Everyone in radio knows that when things get a little dicey, you pick up the phone and “call legal.” We’re an industry of government regulations and laws, and last I checked, most of us have never been to law school.
A guy who is synonymous with broadcast law is attorney David Oxenford. He’s been involved in broadcasting for more than three decades, and is a partner at the Washington, D.C. law firm, Wilkinson Barker Knauer LLP. Chances are you’ve seen David speak at industry conferences, especially state broadcaster association get-togethers where he is a mainstay.
David is also the editor and principal writer of www.broadcastlawblog.com, which has been covering legal issues of interest to broadcasters for nearly ten years. David is the go-to guy for everything legal when it comes to the radio industry, so we thought he’d be the perfect person to write this week’s “Guest List” especially given the recent decision from the Copyright Royalty Board.
His list, not surprisingly, is:
Five Things Every Radio Broadcaster Should Know About the Copyright Royalty Board Decision on Music Royalties
As you’ll read below, radio just got a better deal on royalties, but it’s essential to read the fine print. And that’s where David Oxenford comes in. So take good notes!
In December, the Copyright Royalty Board reached its decision setting the royalties to be paid for the public performance of sound recordings during the period from January 1, 2016 through December 31, 2020. These are the royalties paid by all webcasters, including radio stations that stream their signals on the Internet or through mobile apps.
SoundExchange collects these royalties and distributes them to artists and copyright holders. Here are five things that every broadcaster should know about that decision and about the SoundExchange royalties in general.
1. The new royalties set by the CRB represent a big savings for broadcasters.
SoundExchange royalties are paid on a per song, per listener basis. For broadcasters, those rates in 2015 were $.0025 per song per listener (a quarter of a cent for every listener who listened to each song).
Under the new ruling, as of January 1, those rates have fallen to $.0017 – a decrease of about one-third. This is the first time that these rates have ever gone down in a CRB proceeding. Thanks to the NAB and other webcasters for fighting to reduce these royalties and convincing the CRB that a reduction was appropriate.
2. All stations that stream music must pay these royalties in addition to the royalties that are paid to ASCAP, BMI and SESAC.
I am always surprised that there are still broadcasters who don’t realize that, when they stream their music, they need to pay SoundExchange in addition to ASCAP, BMI and SESAC. SoundExchange is paid for the digital performance of sound recordings (i.e., a song as recorded by a specific band or performer), and the royalties are split between the performers themselves and the copyright holder in the sound recording (typically the record label).
ASCAP, BMI and SESAC are paid for the performance of the underlying musical work or musical composition (i.e., the musical notes and the words to the song). The royalties they collect go to the songwriters and their publishing companies. In connection with their over-the-air broadcasts, stations pay only for the musical work, so they only pay ASCAP, BMI and SESAC. Once a station makes an Internet transmission, however, the station needs to pay not only ASCAP, BMI and SESAC, but also SoundExchange.
3. There are limits on the music that you can play under the SoundExchange license.
To be able to pay under the license that is administered by SoundExchange, you need to observe certain rules that limit the music that you play. These rules were set up to make it difficult for listeners to record music by knowing what artists were coming up, and also to prevent digital services from setting up single-artist channels that could substitute for music sales.
The rules, called the “performance complement,” prohibit a webcaster from playing more than two songs from the same album consecutively. A webcaster also cannot play more than three songs from the same album in a 3 hour period, nor can it play more than four songs from any artist (or even from different artists featured in the same collection, e.g. a box set) in a three-hour period.
You also cannot pre-announce when a song will be played, nor publish a program guide that sets that out when particular songs will be aired (except for classical music stations that were publishing program guides 20 years ago when these rules were adopted).
In 2008, the NAB negotiated with the record companies and obtained for broadcasters who stream their over-the-air signal waivers of the performance complement rules. These waivers were in place until the end of 2015, but they have now expired. While the NAB has indicated that they are trying to get extensions of the waivers, no agreements have yet been announced.
So, technically, if you can’t abide by these rules, you either need to stop streaming the portion of your programming that does not comply, or get direct licenses from the record labels to use their music in a manner different than permitted under the SoundExchange license – and such negotiations are not an easy task.
4. You need to report what you play and how many people heard each song.
As part of their royalty obligations, stations need to report monthly on the songs that they have streamed, and how many people heard some or all of each track. Payments due for such streaming must also be made monthly, within 45 days of the end of a month.
Most stations work with a streaming service provider that measures the station’s online audience on a constant basis, and generates reports of music use by correlating the listening numbers with the songs that are scheduled in the station’s music scheduling software. SoundExchange can audit webcasters – and they usually conduct a number of audits each year to make sure that the monthly reports accurately depict the music that was played.
5. These royalties apply only to “noninteractive” streams – and not to podcasts or any on-demand music service.
A SoundExchange license only gives you the right to stream music in a noninteractive manner – one where the listener does not know and cannot control the specific song that is coming up next. Essentially, when Congress created the license that is paid to SoundExchange, they made it easy for online stations to write one monthly check and get rights to all of the music they wanted to use, but the license is restricted to services that essentially act like radio – the listener can pick the kind of music that they want to hear, but he or she never knows for sure what the next song will be.
So, using the SoundExchange license, the listener can pick a rock station, or a jazz stream or a classical site, and they can even have a webcaster create a channel of music that sounds like a particular artist. But, for the service to qualify to pay SoundExchange, the listener can’t be in a position to know what the next song will be.
For any other online offering where the listener knows what he or she will be hearing, or where they can figure it out because the same songs are always played in the same order – downloads, music services like Spotify or Rhapsody where you can pick a song and hear it on demand, on-demand streams where the same songs are streamed in the same order every time you click on the stream, or podcasts that contain music – the service needs to get the rights to use the music directly from the copyright owner.
So broadcasters need to be careful about the ways that they may use music, for instance in podcasts – as SoundExchange, ASCAP, BMI and SESAC do not cover that kind of use – so the station will need to get permission directly from the artist or record label.
These points just scratch the surface on these questions, as the whole area of music rights can be incredibly complicated. For more information about music rights and the SoundExchange royalty, you can check out my blog – www.broadcastlawblog.com (under the Internet Radio or Music Rights Topics), or look at the SoundExchange website, www.soundexchange.com and click on the “service provider” tab. But, if you are looking to use music in any digital setting, it is always best to consult a lawyer familiar with these issues.
Thanks to David for taking the time to lend us his expertise. And thanks to Seth Resler for putting this week’s “Guest List” together. As always, comments are welcome.
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There is no person more knowledgeable in this area. Plus, David Oxenford is wrapped in a pleasant personality; always listening carefully, answering thoughtfully.
About “Thanks to the NAB and other webcasters for fighting to reduce these royalties and convincing the CRB that a reduction was appropriate.” Keep in mind that it was NAB which negotiated a 0.0025% royalty rate for 2015, in 2009. At the time trade publications applauded.
“Under the deal announced today, local radio stations will pay a per-song rate of $1.50 per thousand listeners in 2009 and 2010, compared with the CRB’s $1.80 and $1.90, respectively. But the deal also calls for rates to rise to $2.50 by 2015.” – https://latimesblogs.latimes.com/technology/2009/02/webcasting-nab.html
That’s interesting, but I wish he could have elaborated on the effect of the smaller broadcaster, who as I understand it, saw their costs go up substantially as a result of the new ruling, due to the lack of a small broadcaster clause in the new terms. It would be nice to know his thoughts in this area, especially since these smaller broadcasters may be the most susceptible to misunderstanding the legalese…
Although this is all very nicely lated our, it does nothing to help the small webcaster.
Fred and Paul – thanks for giving me the opportunity to share these thoughts on your blog. For your readers and others, I today posted on my blog additional information about some of the topics covered in this article – https://www.broadcastlawblog.com/2016/03/articles/5-things-broadcasters-should-know-about-soundexchange-music-royalties/
I note the comments that these rates are still too high. Note that the NAB did request rates that were a third of those that were ultimately adopted by the CRB. While those lower rates were not approved, the fact that the rates went down at all is pretty amazing as those rates have, in the past, only moved in one direction – up. To get a reduction of almost a third after litigating against the recording industry has to be considered a good result. Not all that we could have hoped, but at least moving in the right direction.
And, yes, many small webcasters (and webcasters know that I have worked with small webcasters for years, having negotiated most of the past small webcaster deals) have real problems with the new rates as there no longer is a percentage of revenue royalty rate. No small webcasters actually litigated the recent CRB case, possibly as it is a very expensive process. At this point, the only way to revive the percentage of revenue royalty is through negotiations with the labels and SoundExchange. Small webcasters need to convince them that they should place a value on small webcasters and that a special royalty is needed to preserve these webcasters. This is not an easy task, but nothing is easy when dealing with music rights issues. I know that some have tried to open these conversations, and I am sure that they will continue until, hopefully, some accommodation is reached.
David, thanks for taking the time to comment, and for providing us with your knowledge and expertise. These “Guest List” posts are very additive to our blog, and your contribution this week is greatly appreciated.
Question. I note the requirement to keep track of which songs are performed. I work for two small market stations that stream as well, and we use a stream service. We provide zero data as to what is playing on the air/stream to them. If I recall, we pay for a blanket license that covers whatever we broadcast and eliminates the requirement to provide song data (title, artist etc). It is a more expensive license, although not prohibitive. We are live radio and music is sourced from computer, vinyl, tapes, CD’s, etc so for a good part of it no data stream is even available. We send a clean analog audio feed from the console to the stream, no data whatsoever. I did not see this mentioned in the blog. Your comments appreciated on this.
As of January 1, all of the licenses, except for those that apply to college radio and CPB affiliates, require keeping track of what is being played. Under certain licenses that applied until the end of last year, smaller services could get an exemption from those requirements.