Proposed Rule2022-24300
Determination of Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)
Primary source
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Published
November 7, 2022
Issuing agencies
Library of CongressCopyright Royalty Board
Abstract
The Copyright Royalty Judges publish for comment and objection proposed regulations that set rates and terms applicable during the period from January 1, 2023, through December 31, 2027, for the section 115 statutory license for making and distributing phonorecords of nondramatic musical works.
Full Text
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<title>Federal Register, Volume 87 Issue 214 (Monday, November 7, 2022)</title>
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[Federal Register Volume 87, Number 214 (Monday, November 7, 2022)]
[Proposed Rules]
[Pages 66976-66985]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-24300]
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LIBRARY OF CONGRESS
Copyright Royalty Board
37 CFR Part 385
[Docket No. 21-CRB-0001-PR (2023-2027)]
Determination of Rates and Terms for Making and Distributing
Phonorecords (Phonorecords IV)
AGENCY: Copyright Royalty Board, Library of Congress.
ACTION: Proposed rule.
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SUMMARY: The Copyright Royalty Judges publish for comment and objection
proposed regulations that set rates and terms applicable during the
period from January 1, 2023, through December 31, 2027, for the section
115 statutory license for making and distributing phonorecords of
nondramatic musical works.
DATES: Comments and objections, if any, are due no later than December
7, 2022.
ADDRESSES: You may send comments, identified by docket number 21-CRB-
0001-PR (2023-2027), online through eCRB at <a href="https://app.crb.gov">https://app.crb.gov</a>.
Instructions: To send your comment through eCRB, if you don't have
a user account, you will first need to register for an account and wait
for your
[[Page 66977]]
registration to be approved. Approval of user accounts is only
available during business hours. Once you have an approved account, you
can only sign in and file your comment after setting up multi-factor
authentication, which can be done at any time of day. All comments must
include the Copyright Royalty Board name and the docket number for this
proposed rule. All properly filed comments will appear without change
in eCRB at <a href="https://app.crb.gov">https://app.crb.gov</a>, including any personal information
provided.
Docket: For access to the docket to read background documents or
comments received, go to eCRB at <a href="https://app.crb.gov">https://app.crb.gov</a> and perform a case
search for docket 21-CRB-0001-PR (2023-2027).
FOR FURTHER INFORMATION CONTACT: Anita Brown, CRB Program Specialist,
at 202-707-7658 or <a href="/cdn-cgi/l/email-protection#9af9e8f8daf6f5f9b4fdf5ec"><span class="__cf_email__" data-cfemail="5f3c2d3d1f33303c71383029">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Background
Section 115 of the Copyright Act, title 17 of the United States
Code, requires a copyright owner of a nondramatic musical work to grant
a license (also known as the ``mechanical'' compulsory license) to any
person who wants to make and distribute phonorecords of that work,
under circumstances set forth in the statute and regulations. In
addition to the production or distribution of physical phonorecords
(compact discs, vinyl, cassette tapes, and the like), section 115
applies to digital transmissions of phonorecords, including permanent
digital downloads and ringtones.
Chapter 8 of the Copyright Act authorizes the Copyright Royalty
Judges (Judges) to conduct proceedings every five years to determine
the rates and terms for the section 115 license. 17 U.S.C. 801(b)(1),
804(b)(4). Accordingly, the Judges commenced the current proceeding in
January 2021, by publishing notice of the commencement and a request
that interested parties submit petitions to participate. See 86 FR 25
(Jan. 5, 2021).
The Judges received petitions to participate in the current
proceeding from <a href="http://Amazon.com">Amazon.com</a> Services LLC, Apple Inc., Copyright Owners
(joint petitioners Nashville Songwriters Association International
(NSAI) and National Music Publishers Association (NMPA)), Google LLC,
George Johnson, Joint Record Company Participants (filed by Recording
Industry Association of America, Inc. for joint petitioners Sony Music
Entertainment, UMG Recordings, Inc., and Warner Music Group Corp.),
Pandora Media, LLC, David Powell, SoundCloud Operations Inc.,\1\
Spotify USA Inc., and Brian Zisk.
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\1\ SoundCloud Operations Inc. withdrew from the proceeding on
May 21, 2021.
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The Judges gave notice to all participants of the three-month
negotiation period required by 17 U.S.C. 803(b)(3) and directed that,
if the participants were unable to negotiate a settlement, they should
submit Written Direct Statements no later than September 10, 2021.\2\
The Judges extended the deadline to October 13, 2021. Order Granting
Joint Motion to Modify the Case Scheduling Order (eCRB No. 25555) (Aug.
3, 2021). The Judges received Written Direct Statements from
participants <a href="http://Amazon.com">Amazon.com</a> Services LLC, Apple Inc., Copyright Owners
(Nashville Songwriters Association International (NSAI) and National
Music Publishers Association (NMPA)), Google LLC, George Johnson,
Pandora Media, LLC, and Spotify USA Inc.
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\2\ Several parties negotiated a proposed partial settlement in
May 2021. The Judges accordingly published for comment the parties'
proposed changes (to subparts A and B of 37 CFR part 385). See 87 FR
33093 (June 1, 2022).
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On August 31, 2022, the Judges received a motion stating that
several participants, (Settling Parties),\3\ had reached a partial
settlement regarding the rates and terms under Section 115 of the
Copyright Act, namely, for Licensed Activity (as defined in 37 CFR part
385, subpart A) \4\ presently addressed in subparts C & D of 37 CFR
part 385 together with certain regulations of general application
(e.g., definitions and late fee provisions) applicable to the subpart C
& D Configurations presently addressed in 37 CFR part 385, subpart A,
for the 2023-2027 rate period \5\ and seeking approval of that partial
settlement. See Motion to Adopt Settlement of Statutory Royalty Rates
and Terms for Subpart C and D Configurations, Docket No. 21-CRB-0001-PR
(2023-2027) at 1 (Motion). The movants state that ``the settlement [ ]
represents the consensus of both licensees and licensors representing
the vast majority of the market for rights under Section 115 for
Subpart C & D Configurations.'' \6\ Motion at 3.
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\3\ The participants who filed the motion are the National Music
Publishers' Association (``NMPA'') and Nashville Songwriters
Association International (``NSAI,'' and collectively with NMPA, the
``Copyright Owners''), on the one hand, and <a href="http://Amazon.com">Amazon.com</a> Services LLC,
Apple Inc., Google LLC, Pandora Media, LLC, and Spotify USA Inc.
Motion at 1.
\4\ ``Licensed Activity . . . as the term is used in subparts C
and D of this part, means delivery of musical works, under voluntary
or statutory license, via Digital Phonorecord Deliveries in
connection with Interactive Eligible Streams, Eligible Limited
Downloads, Limited Offerings, mixed Bundles, and Locker Services.''
37 CFR 385.2.
\5\ The motion refers to the rate period as ``the full time
period addressed by the Proceeding''. Motion at 1.
\6\ The movants indicate that participant George Johnson does
not agree to the settlement and that participants David Powell and
Brian Zisk should be dismissed because they did not file a Written
Direct Statement. Motion at 3 and n. 1. Mr. Johnson filed an
opposition to the motion (eCRB. No. 27239) on September 6 which the
Judges consider relevant to this proposed rule.
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On September 26, 2022, the Judges issued ``Order 63 to File
Certification or Provide Settlement Agreements'' (Order 63), which
ordered the Settling Parties to certify that the Motion and the
Proposed Regulations annexed to the Motion represent the full agreement
of the Settling Parties, i.e., that there are no other related
agreements and no other clauses. Order 63 further ordered that if such
other agreements or clauses exist, the Settling Parties shall file
them.
On September 26, 2022, the Settling Parties filed a ``Joint
Response to George Johnson's Motion to Compel Production of Settlement
and CRB Order 63'' (Joint Response). Portions of the Joint Response,
which were submitted as Restricted, are responsive to Order 63. On
October 6, 2022, the Settling Parties filed a ``Joint Submission of
Settling Participants Regarding Settlement Agreement'' (Joint
Submission) which removed the Restricted designation to the
``Settlement Agreement'' attached as Exhibit A to the Joint Submission.
However, the Joint Response and the Joint Submission do not completely
and adequately respond to Order 63.
On October 3, 2022, Google and NMPA filed ``Google and NMPA's Joint
Notice of Lodging'' (Joint Notice of Lodging), which indicated that
those two parties found Order 63 unclear regarding what is meant by
``related agreements.'' Google and NMPA offered that they broadly
construed Order 63's reference to ``related agreements'' to include
certain letter agreements executed between Google, on the one hand, and
certain music publishers and the NMPA, on the other hand, on or around
the execution date of the settlement agreement. Google and NMPA
indicated they will ``lodge'' such letter agreements concurrently with
their Joint Notice of Lodging.\7\ Google and NMPA also indicated that
they do not believe that the letter agreements are substantively
related to the parties' settlement agreement, and that the letter
agreements simply concern Google's allocation practices to avoid double
[[Page 66978]]
payments arising from certain direct agreements.
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\7\ On October 7, 2022, Google and NMPA submitted ``Google and
NMPA's Joint Notice of Public Lodging'' which included public
versions of letter agreements.
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On October 17, 2022, the Judges issued ``Order 64 to File
Settlement Agreements and Provide Certification'' (Order 64), which
clarified the scope of Order 63 and ordered the Settling Parties to:
(1) file (not ``lodge'') any supplemental written agreements
between Service Participants, on the one hand, and Copyright Owners
and/or their affiliates, including copyright owners that they
represented in this proceeding, on the other hand, that represent
consideration for, or are contractually related to, the Settlement
referenced in the Motion.
(2) file a detailed description of any supplemental oral
agreements between Service Participants, on the one hand, and
Copyright Owners and/or their affiliates, including copyright owners
that they represented in this proceeding, on the other hand, that
represent consideration for, or are contractually related to the
Settlement referenced in the Motion, through a certification or
certifications from individuals with direct knowledge of any such
supplemental oral agreements.
(3) file a certification or certifications from a person or
persons with first-hand knowledge stating that there are no other
agreements, written or oral, beyond the Settlement, the Settlement
Agreement and the filed supplemental written or oral agreements
responsive to this order.
(4) explain in a supplemental brief why the remaining restricted
portions of the Joint Response, apart from Exhibit A, from which the
Restricted designation has been removed, would, if disclosed,
interfere with the ability of the Producer to obtain like
information in the future.
On October 26, 2022, the Settling Parties filed a ``Joint
Response to Order 64''
(Joint Response 2).
In response to item #1 above, Joint Response 2 noted that the
October 6, 2022, Joint Submission removed the Restricted designation to
the ``Settlement Agreement'' and attached it within Exhibit A to Joint
Response 2. In Joint Response 2, Google and NMPA also filed the
aforementioned letter agreements as Exhibit B to Joint Submission 2.\8\
Joint Response 2 also included the Settling Parties' representation
that other than the Settlement Agreement itself, there are no other
agreements responsive to Order 64.
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\8\ Joint Response 2 reiterated Google and NMPA's view that the
letter agreements are not substantively related to the parties'
settlement agreement, and that the letter agreements simply concern
Google's allocation practices to avoid double payments arising from
certain direct agreements
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In response to item #2 above, Joint Response 2 stated that there
are no supplemental oral agreements responsive to Order 64.
In response to item #3 above, Joint Response 2 included Exhibits C-
1 through C-7, certifications from a representative of each Party with
first-hand knowledge of the Settlement Agreement and negotiations,
which collectively attest that there are no other agreements, written
or oral, responsive to Order 64 beyond the agreements provided as part
of Joint Response 2.
In response to item #4 above, Joint Response 2 noted that the
Settling Parties do not believe that there is any reason why any
restricted portions of the Joint Response need to remain restricted.
Therefore, the Settling Parties filed, concurrently with Joint Response
2, a revised version of the Joint Response that removes all redactions,
entitled ``[Revised to Remove Redactions] Joint Response to George
Johnson's Motion to Compel Production of Settlement and CRB Order 63.''
(Revised Joint Response).
The Settling Parties offered that through Joint Response 2, and the
related submissions referenced therein, the Judges have all materials
necessary to publish the proposed rates and terms for public comment.
The Settling Parties noted the necessary public comment and objection
period, as well as potential consequences to the industry if rates and
terms are not effective in time to be operationalized for the beginning
of 2023, and therefore request that the Judges publish the proposed
rates and terms for public comment as soon as possible.\9\ Proposed
regulations implementing the settlement are attached to Joint Response
2.
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\9\ The Judges are aware of the participants' and the public's
interest in timely implementation of rates and terms, and note that
the submission of partial agreements and related materials as
restricted has been a source of unfortunate delay in consideration
of the proposed settlement of statutory royalty rates and terms for
subpart C and D configurations.
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Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to
adopt rates and terms negotiated by ``some or all of the participants
in a proceeding at any time during the proceeding'' provided they are
submitted to the Judges for approval. This section states that the
Judges shall (1) provide an opportunity to comment on the agreement to
non-participants who would be bound by the terms, rates, or other
determination set by the agreement; and (2) provide an opportunity to
comment and to object to participants in the proceeding who would be
bound by the terms, rates, or other determination set by the agreement.
See section 801(b)(7)(A). The Judges may decline to adopt the agreement
as a basis for statutory terms and rates for participants not party to
the agreement if any participant objects and the Judges conclude that
the agreement does not provide a reasonable basis for setting statutory
terms or rates. Id.
Having reviewed Joint Response 2, its attachments, and the related
submissions referenced therein, the Judges find that Joint Response 2,
Exhibit A, sub-exhibit A (referenced therein as the ``Settlement
Agreement'' and ``Proposed Regulations'') includes ``the agreement''
for purposes of Section 801(b)(7)(A). The portions of Joint Response 2
Exhibit A, sub-exhibit A referred to as ``Settlement Agreement'' and
``Proposed Regulations'' may be found on pages 9-17 of 89 and 19-34 of
89 of Joint Response 2, (eCRB No. 27290). The regulatory amendments
that adoption of the proposed settlement would entail are reflected in
the Proposed Regulations portion of this document.\10\
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\10\ The docket for this proceeding, including documents
referenced in this document, may be accessed via the Electronic
filing system eCRB at <a href="https://app.crb.gov">https://app.crb.gov</a> and perform a case search
for docket 21-CRB-0001-PR (2023-2027).
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If the Judges adopt rates and terms reached pursuant to a
negotiated settlement, those rates and terms are binding on all
copyright owners of musical works and those using the musical works in
the activities described in the proposed regulations.
The Judges solicit comments and objections from participants on
whether they should adopt the proposed regulations as statutory rates
and terms relating to the making and distribution of phonorecords of
nondramatic musical works.
Comments and objections regarding the rates and terms must be
submitted no later than December 7, 2022.
List of Subjects in 37 CFR Part 385
Copyright, Phonorecords, Recordings.
Proposed Regulations
For the reasons set forth in the preamble, the Copyright Royalty
Judges propose to amend 37 CFR part 385 as follows:
PART 385--RATES AND TERMS FOR USE OF NONDRAMATIC MUSICAL WORKS IN
THE MAKING AND DISTRIBUTING OF PHYSICAL AND DIGITAL PHONORECORDS
0
1. The authority citation for part 385 continues to read as follows:
Authority: 17 U.S.C. 115, 801(b)(1), 804(b)(4).
0
2. Revise subpart A to read as follows:
[[Page 66979]]
Subpart A--Regulations of General Application
Sec.
385.1 General.
385.2 Definitions.
385.3 Late payments.
385.4 Recordkeeping for promotional or free trial non-royalty-
bearing uses.
Subpart A--Regulations of General Application
Sec. 385.1 General.
(a) Scope. This part establishes rates and terms of royalty
payments for the use of nondramatic musical works in making and
distributing of physical and digital phonorecords in accordance with
the provisions of 17 U.S.C. 115. This subpart contains regulations of
general application to the making and distributing of phonorecords
subject to the section 115 license.
(b) Legal compliance. Licensees relying on the compulsory license
detailed in 17 U.S.C. 115 shall comply with the requirements of that
section, the rates and terms of this part, and any other applicable
regulations. This part describes rates and terms for the compulsory
license only.
(c) Interpretation. This part is intended only to set rates and
terms for situations in which the exclusive rights of a Copyright Owner
are implicated and a compulsory license pursuant to 17 U.S.C. 115 is
obtained. Neither this part nor the act of obtaining a license under 17
U.S.C. 115 is intended to express or imply any conclusion as to the
circumstances in which a user must obtain a compulsory license pursuant
to 17 U.S.C. 115.
(d) Relationship to voluntary agreements. The rates and terms of
any license agreements entered into by Copyright Owners and Licensees
relating to use of musical works within the scope of those license
agreements shall apply in lieu of the rates and terms of this part.
Sec. 385.2 Definitions.
Unless otherwise specified, capitalized terms in this part shall
have the same meaning given to them in 17 U.S.C. 115(e). For the
purposes of this part, the following definitions apply:
Accounting Period means the monthly period specified in 17 U.S.C.
115(c)(2)(I) and in 17 U.S.C. 115(d)(4)(A)(i), and any related
regulations, as applicable.
Active Subscriber means an End User of a Bundled Subscription
Offering who has made at least one Play during the Accounting Period.
Affiliate means an entity controlling, controlled by, or under
common control with another entity, except that an affiliate of a Sound
Recording Company shall not include a Copyright Owner to the extent it
is engaging in business as to musical works.
Artificial Accounts are accounts that are disabled or terminated
for having engaged in User Manipulation or other fraudulent activity
and for which any subscription revenues are refunded or otherwise not
received by the Service Provider.
Bundle means a combination of a Subscription Offering providing
Eligible Interactive Streams and/or Eligible Limited Downloads and one
or more other products or services having more than token value,
purchased by End Users in a single transaction (e.g., where End Users
make a single payment without separate pricing for the Subscription
Offering component).
Bundled Subscription Offering means a Subscription Offering
providing Eligible Interactive Streams and/or Eligible Limited
Downloads included within a Bundle.
Copyright Owner(s) are nondramatic musical works copyright owners
who are entitled to royalty payments made under this part pursuant to
the compulsory license under 17 U.S.C. 115.
Digital Phonorecord Delivery has the same meaning as in 17 U.S.C.
115(e)(10).
Eligible Interactive Stream means a Stream that is an Interactive
Stream as defined in 17 U.S.C. 115(e)(13).
Eligible Limited Download means a Limited Download as defined in 17
U.S.C. 115(e)(16) that is only accessible for listening for--
(1) An amount of time not to exceed one month from the time of the
transmission (unless the Licensee, in lieu of retransmitting the same
sound recording as another Eligible Limited Download, separately, and
upon specific request of the End User made through a live network
connection, reauthorizes use for another time period not to exceed one
month), or in the case of a subscription plan, a period of time
following the end of the applicable subscription no longer than a
subscription renewal period or three months, whichever is shorter; or
(2) A number of times not to exceed 12 (unless the Licensee, in
lieu of retransmitting the same sound recording as another Eligible
Limited Download, separately, and upon specific request of the End User
made through a live network connection, reauthorizes use of another
series of 12 or fewer plays), or in the case of a subscription
transmission, 12 times after the end of the applicable subscription.
End User means each unique person that:
(1) Pays a subscription fee for an Offering during the relevant
Accounting Period; or
(2) Makes at least one Play during the relevant Accounting Period.
Family Plan means a discounted Subscription Offering to be shared
by up to six members of the same family or household for a single
subscription price.
Free Trial Offering means a subscription to a Service Provider's
transmissions of sound recordings embodying musical works when--
(1) Neither the Service Provider, the Sound Recording Company, the
Copyright Owner, nor any person or entity acting on behalf of or in
lieu of any of them receives any monetary consideration for the
Offering;
(2) The usage does not exceed 45 days per subscriber per one-year
period, which days may be nonconsecutive;
(3) In connection with the Offering, the Service Provider complies
with the recordkeeping requirements in Sec. 385.4 or superseding
Copyright Office recordkeeping requirements;
(4) The Free Trial Offering is made available to the End User free
of any charge; and
(5) The Service Provider offers the End User periodically during
the trial an opportunity to subscribe to, and/or auto-renews the End
User into, a non-Free Trial Offering of the Service Provider.
GAAP means U.S. Generally Accepted Accounting Principles in effect
at the relevant time, except that if the U.S. Securities and Exchange
Commission permits or requires entities with securities that are
publicly traded in the U.S. to employ International Financial Reporting
Standards in lieu of Generally Accepted Accounting Principles, then
that entity may employ International Financial Reporting Standards as
``GAAP'' for purposes of this subpart.
Licensee means any entity availing itself of the compulsory license
under 17 U.S.C. 115 to use copyrighted musical works in the making or
distributing of physical or digital phonorecords.
Licensed Activity as the term is used in subparts C and D of this
part, means Covered Activity, under voluntary or statutory license, in
the form of Eligible Interactive Streams, Eligible Limited Downloads,
and Restricted Downloads.
Locker Service means an Offering providing digital access to sound
recordings of musical works in the form of Eligible Interactive
Streams, Permanent Downloads, Restricted Downloads or Ringtones where
the Service Provider has reasonably
[[Page 66980]]
determined that the End User has purchased or is otherwise in
possession of the subject phonorecords of the applicable sound
recording prior to the End User's first request to use the sound
recording via the Locker Service. The term Locker Service does not mean
any part of a Service Provider's products otherwise meeting this
definition, but as to which the Service Provider has not obtained a
section 115 license.
Mixed Service Bundle means an Offering providing Licensed Activity
consisting of Eligible Interactive Streams or Eligible Limited
Downloads that meets all of the following criteria:
(1) The Offering is made available to End Users only in combination
(i.e., the Offering is not available on a standalone basis) with one or
more products or services (including services subject to other
subparts) of more than token value as part of one transaction for which
End Users make a payment without receiving pricing for the Offering
separate from the product(s) or service(s) with which it is made
available.
(2) The Offering is made available by a Service Provider that also
offers End Users a separate, standalone Subscription Offering.
(3) The Offering offers End Users less functionality relative to
that separate, standalone Subscription Offering. Such lesser
functionality may include, but is not limited to, limitations on the
ability of End Users to choose to listen to specific sound recordings
on request or a limited catalog of sound recordings.
(4) Where an Offering could qualify or be considered as either a
Bundled Subscription Offering or a Mixed Service Bundle, such Offering
shall be deemed a Mixed Service Bundle for the purpose of calculating
and paying royalties under subpart C of this part.
Music Bundle means two or more of physical phonorecords, Permanent
Downloads or Ringtones delivered as part of one transaction (e.g.,
download plus ringtone, CD plus downloads). In the case of Music
Bundles containing one or more physical phonorecords, the Service
Provider must sell the physical phonorecord component of the Music
Bundle under a single catalog number, and the musical works embodied in
the Digital Phonorecord Delivery configurations in the Music Bundle
must be the same as, or a subset of, the musical works embodied in the
physical phonorecords; provided that when the Music Bundle contains a
set of Digital Phonorecord Deliveries sold by the same Sound Recording
Company under substantially the same title as the physical phonorecord
(e.g., a corresponding digital album), the Service Provider may include
in the same bundle up to 5 sound recordings of musical works that are
included in the stand-alone version of the set of digital phonorecord
deliveries but not included on the physical phonorecord. In addition,
the Service Provider must permanently part with possession of the
physical phonorecord or phonorecords it sells as part of the Music
Bundle. In the case of Music Bundles composed solely of digital
phonorecord deliveries, the number of digital phonorecord deliveries in
either configuration cannot exceed 20, and the musical works embodied
in each configuration in the Music Bundle must be the same as, or a
subset of, the musical works embodied in the configuration containing
the most musical works.
Offering means a Service Provider's engagement in Licensed Activity
covered by subparts C and D of this part.
Paid Locker Service means a Locker Service for which the End User
pays a fee to the Service Provider.
Performance Royalty means the license fee payable for the right to
perform publicly musical works in any of the forms covered by subparts
C and D this part.
Permanent Download has the same meaning as in 17 U.S.C. 115(e)(24).
Play means an Eligible Interactive Stream, or a play of an Eligible
Limited Download, lasting 30 seconds or more and, if a track lasts in
its entirety under 30 seconds, an Eligible Interactive Stream or a play
of an Eligible Limited Download of the entire duration of the track. A
Play excludes an Eligible Interactive Stream or a play of an Eligible
Limited Download caused by User Manipulation.
Promotional Offering means a digital transmission of a sound
recording, in the form of an Eligible Interactive Stream or an Eligible
Limited Download, embodying a musical work, the primary purpose of
which is to promote the sale or other paid use of that sound recording
or to promote the artist performing on that sound recording and not to
promote or suggest promotion or endorsement of any other good or
service and
(1) A Sound Recording Company is lawfully distributing the sound
recording through established retail channels or, if the sound
recording is not yet released, the Sound Recording Company has a good
faith intention to lawfully distribute the sound recording or a
different version of the sound recording embodying the same musical
work;
(2) The Service Provider is in compliance with the recordkeeping
requirements of Sec. 385.4 or superseding Copyright Office
recordkeeping requirements;
(3) For Eligible Interactive Streams of segments of sound
recordings not exceeding 90 seconds, the Sound Recording Company
delivers or authorizes delivery of the segments for promotional
purposes and neither the Service Provider nor the Sound Recording
Company creates or uses a segment of a sound recording in violation of
17 U.S.C. 106(2) or 115(a)(2);
(4) The Promotional Offering is made available to an End User free
of any charge; and
(5) The Service Provider provides to the End User at the same time
as the Promotional Offering Stream an opportunity to purchase the sound
recording or the Service Provider periodically offers End Users the
opportunity to subscribe to a paid Offering of the Service Provider.
Purchased Content Locker Service means a Locker Service made
available to End User purchasers of Permanent Downloads, Ringtones, or
physical phonorecords at no incremental charge above the otherwise
applicable purchase price of the Permanent Downloads, Ringtones, or
physical phonorecords acquired from a qualifying seller. With a
Purchased Content Locker Service, an End User may receive one or more
additional phonorecords of the purchased sound recordings of musical
works in the form of Permanent Downloads or Ringtones at the time of
purchase, or subsequently have digital access to the purchased sound
recordings of musical works in the form of Eligible Interactive
Streams, additional Permanent Downloads, Restricted Downloads, or
Ringtones.
(1) A qualifying seller for purposes of this definition is the
entity operating the Service Provider, including Affiliates,
predecessors, or successors in interest, or--
(i) In the case of Permanent Downloads or Ringtones, a seller
having a legitimate connection to the locker service provider pursuant
to one or more written agreements (including that the Purchased Content
Locker Service and Permanent Downloads or Ringtones are offered through
the same third party); or
(ii) In the case of physical phonorecords,
(A) The seller of the physical phonorecord has an agreement with
the Purchased Content Locker Service provider establishing an
integrated offer that creates a consumer experience commensurate with
having the same Service Provider both sell the physical
[[Page 66981]]
phonorecord and offer the integrated locker service; or
(B) The Service Provider has an agreement with the entity offering
the Purchased Content Locker Service establishing an integrated offer
that creates a consumer experience commensurate with having the same
Service Provider both sell the physical phonorecord and offer the
integrated locker service.
(2) [Reserved]
Relevant Page means an electronic display (for example, a web page
or screen) from which a Service Provider's Offering consisting of
Eligible Interactive Streams or Eligible Limited Downloads is directly
available to End Users, but only when the Offering and content directly
relating to the Offering (e.g., an image of the artist, information
about the artist or album, reviews, credits, and music player controls)
comprises 75% or more of the space on that display, excluding any space
occupied by advertising. An Offering is directly available to End Users
from a page if End Users can receive sound recordings of musical works
(in most cases this will be the page on which the Eligible Limited
Download or Eligible Interactive Stream takes place).
Restricted Download means a Digital Phonorecord Delivery in a form
that cannot be retained and replayed on a permanent basis. The term
Restricted Download includes an Eligible Limited Download.
Ringtone means a phonorecord of a part of a musical work
distributed as a Digital Phonorecord Delivery in a format to be made
resident on a telecommunications device for use to announce the
reception of an incoming telephone call or other communication or
message or to alert the receiver to the fact that there is a
communication or message.
Service Provider means that entity governed by subparts C and D of
this part, which might or might not be the Licensee, that with respect
to the section 115 license
(1) Contracts with or has a direct relationship with End Users or
otherwise controls the content made available to End Users;
(2) Is able to report fully on Service Provider Revenue from the
provision of musical works embodied in phonorecords to the public, and
to the extent applicable, verify Service Provider Revenue through an
audit; and
(3) Is able to report fully on its usage of musical works, or
procure such reporting and, to the extent applicable, verify usage
through an audit.
Service Provider Revenue. (1) Subject to paragraphs (2) through (5)
of this definition and subject to GAAP, Service Provider Revenue shall
mean, for each Offering subject to subpart C of this part:
(i) All revenue from End Users recognized by a Service Provider for
the provision of the Offering;
(ii) All revenue recognized by a Service Provider by way of
sponsorship and commissions as a result of the inclusion of third-party
``in-stream'' or ``in-download'' advertising as part of the Offering,
i.e., advertising placed immediately at the start or end of, or during
the actual delivery of, a musical work, by way of Eligible Interactive
Streams or Eligible Limited Downloads; and
(iii) All revenue recognized by the Service Provider, including by
way of sponsorship and commissions, as a result of the placement of
third-party advertising on a Relevant Page of the Service Provider or
on any page that directly follows a Relevant Page leading up to and
including the Eligible Limited Download or Eligible Interactive Stream
of a musical work; provided that, in case more than one Offering is
available to End Users from a Relevant Page, any advertising revenue
shall be allocated between or among the Service Providers on the basis
of the relative amounts of the page they occupy.
(2) Service Provider Revenue shall:
(i) Include revenue recognized by the Service Provider, or by any
associate, Affiliate, agent, or representative of the Service Provider
in lieu of its being recognized by the Service Provider; and
(ii) Include the value of any barter or other nonmonetary
consideration; and
(iii) Except as expressly detailed in this part, not be subject to
any other deduction or set-off other than refunds to End Users for
Offerings that the End Users were unable to use because of technical
faults in the Offering or other bona fide refunds or credits issued to
End Users in the ordinary course of business.
(3) Service Provider Revenue shall exclude revenue derived by the
Service Provider solely in connection with activities other than
Offering(s), whereas advertising or sponsorship revenue derived in
connection with any Offering(s) shall be treated as provided in
paragraphs (1), (2), and (4) of this definition.
(4) For purposes of paragraph (1) of this definition, advertising
or sponsorship revenue shall be reduced by the actual cost of obtaining
that revenue, not to exceed 15%.
(5) In instances in which a Service Provider provides a Bundled
Subscription Offering to End Users, the revenue from End Users deemed
to be recognized by the Service Provider for the Offering for the
purpose of paragraph (1) of this definition of Service Provider Revenue
shall be as follows:
(i) For Bundled Subscription Offerings where both each component of
the Bundle is a product or service of the Service Provider (including
Affiliates) and the Service Provider (including Affiliates) makes the
Bundle available to End Users directly, then the revenue from End Users
deemed to be recognized by the Service Provider for the purpose of
paragraph (1) of this definition shall be the aggregate of the retail
price paid for the Bundle (i.e., all components for one retail price)
multiplied by a fraction where the numerator is the standalone retail
price of the Subscription Offering component in the Bundle and the
denominator is the sum of the standalone retail prices of each of the
components in the Bundle (e.g. if a Service Provider sells the
Subscription Offering component on a standalone basis for $10/month and
a separate product and/or service on a standalone basis for $5/month,
then the fraction shall be $10 divided by $15, i.e. \2/3\, resulting in
Service Provider Revenue of $8,000 if the aggregate of the retail price
paid for the Bundle is $12,000).
(ii) For Bundled Subscription Offerings where either one or more
components of the Bundle are not products or services of the Service
Provider (including Affiliates) or the Service Provider (including
Affiliates) does not make the Bundle available to End Users directly,
then the revenue from End Users deemed to be recognized by the Service
Provider for the purpose of paragraph (1) of this definition shall be
the revenue recognized by the Service Provider from the Bundle
multiplied by a fraction where the numerator is the standalone retail
price of the Subscription Offering component in the Bundle and the
denominator is the sum of the standalone retail prices of each of the
components of the Bundle. Notwithstanding the preceding sentence, where
the Service Provider does not recognize revenue for one or more
components of the Bundle, then the standalone price(s) of the
component(s) for which revenue is not recognized shall not be included
in the calculation of the denominator of the fraction described in this
sub-paragraph (e.g., where a Bundle of three services, each with a
standalone price of $20/month, sells for $50/month, and the Service
Provider recognizes $30,000 of revenue from the provision of only two
of those services, one of which is a Subscription Offering, then the
fraction
[[Page 66982]]
shall be $20 divided by $40, i.e. \1/2\, resulting in Service Provider
Revenue of $15,000).
(iii) For the calculations in paragraphs (5)(i) and (ii) of this
definition, in the event that there is no standalone published price
for a component of the Bundle, then the Service Provider shall use the
average standalone published price for End Users for the most closely
comparable product or service in the U.S. or, if more than one
comparable exists, the average of standalone prices for comparables. If
no reasonably comparable product or service exists in the U.S., then
the Service Provider may use another good faith, reasonable measure of
the market value of the component.
Sound Recording Company means a person or entity that:
(1) Is a copyright owner of a sound recording embodying a musical
work;
(2) In the case of a sound recording of a musical work fixed before
February 15, 1972, has rights to the sound recording, under chapter 14
of title 17, United States Code, that are equivalent to the rights of a
copyright owner of a sound recording of a musical work under title 17,
United States Code;
(3) Is an exclusive Licensee of the rights to reproduce and
distribute a sound recording of a musical work; or
(4) Performs the functions of marketing and authorizing the
distribution of a sound recording of a musical work under its own
label, under the authority of a person identified in paragraphs (1)
through (3) of this definition.
Standalone Limited Offering means a Subscription Offering providing
Eligible Interactive Streams or Eligible Limited Downloads for which--
(1) An End User cannot choose to listen to a particular sound
recording (i.e., the Service Provider does not provide Eligible
Interactive Streams of individual recordings that are on-demand, and
Eligible Limited Downloads are rendered only as part of programs rather
than as individual recordings that are on-demand); or
(2) The particular sound recordings available to the End User over
a period of time are substantially limited relative to Service
Providers in the marketplace providing access to a comprehensive
catalog of recordings (e.g., a product limited to a particular genre or
permitting Eligible Interactive Streams only from a monthly playlist
consisting of a limited set of recordings).
Standalone Non-Portable Subscription Offering--Mixed means a
Subscription Offering through which an End User can listen to sound
recordings either in the form of Eligible Interactive Streams or
Eligible Limited Downloads but only from a non-portable device to which
those Eligible Interactive Streams or Eligible Limited Downloads are
originally transmitted.
Standalone Non-Portable Subscription Offering--Streaming Only means
a Subscription Offering through which an End User can listen to sound
recordings only in the form of Eligible Interactive Streams and only
from a non-portable device to which those Eligible Interactive Streams
are originally transmitted while the device has a live network
connection.
Standalone Portable Subscription Offering means a Subscription
Offering through which an End User can listen to sound recordings in
the form of Eligible Interactive Streams or Eligible Limited Downloads
from a portable device.
Stream means the digital transmission of a sound recording of a
musical work to an End User--
(1) To allow the End User to listen to the sound recording, while
maintaining a live network connection to the transmitting service,
substantially at the time of transmission, except to the extent that
the sound recording remains accessible for future listening from a
Streaming Cache Reproduction;
(2) Using technology that is designed such that the sound recording
does not remain accessible for future listening, except to the extent
that the sound recording remains accessible for future listening from a
Streaming Cache Reproduction; and
(3) That is subject to licensing as a public performance of the
musical work.
Streaming Cache Reproduction means a reproduction of a sound
recording embodying a musical work made on a computer or other
receiving device by a Service Provider solely for the purpose of
permitting an End User who has previously received a Stream of that
sound recording to play the sound recording again from local storage on
the computer or other device rather than by means of a transmission;
provided that the End User is only able to do so while maintaining a
live network connection to the Service Provider, and the reproduction
is encrypted or otherwise protected consistent with prevailing industry
standards to prevent it from being played in any other manner or on any
device other than the computer or other device on which it was
originally made.
Student Plan means a discounted Subscription Offering available on
a limited basis to students.
Subscription Offering means an Offering for which End Users are
required to pay a fee to have access to the Offering for defined
subscription periods of 3 years or less (in contrast to, for example, a
service where the basic charge to users is a payment per download or
per play), whether the End User makes payment for access to the
Offering on a standalone basis or as part of a Bundle.
TCC means the total amount expensed by a Service Provider or any of
its Affiliates in accordance with GAAP for rights to make Eligible
Interactive Streams or Eligible Limited Downloads of a musical work
embodied in a sound recording through the Service Provider for the
Accounting Period, which amount shall equal the Applicable
Consideration for those rights at the time the Applicable Consideration
is properly recognized as an expense under GAAP. As used in this
definition, ``Applicable Consideration'' means anything of value given
for the identified rights to undertake the Licensed Activity,
including, without limitation, ownership equity, monetary advances,
barter or any other monetary and/or nonmonetary consideration, whether
that consideration is conveyed via a single agreement, multiple
agreements and/or agreements that do not themselves authorize the
Licensed Activity but nevertheless provide consideration for the
identified rights to undertake the Licensed Activity, and including any
value given to an Affiliate of a Sound Recording Company for the rights
to undertake the Licensed Activity. Value given to a Copyright Owner of
musical works that is controlling, controlled by, or under common
control with a Sound Recording Company for rights to undertake the
Licensed Activity shall not be considered value given to the Sound
Recording Company. Notwithstanding the foregoing, Applicable
Consideration shall not include in-kind promotional consideration given
to a Sound Recording Company (or Affiliate thereof) that is used to
promote the sale or paid use of sound recordings embodying musical
works or the paid use of music services through which sound recordings
embodying musical works are available where the in-kind promotional
consideration is given in connection with a use that qualifies for
licensing under 17 U.S.C. 115.
User Manipulation means any behavior that artificially distorts the
number of Plays, including, but not limited to, the use of manual
(e.g., click farms) or automated (e.g., bots) means.
Sec. 385.3 Late payments.
A Licensee shall pay a late fee of 1.5% per month, or the highest
lawful rate,
[[Page 66983]]
whichever is lower, for any payment owed to a Copyright Owner and
remaining unpaid after the due date established in 17 U.S.C.
115(c)(2)(I) or 17 U.S.C. 115(d)(4)(A)(i), as applicable and detailed
in part 210 of this title. Late fees shall accrue from the due date
until the Copyright Owner receives payment.
Sec. 385.4 Recordkeeping for promotional or free trial non-royalty-
bearing uses.
(a) Effect of Copyright Office recordkeeping regulations. Unless
and until the Copyright Office promulgates superseding regulations
concerning recordkeeping for promotional or free trial non-royalty-
bearing uses subject to this part, the recordkeeping provisions in this
section shall apply to Service Providers.
(b) General. A Service Provider transmitting a sound recording
embodying a musical work subject to 17 U.S.C. 115 and subparts C and D
of this part and claiming a Promotional Offering or Free Trial Offering
zero royalty rate shall keep complete and accurate contemporaneous
written records of making or authorizing Eligible Interactive Streams
or Eligible Limited Downloads, including the sound recordings and
musical works involved, the artists, the release dates of the sound
recordings, a brief statement of the promotional activities authorized,
the identity of the Offering or Offerings for which the zero-rate is
authorized (including the internet address if applicable), and the
beginning and end date of each zero rate Offering.
(c) Retention of records. A Service Provider claiming zero rates
shall maintain the records required by this section for no less time
than the Service Provider maintains records of royalty-bearing uses
involving the same types of Offerings in the ordinary course of
business, but in no event for fewer than five years from the conclusion
of the zero rate Offerings to which they pertain.
(d) Availability of records. If the Mechanical Licensing Collective
requests information concerning zero rate Offerings, the Service
Provider shall respond to the request within an agreed, reasonable
time.
0
3. Revise subpart C, consisting of Sec. Sec. 385.20 and 385.21, to
read as follows:
Subpart C--Eligible Interactive Streaming, Eligible Limited
Downloads, Standalone Limited Offerings, Mixed Service Bundles,
Bundled Subscription Offerings, Locker Services, and Other Delivery
Configurations
Sec. 385.20 Scope.
This subpart establishes rates and terms of royalty payments for
Eligible Interactive Streams and Eligible Limited Downloads of musical
works, and other reproductions or distributions of musical works
through Standalone Limited Offerings, Mixed Service Bundles, Bundled
Subscription Offerings, Paid Locker Services, and Purchased Content
Locker Services provided through subscription and nonsubscription
digital music Service Providers in accordance with the provisions of 17
U.S.C. 115, exclusive of Offerings subject to subpart D of this part.
Sec. 385.21 Royalty rates and calculations.
(a) Applicable royalty. Licensees that engage in Licensed Activity
covered by this subpart pursuant to 17 U.S.C. 115 shall pay royalties
therefor that are calculated as provided in this section.
(b) Rate calculation. Royalty payments for Licensed Activity in
this subpart shall be calculated as provided in this paragraph (b). If
a Service Provider makes available different Offerings, royalties must
be calculated separately with respect to each Offering taking into
consideration Service Provider Revenue, TCC, subscribers, Plays,
expenses, and Performance Royalties associated with each Offering. A
Service Provider shall not be required to subject the same portion of
Service Provider Revenue, TCC, subscribers, Plays, expenses, or
Performance Royalties to the calculation of royalties for more than one
Offering in an Accounting Period.
(1) Step 1: Calculate the all-in royalty for the Offering. For each
Accounting Period, the all-in royalty for each Offering in this subpart
with the exception of Mixed Service Bundles shall be the greater of
{a{time} the applicable percent of Service Provider Revenue, as set
forth in Table 1 to this paragraph (b)(1), and {b{time} the result of
the TCC Prong Calculation for the respective type of Offering as set
forth in Table 2 to this paragraph (b)(1). For Mixed Service Bundles,
the all-in royalty shall be the result of the TCC Prong Calculation as
set forth in table 2.
Table 1 to Paragraph (b)(1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Royalty year 2023 2024 2025 2026 2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of Service Provider Revenue................................ 15.1 15.2 15.25 15.3 15.35
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 2 to Paragraph (b)(1)
------------------------------------------------------------------------
Type of offering TCC prong calculation
------------------------------------------------------------------------
Standalone Non-Portable Subscription The lesser of (i) 26.2% of TCC
Offering--Streaming Only. for the Accounting Period or
(ii) the aggregate amount of
60 cents per subscriber for
the Accounting Period.
Standalone Non-Portable Subscription The lesser of (i) 26.2% of TCC
Offering--Mixed. for the Accounting Period or
(ii) the aggregate amount of
60 cents per subscriber for
the Accounting Period.
Standalone Portable Subscription The lesser of (i) 26.2% of TCC
Offering. for the Accounting Period or
(ii) the aggregate amount of
$1.10 per subscriber for the
Accounting Period.
Free nonsubscription/ad-supported 26.2% of TCC for the Accounting
services free of any charge to the End Period.
User.
Bundled Subscription Offering.......... 24.5% of TCC for the Accounting
Period.
Mixed Service Bundle................... 26.2% of TCC for the Accounting
Period.
Purchased Content Locker Service....... 26.2% of TCC for the Accounting
Period.
Standalone Limited Offering............ 26.2% of TCC for the Accounting
Period.
Paid Locker Service.................... 26.2% of TCC for the Accounting
Period.
------------------------------------------------------------------------
[[Page 66984]]
(2) Step 2: Subtract applicable Performance Royalties. From the
amount determined in step 1 in paragraph (b)(1) of this section, for
each Offering of the Service Provider, subtract the total amount of
Performance Royalties that the Service Provider has expensed or will
expense pursuant to public performance licenses in connection with uses
of musical works through that Offering during the Accounting Period
that constitute Licensed Activity. Although this amount may be the
total of the Service Provider's payments for that Offering for the
Accounting Period, it will be less than the total of the performance
royalties if the Service Provider is also engaging in public
performance of musical works that does not constitute Licensed
Activity. In the case in which the Service Provider is also engaging in
the public performance of musical works that does not constitute
Licensed Activity, the amount to be subtracted for Performance
Royalties shall be the amount allocable to Licensed Activity uses
through the relevant Offering as determined in relation to all uses of
musical works for which the Service Provider pays performance royalties
for the Accounting Period. The Service Provider shall make this
allocation on the basis of Plays of musical works, provided that if the
Service Provider is not capable of tracking Play information, including
because of bona fide limitations of the available technology for
Offerings of that nature or of devices useable with the Offering, the
allocation may instead be accomplished in a manner consistent with the
methodology used for making royalty payment allocations for the use of
individual sound recordings, and further provided that, if the Service
Provider is also not capable of utilizing a manner consistent with a
methodology used for making royalty payment allocations for the use of
individual sound recordings, the Service Provider may use an
alternative, good faith methodology that is reasonable, identifiable,
and implemented consistently.
(3) Step 3: Determine the payable royalty pool. The payable royalty
pool is the amount payable for the reproduction and distribution of all
musical works used by the Service Provider by virtue of its Licensed
Activity for a particular Offering during the Accounting Period. This
amount is the greater of:
(i) The result determined in step 2 in paragraph (b)(2) of this
section; and
(ii) The royalty floor (if any) resulting from the calculations
described in paragraph (d) of this section.
(4) Step 4: Calculate the per-work royalty allocation. This is the
amount payable for the reproduction and distribution of each musical
work used by the Service Provider by virtue of its Licensed Activity
through a particular Offering during the Accounting Period. To
determine this amount, the result determined in step 3 in paragraph
(b)(3) of this section must be allocated to each musical work used
through the Offering. The allocation shall be accomplished by the
Mechanical Licensing Collective by dividing the payable royalty pool
determined in step 3 for the Offering by the total number of Plays of
all musical works through the Offering during the Accounting Period
(other than Plays subject to subpart D of this part) to yield a per-
Play allocation, and multiplying that result by the number of Plays of
each musical work (other than Plays subject to subpart D of this part)
through the Offering during the Accounting Period. For purposes of
determining the per-work royalty allocation in all calculations under
step 4 in this paragraph (b)(4) only (i.e., after the payable royalty
pool has been determined), for sound recordings of musical works with a
playing time of over 5 minutes, each Play shall be counted as provided
in paragraph (c) of this section. Notwithstanding the foregoing, if the
Service Provider is not capable of tracking Play information because of
bona fide limitations of the available technology for Offerings of that
nature or of devices useable with the Offering, the per-work royalty
allocation may instead be accomplished in a manner consistent with the
methodology used for making royalty payment allocations for the use of
individual sound recordings.
(c) Overtime adjustment. For purposes of the calculations in step 4
in paragraph (b)(4) of this section only, for sound recordings of
musical works with a playing time of over 5 minutes, adjust the number
of Plays as follows.
(1) 5:01 to 6:00 minutes--Each Play = 1.2 Plays.
(2) 6:01 to 7:00 minutes--Each Play = 1.4 Plays.
(3) 7:01 to 8:00 minutes--Each Play = 1.6 Plays.
(4) 8:01 to 9:00 minutes--Each Play = 1.8 Plays.
(5) 9:01 to 10:00 minutes--Each Play = 2.0 Plays.
(6) For playing times of greater than 10 minutes, continue to add
0.2 Plays for each additional minute or fraction thereof.
(d) Royalty floors for specific types of Offerings. The following
royalty floors for use in step 3 in paragraph (b)(3) of this section
shall apply to the respective types of Offerings:
(1) Standalone non-portable Subscription Offerings--streaming only.
Except as provided in paragraphs (d)(4) and (6) of this section with
respect to Standalone Limited Offerings, in the case of a Subscription
Offering through which an End User can listen to sound recordings only
in the form of Eligible Interactive Streams and only from a non-
portable device to which those Eligible Interactive Streams are
originally transmitted while the device has a live network connection,
the royalty floor for use in step 3 in paragraph (b)(3) of this section
is the aggregate amount of 18 cents per subscriber per Accounting
Period.
(2) Standalone non-portable Subscription Offerings--mixed. Except
as provided in paragraphs (d)(4) and (6) of this section with respect
to Standalone Limited Offerings, in the case of a Subscription Offering
through which an End User can listen to sound recordings either in the
form of Eligible Interactive Streams or Eligible Limited Downloads but
only from a non-portable device to which those Eligible Interactive
Streams or Eligible Limited Downloads are originally transmitted, the
royalty floor for use in step 3 in paragraph (b)(3) of this section is
the aggregate amount of 36 cents per subscriber per Accounting Period.
(3) Standalone portable Subscription Offerings. Except as provided
in paragraphs (d)(4) and (6) of this section with respect to Standalone
Limited Offerings, in the case of a Subscription Offering through which
an End User can listen to sound recordings in the form of Eligible
Interactive Streams or Eligible Limited Downloads from a portable
device, the royalty floor for use in step 3 in paragraph (b)(3) of this
section is the aggregate amount of 60 cents per subscriber per
Accounting Period.
(4) Bundled Subscription Offerings. In the case of a Bundled
Subscription Offering, the royalty floor for use in step 3 in paragraph
(b)(3) of this section is the aggregate amount of 33 cents per
Accounting Period for each Active Subscriber. Notwithstanding the
foregoing, solely where the Licensed Activity provided as part of a
Bundled Subscription Offering would qualify as a Standalone Limited
Offering if offered on a standalone basis, the royalty floor for use in
step 3 in paragraph (b)(3) of this section is the aggregate amount of
25 cents per Accounting Period for each Active Subscriber.
(5) Mixed Service Bundles. In the case of a Mixed Service Bundle,
the royalty floor for use in step 3 in paragraph (b)(3) of this section
is the aggregate amount
[[Page 66985]]
of 25 cents per Accounting Period for each Active Subscriber.
(6) Other Offerings. A Standalone Limited Offering, a Paid Locker
Service, a Purchased Content Locker Service, and a free
nonsubscription/ad-supported service free of any charge to the End User
shall not be subject to a royalty floor in step 3 in paragraph (b)(3)
of this section.
(e) Computation of per-subscriber rates and royalty floors. For
purposes of this section, to determine the per-subscriber rates in step
1 in paragraph (b)(1) of this section and the royalty floors in step 3
in paragraph (b)(3) of this section, as applicable to any particular
Offering, the total number of subscribers for the Accounting Period
shall be calculated by taking all End Users who were subscribers for a
complete Accounting Period, prorating in the case of End Users who were
subscribers for only part of an Accounting Period (such proration may
take into account the subscriber's billing period), and deducting on a
prorated basis for End Users covered by an Offering subject to subpart
D of this part, except in the case of a Bundled Subscription Offering,
subscribers shall be determined with respect to Active Subscribers. The
product of the total number of subscribers for the Accounting Period
and the specified number of cents per subscriber (or Active Subscriber,
as the case may be) shall be used as the subscriber-based components of
the royalty calculation for the Accounting Period. A Family Plan
subscription shall be treated as 1.75 subscribers per Accounting
Period, prorated in the case of a Family Plan subscription in effect
for only part of an Accounting Period. A Student Plan subscription
shall be treated as 0.5 subscribers per Accounting Period, prorated in
the case of a Student Plan subscription in effect for only part of an
Accounting Period. A Bundled Subscription Offering containing a Family
Plan with one or more Active Subscriber(s) shall be treated as having
1.75 Active Subscribers. A Bundled Subscription Offering containing a
Student Plan with an Active Subscriber shall be treated as having 0.5
Active Subscribers. For the purposes of calculating per-subscriber
rates and royalty floors under this section, Artificial Accounts shall
not be counted as subscribers, Active Subscribers, or End Users.
0
4. Revise subpart D, consisting of Sec. Sec. 385.30 and 385.31, to
read as follows:
Subpart D--Promotional Offerings, Free Trial Offerings, and Certain
Purchased Content Locker Services
Sec. 385.30 Scope.
This subpart establishes rates and terms of royalty payments for
Promotional Offerings, Free Trial Offerings, and certain Purchased
Content Locker Services provided by subscription and nonsubscription
digital music Service Providers in accordance with the provisions of 17
U.S.C. 115.
Sec. 385.31 Royalty rates.
(a) Promotional Offerings. For Promotional Offerings of audio-only
Eligible Interactive Streams and Eligible Limited Downloads of sound
recordings embodying musical works that the Sound Recording Company
authorizes royalty-free to the Service Provider, the royalty rate is
zero.
(b) Free Trial Offerings. For Free Trial Offerings, the royalty
rate is zero.
(c) Certain Purchased Content Locker Services. For every Purchased
Content Locker Service for which the Service Provider receives no
monetary consideration, the royalty rate is zero.
David P. Shaw,
Chief Copyright Royalty Judge.
[FR Doc. 2022-24300 Filed 11-3-22; 4:15 pm]
BILLING CODE 1410-72-P
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</html>Indexed from Federal Register on November 7, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.