Cedar Boschan on Rising Pressure to Improve Creators' Royalties

Rolling Stone and Billboard recently interviewed me regarding Sony's "Legacy Artist Royalty Plan."  You can read about it here.

On the heels of Sony's announcement, the United Kingdom's Members of Parliament have found cause for a "'complete reset of streaming' that 'enshrines in law rights to a fair share of the earnings,'" which you can read about here.

Given concerns of inflation in the US, and the rising social pressure to fairly compensate creators, do you think the CRB will be more apt to consider our comments on the proposed mechanical rate freeze?

Are you going to comment on such settlement for the CRB to consider? (Click here for instructions on how to register to comment, although the mobile interface was a bit different for me.)

Cedar Boschan to Give Royalty Rate Update at California Copyright Conference - October 13

I will discuss on October 13, 2009 Copyright Royalty Board actions and potential legislation at the California Copyright Conference's annual "Legal Update" panel.

My fellow panelists are some of the best in the West, so don't miss it:

KENNETH D. FREUNDLICH, ESQ., Freundlich Law
DINA LAPOLT, ESQ., LaPolt Law
MICHAEL PERLSTEIN, ESQ., Fishbach, Perlstein, Lieberman & Almond
PATRICK ROSS, Copyright Alliance

Moderator:
STEVEN WINOGRADSKY, ESQ., Winogradsky/Sobel

This event is usually a very well attended meeting, so please make your reservations early. One (1) hour of MCLE credit is available to California attorneys.

Register at the California Copyright Conference Web site or see more details pasted below:

_____________________________________________

Annual "LEGAL UPDATE" Panel
Tuesday, October 13, 2009
6:15 PM Check-In * 6:30 PM Cocktails * 7:00 PM Dinner
COURTYARD BY MARRIOTT, 15433 Ventura Blvd, Sherman Oaks, CA 91403 (Near Sepulveda & Ventura Blvd., just west of the 405 freeway)
Parking entrance on Orion Avenue
Free parking with validation.

Appetizer: California Mixed Green Salad Salad
Entrée: Chicken Marsala, Beef Stir-fry or Vegetarian Pasta
Dessert: Chef's Choice

CCC Members $40 per person / Non-members $50 per person

RESERVE YOUR SEAT NOW - RESERVATIONS ACCEPTED UNTIL
10:00 AM FRIDAY, Oct 9, 2009

Please help us make this an enjoyable experience for everyone by using the reservation system. A failure to reserve by the deadline may result in not receiving your preferred choice of dinner entree.

Register online with your credit card at www.theccc.org
Or use our voicemail system (818-379-3312)
Dinners payable at the door by cash or check only. No credit cards.

To join the California Copyright Conference or to renew your membership, please visit the website for more info: http://www.theccc.org/join.php

LAUNCHcast Wins - Service Deemed Noninteractive by US 2nd Circuit Court of Appeals

Those who are calculating CRB royalties may be interested to read this decision published August 21, 2009 in the Federal Register.

The US Court of Appeals' Second Circuit upheld a 1997 jury decision that Yahoo's LAUNCHcast - a webcasting service now operated by CBS that provides Internet radio stations customized for individual users – is not an "interactive service" as defined in 17 U.S.C. §114(j)(7):

An “interactive service” is one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient. The ability of individuals to request that particular sound recordings be performed for reception by the public at large, or in the case of a subscription service, by all subscribers of the service, does not make a service interactive, if the programming on each channel of the service does not substantially consist of sound recordings that are performed within 1 hour of the request or at a time designated by either the transmitting entity or the individual making such request. If an entity offers both interactive and noninteractive services (either concurrently or at different times), the noninteractive component shall not be treated as part of an interactive service.

Specifically, the US Court of Appeals found that LAUNCHcast's

1. Users could not request specific musical works through LAUNCHcast
2. Transmissions were not specially created for the user within the meaning of §114(j)(7)

Nobody disputes point #1 above, but point #2 is debatable. At least I found BMG's argument that "...Any service that reflects user input is specially created for and by the user and therefore qualifies as an interactive service" to be compelling. But the court did not "read the statute so broadly." Ultimately, the intent of §114(j)(7), as revised, guided the court to its decision.

The decision means that LAUNCHcast may pay statutory master performance royalties to SoundExchange instead of negotiating fees for each master with various record companies. The designation of a music service as "non-interactive" impacts royalties reportable to music publishers as well.

According to The Broadcast Law Blog:

"Other cases in other circuits would not be bound by this decision, though they will no doubt find it to be instructive."

Do you agree with the Second Circuit?

The posts on this blog confer no rights or warranties. The opinions expressed on this site are my own and may not represent those of my firm. © 2009, Cedar Boschan. To request permission to reproduce, please contact boschan@royaltyauditors.com.

CRB Retroactove Rates for Limited Downloads Prior to 2008

I recently began an analysis of the publishing royalty rates adopted by the United States Copyright Royalty Judges in November 2008 pursuant to an agreement reached by all of the participants in the proceeding (e.g., the RIAA, NMPA and DiMA) with respect to interactive streaming, limited downloads and incidental digital phonorecord deliveries.

Among other things, my analysis has so far caused me to question which rates apply to limited downloads prior to 2008. Interestingly, I have not heard this topic reported in the media or discussed by my colleagues in the music industry.

Section 385.11 of the Copyright Royalty Judges' Final Determination of Rates and Terms (page 77) states that:

"A limited download is a general digital phonorecord delivery under 17 U.S.C. 115(c)(3)(C) and (D)."

As published in the February 9, 1999 Federal Register, 37 CFR part 255.5 was revised in 1999 to set rates for digital phonorecord deliveries in general. As a result, US Register of Copyrights Marybeth Peters wrote in the January 26, 2009 Federal Register:

"With respect to limited downloads, the previous rate-setting proceeding established royalty fees that clearly applied to limited downloads, whether such downloads were promotional or not."

The Copyright Royalty Judges must have mostly concurred because they responded by amending their Final Determination of Rates and Terms to strike provisions including one that allowed licensees to report no royalties for certain limited downloads deemed to be promotional, including limited downloads that occurred prior to 2008.

Setting aside the issue of promotional units, according to the logic of the Register of Copyrights, it seems that the statutory mechanical royalty rates for all limited downloads through December 31, 2007 are equal to unit rates applicable to permanent downloads and physical records:

Playing time 0:00 - 5:00 minutes:

1996-1997 = $0.0695

1998-1999 = $0.071

2000-2001 = $0.0755

2002-2003 = $0.08

2004-2005 = $0.085

2006-2007 = $0.091

However, the participants' agreement and the Copyright Royalty Judges Final Determination of Rates and Terms (as amended) set forth contrary rates for limited downloads prior to 2008.

Is the Register of Copyrights correct that "the previous rate-setting proceeding established royalty fees that clearly applied to limited downloads"? Which rates do you think apply and for which time periods?

Based on the summary of reportable rates that the Harry Fox Agency published, it represents that the rates for limited downloads prior to 2008 are set forth in the participants' agreement, not the rates applicable to all digital phonorecord deliveries in general.

While I think this may have been the intent of the participants (and the 1999 rate setting panel), perhaps the Register of Copyrights is technically correct that this would be impermissible retroactive rulemaking because when the participants and the CRJs deemed limited downloads to be general digital phonorecord deliveries, they subjected licensees to the same statutory royalty rates that were applicable to other general digital phonorecord deliveries (i.e., permanent downloads) through 2007. Attention attorneys: Please feel free to post comments or email me at boschan@royaltyauditors.com to tell me what you think.

Regardless of what the answer is, that the Copyright Royalty Judges did not clarify rates applicable to limited downloads during the period from inception to December 31, 2007 is troubling to those of us who must compute and audit royalties therefor.

Regrettably, this point is but one example of the confusion arising from the labyrinthine rates that the US music industry took over a decade to issue. The challenge of complying with such royalty rate calculations is great for my business, which reports, certifies and audits such royalties, but bad news for the music business as a whole. I think the Copyright Royalty Judges and the participants cost the music industry much needed profit in choosing to adopt such complex rates.

The posts on this blog confer no rights or warranties. The opinions expressed on this site are my own and may not represent those of my firm. © 2009, Cedar Boschan. To request permission to reproduce, please contact boschan@royaltyauditors.com.

Sound Exchange Monopoly Preserved... For Now

Billboard reports today that D.C.'s US Appeals Court Declined To Rule On CRB due to a missed deadline.

Some background: Royalty Logic had filed a motion questioning the constitutionality of the US Copyright Royalty Board (CRB). If the courts agreed with Royalty Logic's arguments, rates previously set by the CRB may have been invalidated, which is why many groups, including the NMPA, opposed the motion.

The good news about the US Appeals Court's choice is that the rate setting process will not have to restart at square one. However, I think it is bad news that left intact is the CRB's effective decision to grant Sound Exchange a limited monopoly as the sole designee entitled to collect master performance royalties in the United States.

Royalty Logic had originally filed its motion because it too wanted to be an master performance royalty collection agent.

I do not support Royalty Logic's positions on all matters, but ultimately I am concerned that recording artists and record labels will have no choice of collection agents for the master performance royalties contemplated by the Digital Milennium Copyright Act (unlike songwriters and publishers, which may choose to affiliate with one of three major performance rights societies: ASCAP, BMI or SESAC).

Sound Exchange may have won this battle, but perhaps there will soon be another opportunity to introduce competition in the master performance royalty collection marketplace. After all, one thing that set the US music industry apart from the rest of the world is that it allowed competition amongst collection agents.

The posts on this blog confer no rights or warranties. The opinions expressed on this site are my own and may not represent those of my firm. © 2009, Cedar Boschan. To request permission to reproduce, please contact boschan@royaltyauditors.com.