On March 2, 2007, the Copyright Royalty Board (CRB) released its decision for 2006-2010 royalties for the use of sound recordings by internet radio stations and webcasters that stream music online. Musical works and sound recordings are the two categories of work eligible for copyright protection. The “Services,” as the CRB refers to them, are the internet webcasters or broadcast radio simulcasters that stream music. They are divided into commercial webcasters and noncommercial webcasters. In order to qualify as noncommercial, the webcaster must be a tax exempt organization under Section 501 of the Internal Revenue Code or a governmental unit.
The CRB determined the new royalty rates based on the willing buyer and willing seller standard. This standard requires that the willing buyers, which are the Services, agree upon a rate with the willing sellers in the marketplace, which is marketplace in which no statutory licenses exist. The two parties, however, disagree on the degree of competition in the marketplace. The CRB believes this standard is efficient since it encompasses the economic and competitive evidence presented by the parties and also takes into consideration the promotional or substitional effects of the use.
Another decision made by the CRB was to determine a single receiving agent for the royalty fees. SoundExchange, Inc. is a non-profit performing rights organization that represents record labels and artists who have specifically authorized SoundExchange to collect royalties on their behalf. It is controlled by an 18-member Board of Directors compromised of equal numbers of representatives of copyright owners and performers. The CRB eventually chose SoundExchange, Inc. over Royalty Logic as the receiving agent.
The CRB judges agreed on different royalty systems for commercial and noncommercial webcasters. However, both types of webcasters are subject to a $500 minimum fee rate per channel or station. The purpose of this minimum fee, according to SoundExchange, is to “protect against a situation in which a licensee’s performances are such that it costs the license administrator more to administer the license than it would receive in royalties.” Besides the minimum fee, commercial webcasters must pay a per performance usage rate. Webcasters will have to pay $.0008 per performance in 2006, $.0011 per performance in 2007, $.0014 per performance in 2008, $.0018 per performance in 2009, and $.0019 per performance in 2010. Noncommercial webcasters have a specified cap of 159,140 Aggregate Tuning Hours (ATH), where they are exempt from the performance rate. ATH means the total hours of music streaming; for example, an hour of streaming to ten listeners would equal 10.
This source is extremely important to my paper. This is the ruling that sparked all the conflict and debate between the Copyright Royalty Judges and the internet radio companies. This source demonstrates the point of view of the copyright judges, which is crucial to explaining why the new royalty rates were chosen. It also explains the new standard for determining the royalties, which is the main source of conflict for the new rates. My thesis opposes the new royalty rates and standard, and so this source is the copyright ruling I will prove is unfair and unjustified in my paper.