Minimum fee. Private Negotiations

Following the issuance of the CRB decision, private negotiations between SoundExchange, the organization charged with collecting and distributing performance royalties, and both large and small webcasters were initiated in an attempt to reach a compromise royalty rate agreement that would serve as an alternative to the payment scheme provided by the CRB decision. On July 10, 2009, the federal court of appeals issued an opinion in the case that affirmed nearly all aspects of the "Webcaster II" royalty rate proceeding, although it vacated the $500 minimum annual fee per channel or station and remanded that portion of the determination for the CRB to reconsider. Instead, the 110 th Congress passed the Webcaster Settlement Act of 2008 ( P.L. 110-435 ) that authorized SoundExchange to enter into settlement agreements with webcasters that effectively replace the CRB's decision. P.L. The purpose of the act was to provide statutory authority for SoundExchange to negotiate and enter into alternative royalty fee agreements with webcasters that would replace the rates established under the CRB's decision, while Congress was in recess for the November 2008 elections. Finally, the act declared that nothing in the WSA of 2008 (or any agreement entered into under it) shall be taken into account by the U.S. Court of Appeals for the District of Columbia Circuit in its review of the May 1, 2007, determination of royalty rates by the Copyright Royalty Judges. Corporation for Public Broadcasting

The Corporation for Public Broadcasting (CPB) and SoundExchange announced on January 15, 2009, that they had reached a "comprehensive agreement" on the royalty rates to be paid for Internet streaming of sound recordings by approximately 450 public radio webcasters, including CPB-supported station websites, NPR, NPR members, National Federation of Community Broadcasters members, American Public Media, Public Radio Exchange, and Public Radio International. The agreement, which substitutes for the statutory rates determined by the CRB in May 2007, covers a royalty period from January 1, 2005, through December 31, 2010. 111-36, the Webcaster Settlement Act of 2009

Although SoundExchange successfully negotiated new rates with certain categories of webcasters discussed above, SoundExchange did not reach agreements with all webcasters, including the largest commercial webcasters such as Pandora, Live365, and RealNetworks, prior to the February 15, 2009, sunset of SoundExchange's settlement authority under the WSA of 2008. "Pureplay" Webcasters

The first agreement was announced on July 7, 2009, and is available to certain "pureplay" commercial webcasters (those that derive nearly all of their revenue from the streaming of sound recordings) such as Pandora, AccuRadio, and Live365.com. Noncommercial Religious Broadcasters

The noncommercial religious broadcaster agreement governs the royalty period from 2006 to 2015. Sirius XM Radio

The agreement SoundExchange reached with Sirius XM applies not to performances of sound recordings transmitted by satellite, but rather to the streaming of Sirius programming over the Internet or to mobile phones using Internet technology. Copyright Royalty Board Proceedings to Determine Royalty Rates for 2011-2015 ("Webcaster III")

Although the past two years have been consumed with the reactions to the Copyright Royalty Board's May 2007 decision, time marches on, and the CRB announced on January 5, 2009, that it would begin the third proceeding ("Webcaster III") to determine the royalty rates for the statutory license covering Internet transmissions of sound recordings, applicable to the next royalty period that runs from January 1, 2011, through December 31, 2015. Any webcaster that chooses not to opt-in to one of the settlement agreements described above may participate in this proceeding and would be bound by the rates and terms that the CRB shall determine.
Under the Copyright Act, Internet radio broadcasters, or "webcasters," that stream copyrighted music to their listeners are obliged to pay royalty fees to the sound recording copyright owners at statutory rates established by the Copyright Royalty Board (CRB). However, some webcasters may also have the option of paying different royalty fees that are privately negotiated with SoundExchange, the entity that collects performance royalties on behalf of sound recording copyright owners and recording artists.
On March 9, 2007, the CRB announced statutory royalty rates for certain digital transmissions of sound recordings by webcasters for the royalty period January 1, 2006, through December 31, 2010. Several webcasters appealed the CRB's decision to the U.S. Court of Appeals for the District of Columbia Circuit. The appellants argued that the rates were unreasonably high and that the absence of a cap on minimum fees paid per licensee was arbitrary and capricious. On July 10, 2009, the federal court of appeals issued a decision that upheld nearly all aspects of the CRB's determination of rates.
Two recent laws, the Webcaster Settlement Act of 2008 (WSA of 2008; P.L. 110-435) and the Webcaster Settlement Act of 2009 (WSA of 2009; P.L. 111-36), facilitated the ability of webcasters to enter into voluntary agreements with SoundExchange that provide alternative royalty rates that substitute for the statutory rates established under the CRB's decision. These agreements generally permit a webcaster to pay lower rates and may cover a longer royalty period. Pursuant to the WSA of 2008 and 2009, voluntarily negotiated royalty agreements were reached between SoundExchange and the following entities: the Corporation for Public Broadcasting (for the online streaming of public radio stations); the National Association of Broadcasters (for online simulcasts by FM and AM radio stations); a group of "small" webcasters; certain "pureplay" commercial webcasters (those that derive nearly all of their revenue from the streaming of sound recordings) such as Pandora, Live365.com, and AccuRadio; noncommercial educational webcasters (college-affiliated Internet radio stations); noncommercial religious broadcasters (that stream their AM/FM programming over the Internet); and Sirius XM (concerning Internet streaming of Sirius programming as opposed to its satellite-transmitted programming).
Although the above settlements cover the same royalty period as the CRB's determination (from 2006 through 2010), some rate agreements extend beyond that period, until the end of 2015. Thus, webcasters that are parties to extended agreements need not participate in the CRB proceedings to determine statutory royalty rates for the period 2011 to 2015, which were initiated in January 2009. Any webcaster that chooses not to opt-in to a settlement agreement with SoundExchange must instead comply with the applicable statutory rates and terms established by the CRB for the period 2006-2010, and will be subject to any new rates that the CRB determines for 2011-2015.
This report surveys the legislative history of this issue, the CRB's rate decision, and the congressional and public response.