Major Labels Won't Get Higher Royalty Rates in Webcasting IV

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The Copyright Royalty Board wondered if it could deviate from uniform webcasting rates. The Register of Copyrights said the question came too late.

Major and independent labels will be paid the same statutory webcasting rates over the next five years. The possibility that different types of labels could be paid different royalties was put to rest by an opinion released Tuesday by the Register of Copyrights regarding Webcasting IV, the rate-setting procedure that will establish the royalties non-interactive webcasters like Pandora must pay record labels and artists from 2016 to 2020.

In a case of much ado about nothing, the Register concluded the CRB's question did not merit an answer because it arrived too late. Section 802 allows the CRB to request a decision from the Register when a "novel material question of substantive law" is presented during the hearing. But it also requires the CRB's question must either arise or be during the proceeding. Looking at the proceeding, the Register determined the concept of differential rates did not arise during the proceeding when the participants had an opportunity to address the matter.

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The country's largest webcaster expressed support for the opinion in a statement issued Tuesday evening. “Pandora supports a uniform rate structure for all musicians,” said Dave Grimaldi, director of public affairs at Pandora. SoundExchange had not responded to a request for a statement at the time of publication.

Webcasting IV will determine the royalty rates paid by non-interactive Internet radio services that opt for a compulsory right -- the right to perform recordings is guaranteed with limitations -- rather than negotiate directly with rights owners. The Copyright Act allows the CRB to consider the rates and terms rights owners have negotiated with comparable digital music services. But as the Register noted, the Copyright Act does not address whether or not different types of licensors can receive different rates.

The matter arose in September when the Copyright Royalty Board, currently in deliberations for Webcasting IV, asked the Register for guidance a surprising topic: is it permitted to set different rates for different music suppliers.

Specifically, the CRB asked if Section 114 or any other provision of the Copyright Act "prohibit the Judges from setting rates and terms that distinguish among different types or categories of licensors, assuming a factual basis in the evidentiary record before the Judges demonstrates such a distinction in the marketplace?" Both sides of the proceeding were asked in October to supply the CRB with briefs on the matter.

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Majors differed from independents and webcasters in interpretation of the Copyright Act's silence on assigning different rates to different types of licensees. The majors argued the CRB is not explicitly limited in setting different rates. Independents and webcasters argued Congress did not intend for different licensors to be paid different rates.

Ironically, webcasters are starting to do more direct deals that ensure different licensors will receive different royalty rates to. Pandora's deal with independent rights organization Merlin pays below the statutory rate for incremental streams beyond the streams its member' content would normally receive. And although music publishing it outside the scope of Webcasting IV, the multi-year agreement between Pandora and Sony/ATV Music Publishing will pay a higher rate than what the publisher could get outside of direct negotiations.

Labels and webcasters may have to deal with the same issue in five years. Register of Copyrights Maria Pallante didn't address the merits of the CRB's question but wrote "she leaves the answer for another day."  


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