB, in its request for comments, asks if the proxy should be further broken down so that, for instance, noncommercial webcasters would serve as a proxy for other noncommercial webcasters, and commercial webcasters would serve as a proxy for other commercial webcasters.  The Copyright Royalty Judges are also seeking to assess whether SoundExchange has done all that it can do to get the required information, and if the proxy system is a fair way of determining distributions for the money that has not yet been awarded to rightsholders and artists. 

Does this proposal have any impact on the services themselves?  Apparently not, as SoundExchange is at this point only looking for this authority in order to distribute money collected for royalties that came in from 2004 to 2009.  It does not appear to be looking at imposing any new restrictions on webcasters or other digital music services.  Instead, it is only looking for the authority to distribute the money that it has already collected based on the information that it has available.  What should music services take away from this request?

Clearly, digital music services should understand that the actions taken here are taken only because SoundExchange did not get full reporting.  In some of the webcaster settlement agreements (see, e.g. the settlement with broadcasters, summarized here), and in the CRB's own record keeping rulemaking proceeding, it was recognized that certain classes of webcasters could not be expected to provide full census reporting, i.e. reporting that lists all of the songs played by the service and how many listeners heard each song.  This reporting process can be expensive, especially for groups like noncommercial webcasters and even some small broadcasters and other small companies.  In some cases, the cost of reporting would be greater than the royalties collected or certainly the revenue produced by the streaming.  In many of these cases, SoundExchange is already authorized to distribute proceeds based on some proxy methodology.

But other webcasters, who are supposed to be reporting on a census basis, should do so.  The Copyright Royalty Board has asked whether SoundExchange has exhausted all its avenues to collect information about what is being played.  SoundExchange, in its pleading, notes that many services simply have lost past data, and some services are no longer in business.  So getting that information is difficult or impossible.  But in the future, SoundExchange will no doubt be looking to develop stronger enforcement capabilities against webcasters and others who do not meet reporting requirements.  But, even then, there will no doubt be gaps, as there will be computer malfunctions, inaccurate data that is entered, and companies that go out of business withou having met all of their obligations. 

Clearly, no one wants musicians to go unpaid - especially when the royalties have already been collected.  In the past, there has been talk of developing monitoring systems that would be easy and inexpensive to use.  Many streaming service providers already provide some type of reporting system.  But virtually all still require human input - identifying the songs correctly in a service's music scheduling software, and that sometimes is not easy, as information from record companies and other music suppliers is not always available and consistent. Automating such systems, making them ubiquitous, foolproof, easy to use and inexpensive, should be the priority of SoundExchange and webcasters and other music services, so that those who deserve to get paid are paid, but avoiding systems that are so hard to use that they make streaming or other digital music use difficult or impossible. 

Last week, the Copyright Office published in the Federal Register the final decision of the Copyright Royalty Board on the statutory rates for Internet radio royalties - royalties paid by webcasters for the noninteractive streaming of sound recordings.  As we have made clear before, these are royalties that are paid in addition to the royalties paid to ASCAP, BMI and SESAC for the public performance of the musical compositions (see our memo on Using Music in Digital Media, here, that explains the difference between the sound recording and musical composition royalties).  The rates adopted by the CRB are the rates to be paid by any webcaster who has not elected alternative rates available under one of the many settlement agreements between SoundExchange and groups of webcasters, which were entered into under the Webcaster Settlement Acts.  The Final Decision corrects a few typos in the initial decision, but otherwise leaves the substantive holdings of the decision unchanged.  We described those holdings here.  While the publication of the final decision starts the clock running on filing an appeal, the new rates are unchanged from those that were in effect for 2010 for commercial webcasters who had not elected any available alternative set of rates.  Thus, these webcasters will continue to pay at the rate of $.0019 per "performance" (a performance being one listener listening to one song - e.g. if there are 100 people listening to a stream that plays 10 songs in an hour - there are 1000 performances in that hour) for the remainder of 2011.   The publication of these rates has, however, triggered a number of questions about the comparative royalties that different Internet radio services pay for streaming music on the Internet - rates summarized below.

As set out below in detail, there are significant differences in the royalties paid by different services for the 2011-2015 royalty period.  Broadcasters who are streaming their programming on the Internet pay lower per performance royalties than webcasters paying the statutory rate in the first years of the 5 year period, but higher rates at the end of the period. (See a summary of the Broadcaster royalty agreement here).  "Pureplay" webcasters, like Pandora, pay significantly lower per performance royalties than either broadcasters or those paying under the statutory rate, but are required to pay a minimum fee of 25% of the gross revenue of their entire business - ruling out these lower rates as an option for any service that has lines of business other than webcasting.  (See a summary of the Pureplay deal here).  The broadcaster deal and that which applies to the Pureplay webcasters were both arrived at pursuant to settlements reached under the two Webcaster Settlement Acts, passed in 2008 and 2009.  These allowed the groups covered by these agreements to negotiate with SoundExchange over the rates that would cover the industry for the digital noninteractive performances of sound recordings.  The statutory rates were arrived at by a decision of the Copyright Royalty Judges after litigation which took place last year. 

The differing royalty rates for these three groups of webcasters can be summarized as set forth below.

Broadcasters Per Performance Royalties

• 2011 - $.0017 per performance 
• 2012 - $.0020 per performance
• 2013 - $.0022 per performance
• 2014 - $.0023 per performance
• 2015 - $.0025 per performance

Statutory Webcasting Per Performance Royalty Rates

• 2011 - $.0019 per performance
• 2012 - $.0021 per performance
• 2013 - $.0021 per performance
• 2014 - $.0023 per performance
• 2015 - $.0023 per performance

Pureplay Webcasters Per Performance Royalty Rates

• 2011 - $.00102 per performance
• 2012 - $.00110 per performance
• 2013 - $.00120 per performance
• 2014 - $.00130 per performance
• 2015 - $.00140 per performance

As set forth above, there are different aspects to each of these rates that bring different benefits and costs.  Pureplay webcasters pay the higher of the per performance royalties set out above and 25% of their gross revenue for all business lines - hence the name "pureplay", as only businesses that do virtually nothing but webcasting can benefit from these rates.  Broadcasters actually get an additional benefit from their rates that is not available to other webcasters - where they are simulcasting their on-air signals, they need not abide by the Performance Complement - which limits the number of songs from the same artist that other webcasters can play within specified periods (see the details on this waiver here).

What do these rates mean?  On a cost per thousand basis, services playing 10 songs an hour to 1000 listeners would be paying $10.20 per hour under the Pureplay deal, $17.00 an hour under the Broadcaster deal, and $19.00 an hour under the rates set out in the CRB decision.  By 2015, those rates would be $14.00 under the Pureplay deal, $25.00 per hour under the Broadcaster deal, and $23.00 per hour under the CRB decision.  Obviously, to pay for such royalties, broadcaster and statutory webcasters will either need to sell more commercials, or sell at a higher CPM than would a Pureplay webcaster. 

There are other rates available under these and other deals to smaller entities who cannot afford the per performance royalties set out above (though there is always some question about whether the services that pay these per performance royalties can really afford them). For small commercial webcasters with less than $1.25 million in annual revenue, they can pick a percentage of revenue royalty of 10-12% of gross revenues for services with less than 5 million aggregate tuning hours per month, or 12-14% for those with more monthly hours.  Noncommercial services can pay at several different rates - including a royalty structure with limited reporting requirements and higher per performance fess if certain minimum listening levels are exceeded, or one with more reporting but lower royalties after the minimum levels are exceeded (see our comparison, here).  NPR stations have their own deal - where streaming is paid for all affiliated stations by CPB.

It is a confusing royalty world - with services paying differing amounts for essentially the same service.  These rates will be in place until the end of 2015.  After that, who knows what rates will apply - as there will either be new negotiations for new rates, or another CRB proceeding to set rates for the industry. 

Public performances, synch and master use licensing, sound recordings, musical compositions - what are all these terms, and how does a digital media company make sense of them and figure out where to go get permission to use music in their business?  These issues were discussed in a webinar that I did with my partner Rob Driscoll from our firm's New York office for the Texas Association of Broadcasters.  The slides for that presentation are available here.  A revised and updated version of our memo on the Basics of Music Licensing in the Digital Media, giving more information on many of the subjects discussed in the presentation, has also just been published, and is available here. 

During the presentation, we talked about the broadcaster's royalty deal with SoundExchange for Internet radio streaming.  Details of that settlement are here.  The performance complement waivers that are associated with that agreement are detailed here.  In the presentation, we also mentioned that stations with websites featuring user-generated content may avail themselves of a safe harbor from liability if they take certain precautions.  Website operators must register with the Copyright Office the name and contact information of a person with responsibility to receive notices from copyright holders that users have posted infringing content, and to take down any content that is in fact infringing.  The Copyright Office instructions for registration can be found here.   These materials may not answer every question, but they may start you asking the right questions as you use music in connection with your digital properties.

The Copyright Office today announced an extension of time for the fling of comments in its inquiry into the possibe extension of Federal Copyright protection to pre-1972 sound recordings.  We provided a details of that proceeding here.  Internet radio operators and other digital music services that play significant numbers of pre-1972 sound recordings (particularly recordings first made in the United States), may want to comment in this proceeding, as the statutory royalty paid to SoundExchange currently does not appear to cover such recordings, though, should the Copyright Office recommend the extension of the law to cover the recordings, and if Congress takes actions to amend the Copyright Act as a result of this suggestion, royalty obligations could be extended to these recordings.  At the request of the RIAA, the Copyright Office has extended the deadline for comment until January 31, 2011.  Reply comments are now due on March 2, 2011.

The big news in the music world this week is that Apple finally is able to sell digital downloads of the Beatles catalog in its iTunes music store.  For years, the copyright holders who control the Beatles master recordings have withheld permission to use feature the Beatles recordings on iTunes and other digital download and on-demand streaming services, seemingly afraid of diluting the value of their copyrights.  There are other bands who have had a similar reluctance to make their recordings available on-line.  While this impasse has now been broken by the biggest name among these digital holdouts, at least as to iTunes, some have asked why it is that the Beatles were never missing from Internet radio, while they were absent from these other services.  The answer is the statutory license under which Internet Radio operates.

While there have been many disputes over the royalties that have been imposed under the statutory license created by Congress which allow non-interactive digital music companies to use sound recordings to provide music to their customers, there is no question that the license has fulfilled one of its primary functions - making sure that there is access by Internet radio operators to the entire catalog of sound recordings available in the United States.  One of the principal reasons that the statutory license was created was the inherent difficulty, if not the impossibility, for a radio-like digital service operating under the sound recoding performance royalty first adopted in 1995 to secure permission from all of the copyright holders of all of the music that such services might want to use.  Thus, Congress adopted the statutory license which requires the copyright holder to make available its sound recordings to non-interactive services, in exchange for the service agreeing to pay a statutory royalty - the royalty now set by the Copyright Royalty Board.  But only non-interactive services, where listeners cannot select the songs that they hear, are covered by that statutory royalty (see our summary here of one of the cases dealing with the question of what is and what is not a non-interactive service).

Interactive services, where the listeners have the ability to set up playlists or otherwise direct which songs will be heard, or a download service, where the pick specific songs to add to their music library, are not covered by the statutory royalty.  That means that the operator of a service that wants to provide listeners the ability to direct the songs that can be played, must first secure the permission of the copyright holders (usually, for major label releases, the record companies).  And the copyright holders are free to refuse to provide permission for the use of some of their catalog for some or all interactive purposes - such limitations sometimes set out in the record company's agreements with some of their artists.  Not only can the record company withhold permission for the use of certain sound recordings, but the company can also charge different amounts for different songs - effectively letting a "must have" band like the Beatles withhold their music until their terms are met.

These are only some of the issues that come up in setting up a digital music service.  The line between an interactive service and a non-interactive service is not a clear one, as shown by the arguments in the case we summarized last year.  In addition, non-interactive services must meet the performance complement (or get a waiver, as broadcasters have done for simulcast streaming) or, to some extent, they don't qualify for the statutory royalty.  And we're dealing here only with the sound recording copyrights - and there are a whole different set of rules for the copyright in the musical composition.  Obviously - it's not easy to operate a digital music service - much less a profitable one.  For more information about some of these issues, see our guide to the Basics of Music Licensing in Digital Media, here.  

The Copyright Office has just released a Notice of Inquiry asking whether Federal protection should be extended to sound recordings recorded prior to 1972.  A sound recording is a song as recorded by a particular artist.  Sound recordings were first protected under Federal law in 1972.  Prior to that, unauthorized recordings or reproductions of an artist's recoding were policed under various state criminal and civil law.  While the Copyright Act has provided for the protection of pre-1972 sound recordings first registered in other countries, US sound recordings recorded prior to 1972, have not received Federal copyright protections.  Many have assumed that this also exempts pre-1972 sound recordings from royalty requirements under Section 114 of the Copyright Act - i.e. the royalties paid by Internet and satellite radio and other digital music providers under the statutory license.  How would a change in the law affect Internet radio operators?

That is one of the questions that is asked by the Notice of Inquiry.  Many Internet radio operators have not excluded pre-1972 recordings from royalty payments based on any exception that may exist for pre-1972 sound recordings, as the possibility has not been widely publicized.  Moreover, some copyright holders have suggested that the digitization of older songs may somehow bring pre-1972 recordings under the coverage of the Copyright Act, or that there may be state remedies that are somehow the equivalent of the Federal public performance right.  Others may just not want to go to the trouble of determining which copyrighted songs are subject to the Uruguay Round Agreements Act (making the non-US pre-1972 sound recordings subject to US Federal law).  The Copyright Office's Notice of Inquiry asks what impact the inclusion of pre-1972 sound recordings would have on many undertakings - including the archiving and restoration of sound recordings, and on the current benefits that copyright holders and others enjoy under state laws.  In addition, it asks about the benefits and issues that would arise under Section 114 of the Copyright Act - the section that sets out the statutory license under which most Internet radio companies operate.

This is a complicated issue, and Internet radio operators should carefully consider, with counsel, the issue of whether Section 114 royalties are due for pre-1972 sound recordings.  The issues raised in the Notice shows how complex this issue is, and the question of what to do with pre-1972 sound recordings cannot be resolved by the Copyright Office itself.  Any change in the Copyright Act to fully address the Federal laws that would apply to these sound recordings would have to be made by Congress.  The comments filed in this proceeding will help inform the record that will be created in connection with the Copyright Office making a recommendation to Congress about any suggested change in the law. Comments on this issue are due on December 20, with replies 30 days later. 

Dave Oxenford this week conducted a seminar on legal issues facing broadcasters in their digital media efforts.  The seminar was organized by the Michigan Association of Broadcasters, and originated before a group of broadcasters in Lansing, but was webcast live to broadcasters in ten other states.  Dave addressed a variety of legal issues for broadcasters in connection with their website operations and other digital media platforms.  These issues included a discussion of service marks and copyrights, employment matters, music on websites, the use of social media, privacy, and sponsorship disclosure.  An earlier version of Dave's presentation on the Legal Issues in the Cyber Jungle is available here (the updated slides used in the Lansing presentation will be posted here soon).    During the seminar, Dave also mentioned that stations with websites featuring user-generated content, to help insulate themselves from copyright infringement that might occur in the content posted to their website by their audience, should take advantage of the registration with the Copyright Office that may provide safe harbor protection if a station follows the rules and takes down offending content when identified by a copyright holder.  The Copyright Office instructions for registration can be found here.   

One of the most common issues that arise with radio station websites is the streaming of their programming.  In August, Dave gave a presentation to the Texas Association of Broadcasters providing  a step-by-step guide to streaming issues, with a summary of the royalty rates paid by different types of streaming companies.  That summary to Internet Radio issues is available here.  Additional information about use of music on the Internet can be found in Davis Wright Tremaine's Guide to The Basics of Music Licensing in a Digital Age.   Dave also presented this seminar at the Connecticut Broadcasters Association's Annual Convention in Hartford on October 14.

During the webinar, one of the issues that came up in the discussion of music use on the Internet was the provisions of Section 112 of the Copyright Act that allow broadcasters to make "ephemeral copies" of sound recordings to facilitate a broadcast or webcast transmission, but which require that any such copies be kept for no more than 6 months.  As discussed at the seminar, agreements entered into last year by the NAB and major record labels and A2IM, the association that represents that major independent labels, in connection with the NAB/SoundExchange settlement of the dispute over Internet radio royalties, contained provisions that agreed to waive that 6 month limit on the retention of ephemeral copies for broadcasters who signed the settlement agreement on webcasting royalties.  More details about the waiver of this aspect of the ephemeral royalty issue, and about the waivers of the performance complement which would otherwise restrict programming options of webcasters (including how many songs in a row by the same artist could be played) are contained in this post on our blog summarizing the waivers entered into in connection with the NAB/SoundExchange agreement.

The associations which co-sponsored the webinar were the state broadcast associations of the following states:  Illinois, Kansas, Pennsylvania, Missouri, Nebraska, Nevada, North Dakota, Oregon, Tennessee and Indiana. 

So you want to start streaming your radio station on the Internet?  Or maybe you want to start a whole new Internet radio station.  In a session at last week's Texas Association of Broadcasters Annual Convention in Austin, Dave Oxenford talked about the legal considerations starting an Internet radio station, while Chris Dusterhoff of Bryan Broadcasting in Bryan/College Station, Texas talked about some of the technical and business issues in doing so.  A copy of Dave's PowerPoint presentation from that session will be available here shortly.  The presentation addresses some of the issues that you need to consider, including the music royalties that will be required from most webcasting operations. 

In addition to the issues involved in streaming your signal on the Internet, broadcasters have a host of other legal issues that they should consider in connection with their digital presence.  Issues that arise with service marks and copyrights, with employment issues, social media, privacy and sponsorship disclosure were all addressed in Dave's presentation on the Legal Issues in the Cyber Jungle.  A copy of his PowerPoint presentation will be available here soon.  Dave also mentioned that stations with websites featuring user-generated content, to help insulate themselves from copyright infringement that might occur in the posts from their audience members, should take advantage of the registration with the Copyright Office that may provide safe harbor protection if a station follows the rules and takes down offending content when identified by a copyright holder.  The Copyright Office instructions for registration can be found here.   Additional information about use of music on the Internet can be found in Davis Wright Tremaine's Guide to The Basics of Music Licensing in a Digital Age. 

The debate over the proposed performance royalty (or "performance tax") on over-the-air radio is once again front page news in all of the broadcast trade press, as radio executives who make up the NAB Radio Board reportedly are making their way to Washington, DC to decide on whether to pursue a settlement with those seeking to impose the royalty.  What's on the table?  Reportedly a very low (perhaps 1% of revenue as reported in some of the trades) royalty for terrestrial radio, a royalty set in legislation for at least a several year period.  In exchange, broadcasters would get a break on streaming royalties and a push towards getting working FM chips into cell phones - a potentially big audience boost for radio operators.  But from all we have heard, this is not, by any means, a done deal.  What will happen?

We wrote just a few weeks ago about a proposed settlement and why it might or might not be a good idea, and received many comments on our post.  As was clear from the comments, many are not sure why a settlement of any sort makes sense at this point, when the NAB has so far bottled up the royalty in Congress, and where the next Congress is, at least in the eyes of many, going to be far more Republican and, in some people's eyes, a lot less likely to impose the royalty.  Proponents of a settlement respond that the royalty is not necessarily a partisan issue, with Republicans such as Senator Hatch of Utah, Congressman Issa of California, and many members of the Tennessee delegation taking strong positions in favor of the royalty.  So, just because there is a change in Congress (if it in fact occurs) does not necessarily mean that the current Performance Rights Act or some other version of the royalty proposal would be dead.  Moreover, as we wrote in our recent post, there still is the remainder of the current Congress to get through, including the "lame duck" session after the election, when Congressmen who may no longer have jobs will be voting on much legislation, including many big budget bills in which a performance royalty rider can get hidden. 

But any settlement talk raises important questions about the details contained in any settlement proposal -  like whether the record companies, after getting their nose under the proverbial tent, to a place where they can start munching on the revenues of radio stations, will be satisfied with just 1% of the pie.  Will they be back in a few years looking for more?  How can that level of royalty be guaranteed for the long term?  

And what will radio really get in return?  A reduction in the streaming royalties of 25% would be nice - especially for those broadcasters who have already built up substantial audiences at the current high rates.  But will the many broadcast stations who are not now streaming because of the high per performance royalty see this discount as enough of a benefit to start their streaming operations?  And what about the proposal to push for getting activated FM chips in cell phones?  How likely is that to happen?  Will it be a mandatory part of the deal - so that there is no deal unless this requirement is adopted? 

There are many questions that will no doubt be debated tomorrow at the NAB Board meeting.  Individuals involved in the negotiations will no doubt provide details on many of the questions that we have asked here, and information to which we are not privy, which may answer some of the concerns that broadcasters have about any possible settlement.  And there are no doubt many details to be worked with out with the other side even if the Board approves continuing down this settlement path at its meeting tomorrow.  We will all have to wait to see what the next steps are - and what the ultimate impact will be on the future of the broadcast radio industry.

Davis Wright Tremaine attorneys David Oxenford and Rob Driscoll conducted a seminar -  Using Music in Digital Media: Business and Legal Issues - on June 16, 2010 in New York City.  The seminar was presented to attorneys from committees of the New York State and New York City bar associations.  In the seminar, Dave and Rob discussed the music licensing issues that can arise when music is used in digital media - touching on everything from royalties for the streaming of music by Internet radio stations, to the use of music in video productions or in advertisements that may be displayed online, to the occasional use of music by a business on its website to enhance the "stickiness" of that site.  The PowerPoint presentation used for the seminar will be available here shortly.  Many of the issues that were covered in the seminar are discussed in Dave and Rob's memo the on The Basics of Using Music in Digital Media, available by clicking on this link.

Another topic that was discussed was the use of music in user-generated content, and how website operators can avoid liability that may arise from the posting on their sites of content using music and other copyrighted materials by users over whom the site owner has no control.  The Digital Millennium Copyright Act provides protection for those who host sites where such content is posted, but certain formalities need to be observed by the site owner to insure that they receive the law's full protection.  Site owners cannot encourage the posting of copyrighted content unless the appropriate clearances have been obtained, they cannot have actual knowledge of the infringing content, they cannot receive a direct financial benefit from the infringement, and they must act promptly to remove infringing content if notified that it is on their site.  To make this notification possible, to provide a "safe harbor" under the DMCA, a website owner needs to place a notice on its website in a "location accessible to the public," and register with the Copyright Office, the name of a person to be contacted by a copyright owner if the owner finds its content being used on the site without permission.  This notice must provide the contact person's address, phone number and email address.  Information about registering the contact person with the Copyright Office, a list of those website operators who have registered, and a link to the form to be used to register a contact person, can be found here.

Davis Wright Tremaine attorneys David Oxenford and Rob Driscoll conducted a seminar -  Using Music in Digital Media: Business and Legal Issues - on June 16, 2010 in New York City.  The seminar was presented to attorneys from committees of the New York State and New York City bar associations.  In the seminar, Dave and Rob discussed the music licensing issues that can arise when music is used in digital media - touching on everything from royalties for the streaming of music by Internet radio stations, to the use of music in video productions or in advertisements that may be displayed online, to the occasional use of music by a business on its website to enhance the "stickiness" of that site.  The PowerPoint presentation used for the seminar will be available here shortly.  Many of the issues that were covered in the seminar are discussed in Dave and Rob's memo the on The Basics of Using Music in Digital Media, available by clicking on this link.

Another topic that was discussed was the use of music in user-generated content, and how website operators can avoid liability that may arise from the posting on their sites of content using music and other copyrighted materials by users over whom the site owner has no control.  The Digital Millennium Copyright Act provides protection for those who host sites where such content is posted, but certain formalities need to be observed by the site owner to insure that they receive the law's full protection.  Site owners cannot encourage the posting of copyrighted content unless the appropriate clearances have been obtained, they cannot have actual knowledge of the infringing content, they cannot receive a direct financial benefit from the infringement, and they must act promptly to remove infringing content if notified that it is on their site.  To make this notification possible, to provide a "safe harbor" under the DMCA, a website owner needs to place a notice on its website in a "location accessible to the public," and register with the Copyright Office, the name of a person to be contacted by a copyright owner if the owner finds its content being used on the site without permission.  This notice must provide the contact person's address, phone number and email address.  Information about registering the contact person with the Copyright Office, a list of those website operators who have registered, and a link to the form to be used to register a contact person, can be found here.

Davis Wright Tremaine attorneys David Oxenford and Rob Driscoll conducted a seminar -  Using Music in Digital Media: Business and Legal Issues - on June 16, 2010 in New York City.  The seminar was presented to attorneys from committees of the New York State and New York City bar associations.  In the seminar, Dave and Rob discussed the music licensing issues that can arise when music is used in digital media - touching on everything from royalties for the streaming of music by Internet radio stations, to the use of music in video productions or in advertisements that may be displayed online, to the occasional use of music by a business on its website to enhance the "stickiness" of that site.  The PowerPoint presentation from the seminar is available here.  Many of the issues that were covered in the seminar are discussed in Dave and Rob's memo the on The Basics of Using Music in Digital Media, available by clicking on this link.

Another topic that was discussed was the use of music in user-generated content, and how website operators can avoid liability that may arise from the posting on their sites of content using music and other copyrighted materials by users over whom the site owner has no control.  The Digital Millennium Copyright Act provides protection for those who host sites where such content is posted, but certain formalities need to be observed by the site owner to insure that they receive the law's full protection.  Site owners cannot encourage the posting of copyrighted content unless the appropriate clearances have been obtained, they cannot have actual knowledge of the infringing content, they cannot receive a direct financial benefit from the infringement, and they must act promptly to remove infringing content if notified that it is on their site.  To make this notification possible, to provide a "safe harbor" under the DMCA, a website owner needs to place a notice on its website in a "location accessible to the public," and register with the Copyright Office, the name of a person to be contacted by a copyright owner if the owner finds its content being used on the site without permission.  This notice must provide the contact person's address, phone number and email address.  Information about registering the contact person with the Copyright Office, a list of those website operators who have registered, and a link to the form to be used to register a contact person, can be found here.

Davis Wright Tremaine attorneys David Oxenford and Rob Driscoll conducted a seminar -  Using Music in Digital Media: Business and Legal Issues - on June 16, 2010 in New York City.  The seminar was presented to attorneys from committees of the New York State and New York City bar associations.  In the seminar, Dave and Rob discussed the music licensing issues that can arise when music is used in digital media - touching on everything from royalties for the streaming of music by Internet radio stations, to the use of music in video productions or in advertisements that may be displayed online, to the occasional use of music by a business on its website to enhance the "stickiness" of that site.  The PowerPoint presentation from the seminar is available here.  Many of the issues that were covered in the seminar are discussed in Dave and Rob's memo the on The Basics of Using Music in Digital Media, available by clicking on this link.

Another topic that was discussed was the use of music in user-generated content, and how website operators can avoid liability that may arise from the posting on their sites of content using music and other copyrighted materials by users over whom the site owner has no control.  The Digital Millennium Copyright Act provides protection for those who host sites where such content is posted, but certain formalities need to be observed by the site owner to insure that they receive the law's full protection.  Site owners cannot encourage the posting of copyrighted content unless the appropriate clearances have been obtained, they cannot have actual knowledge of the infringing content, they cannot receive a direct financial benefit from the infringement, and they must act promptly to remove infringing content if notified that it is on their site.  To make this notification possible, to provide a "safe harbor" under the DMCA, a website owner needs to place a notice on its website in a "location accessible to the public," and register with the Copyright Office, the name of a person to be contacted by a copyright owner if the owner finds its content being used on the site without permission.  This notice must provide the contact person's address, phone number and email address.  Information about registering the contact person with the Copyright Office, a list of those website operators who have registered, and a link to the form to be used to register a contact person, can be found here.