Rule2022-28316
Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords IV)
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 30, 2022
Effective
January 1, 2023
Issuing agencies
Library of CongressCopyright Royalty Board
Abstract
The Copyright Royalty Judges publish final regulations that set rates and terms applicable during the period from January 1, 2023 through December 31, 2027, for the statutory license for making and distributing phonorecords of nondramatic musical works.
Full Text
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<title>Federal Register, Volume 87 Issue 250 (Friday, December 30, 2022)</title>
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[Federal Register Volume 87, Number 250 (Friday, December 30, 2022)]
[Rules and Regulations]
[Pages 80448-80460]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-28316]
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LIBRARY OF CONGRESS
Copyright Royalty Board
37 CFR Part 385
[Docket No. 21-CRB-0001-PR (2023-2027)]
Determination of Royalty Rates and Terms for Making and
Distributing Phonorecords (Phonorecords IV)
AGENCY: Copyright Royalty Board, Library of Congress.
ACTION: Final rule.
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SUMMARY: The Copyright Royalty Judges publish final regulations that
set rates and terms applicable during the period from January 1, 2023
through December 31, 2027, for the statutory license for making and
distributing phonorecords of nondramatic musical works.
DATES:
Effective date: January 1, 2023.
Applicability date: These rates and terms are applicable during the
period from January 1, 2023 through December 31, 2027.
FOR FURTHER INFORMATION CONTACT: Anita Brown, Program Specialist, (202)
707-7658, <a href="/cdn-cgi/l/email-protection#4c2f3e2e0c20232f622b233a"><span class="__cf_email__" data-cfemail="385b4a5a7854575b165f574e">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Background
On August 31, 2022, the Copyright Royalty Judges (Judges) \1\
received a motion stating that several participants, (Settling
Parties),\2\ had reached a partial settlement (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 \3\)
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 \4\ 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 (eCRB 27222) \5\ (Motion). The Settling Parties 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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\1\ The Copyright Royalty Judges as an institution are
occasionally referenced herein as the Copyright Royalty Board (CRB).
\2\ 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 the music services, <a href="http://Amazon.com">Amazon.com</a>
Services LLC, Apple Inc., Google LLC, Pandora Media, LLC, and
Spotify USA Inc. (collectively, Service Participants) on the other
hand.
\3\ The definition of ``licensed activity,'' as the term is used
in subparts C and D of 37 CFR part 385, means the 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).
\4\ The Motion refers to the rate period as ``the full time
period addressed by the Proceeding.'' Motion at 1.
\5\ eCRB reference numbers may be used to access relevant
documents through the Copyright Royalty Board website.
\6\ The Settling Parties 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'' (eCRB 27253) (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'' (eCRB 27257) (Joint Response).\7\ 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''
(eCRB 27278) (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 did not completely and adequately respond to Order 63.
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\7\ George Johnson's ``Corrected Motion to Compel Parties to
Immediately Submit Actual Signed Proposed Settlement Agreement for
Subpart C with Any MOUs or Side Deals here in Phonorecords IV'' was
filed on September 20, 2022. (eCRB 27249).
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On October 3, 2022, Google and NMPA filed ``Google and NMPA's Joint
Notice of Lodging'' (eCRB 27275) (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. Google and NMPA also indicated that
they do not believe that the letter agreements are substantively
related to the Settlement, and that the letter agreements simply
concern Google's allocation practices to avoid double payments arising
from certain direct agreements. On October 7, 2022, Google and NMPA
submitted ``Google and NMPA's Joint Notice of Public Lodging'' which
included public versions of letter agreements. (eCRB 27279).
On October 17, 2022, the Judges issued ``Order 64 to File
Settlement Agreements and Provide Certification'' (eCRB 27284) (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.
[[Page 80449]]
On October 26, 2022, the Settling Parties filed a ``Joint Response
to Order 64'' (eCRB 27290) (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 Settlement,
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 of the
Settling Parties 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.''
(eCRB 27289) (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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On November 7, 2022, the Judges published the Settlement in the
Federal Register and requested comments from the public. 87 FR 66976
(Nov. 7, 2022). Comments were due by December 7, 2022. The Judges
received 20 comments from interested parties.\10\ One participant,
George Johnson (GEO) filed two comments opposing Settlement 2.\11\
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\10\ Word Collections' Eric Goldberg (eCRB 27370); Word
Collections' Jeff Price (eCRB 27369); Black Music Action Coalition
(BMAC) and Music Artists Coalition (MAC) (eCRB 27369); Songwriters
of North America (SONA) (eCRB 27367); The Recording Academy (eCRB
27365); The Music Publishers Association of the United States (MPA)
(eCRB 27364); Eugene ``Lambchops'' Curry (eCRB 27357); Songwriters
Guild of America, Inc. (SGA), Society of Composers & Lyricists
(SCL), and Music Creators North America (MCNA), and the individual
music creators Rick Carnes and Ashley Irwin (together Independent
Music Creators) (eCRB 27358); Helienne Lindvall, David Lowery and
Blake Morgan (together Writers) (eCRB 27356); Abby North (eCRB
27355); Gwendolyn Seale (eCRB 27354); Austin Texas Musicians (eCRB
27353); Michelle Shocked (eCRB 27352);; The Association of
Independent Music Publishers (AIMP) (eCRB 27349); Production Music
Association (PMA) (eCRB 27340); Ross Golan (eCRB 27336); William
Evans (eCRB 27333); The 100 Percenters (eCRB 27329); and The Church
Music Publishers Association of the United States (CMPA) (eCRB
27326); and Upward Bound Music Company (eCRB 27317).
\11\ On September 6, 2022, before the Judges published the
Settlement for comment, GEO filed a Response in Opposition to the
Subpart C Proposed Settlement (eCRB 27239) (GEO Opposition). On
November 7, 2022, after the Judges published the Settlement for
comment, GEO filed Comments and Second Response in Opposition to the
Subpart C Proposed Settlement in Phonorecords IV (eCRB 27371) (GEO
Second Opposition), which objects to adoption of the Settlement and
included in an Exhibit GEO's prior Response in Opposition to the
Subpart C Proposed Settlement. GEO also states his desire to join
(entirely or partially) with several commenters that oppose aspects
of the Settlement.
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Statutory Standard and Precedent
Pursuant to section 801(b)(7)(A) of the Copyright Act, the Judges
have the authority to adopt settlements between some or all of the
participants to a proceeding at any time during a proceeding. 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.
Regardless of the comments of interested parties or participants,
the Judges are not compelled to adopt a settlement to the extent it
includes provisions that are inconsistent with the statutory license.
See Review of Copyright Royalty Judges Determination, 74 FR 4537, 4540
(Jan. 26, 2009) (error for Judges to adopt settlement without threshold
determination of legality); see also Review of Copyright Royalty Judges
Determination, 73 FR 9143, 9146 (Feb. 19, 2008) (error not to set
separate rates as required under sections 112 and 114 when parties'
unopposed settlement combined rates in contravention of those statutory
sections).\12\
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\12\ The Register found that a ``paucity of evidence'' in the
record to support a determination of separate rates for the separate
licenses ``does not dispatch the . . . Judges' statutory
obligations.'' Review of Copyright Royalty Judges Determination, 73
FR 9143, 9145 (Feb. 19, 2008). The Register noted that the Judges
have subpoena power to compel witnesses to appear and give
testimony. Id.
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As the Register of Copyrights (Register) observed in the 2009
review of the Judges' decision, nothing in the statute precludes
rejection of any portions of a settlement that would be contrary to
provisions of the applicable license or otherwise contrary to the
statute. 74 FR 4540. In the instance under review by the Register, the
settlement agreement purported to alter the date(s) for payment of
royalties granting licensees a longer period than section 115 provided.
Id. at 4542. The Register also noted that nothing in the statute
relating to adoption of settlements precludes the Judges from
considering comments of non-participants ``which argue that proposed
[settlement] provisions are contrary to statutory law.'' Id. at 4540.
Summary of Non-Participant Comments
The comments of interested parties in this proceeding overlapped in
significant aspects and are summarized as follows.
Comments in Support
The following commenters all express support for adoption of the
Settlement. Black Music Action Coalition (BMAC) and Music Artists
Coalition (MAC); Songwriters of North America (SONA); The Recording
Academy; The Music Publishers Association of the United
[[Page 80450]]
States (MPA); The Association of Independent Music Publishers (AIMP);
Production Music Association (PMA); Ross Golan; The 100 Percenters; and
The Church Music Publishers Association of the United States (CMPA).
These commenters express generally positive assessment of the
Settlement. However, several of these comments, while supportive of
adoption of the Settlement, take issue with the current extent of
regulation of musical works and with aspects of the rate setting
process, which are beyond the scope of the Judges' consideration of the
Settlement.
Comments in Opposition
Word Collections' Eric Goldberg offers a series of comparisons of
historical mechanical per play rates to the growth in 115 licensed
music services' Subscriber Counts, Service Revenue, and Total Content
Costs (``meaning the amount paid to labels for sound recording
rights''). Mr. Goldberg also presents predictions of mechanical per
play rates over the Phonorecords IV rate period under the terms of the
Settlement. His analysis is intended to support his view that, as a
matter of equity, the headline rates (applicable to service revenue)
should be increased further to give songwriters parity with the music
services and record labels who depend upon the songwriters' creative
works of authorship. Word Collections' Eric Goldberg at 1-6.
Word Collections' Jeff Price reiterates aspects of the comment from
Word Collections' Eric Goldberg, advancing the notion that any increase
realized by songwriters and musical work owners under the settlement
would not keep pace with the cost of living, inflation, or with the
benefits realized by music services or sound recording copyright
owners. Mr. Price offers that a headline rate of 25% combined with the
elimination of several deductions from attributable revenue would
properly compensate songwriters and copyright owners. Word Collections'
Jeff Price at 6-7.
Mr. Price states that his comment is intended to provide
information to the Judges regarding the NMPA and who it represents when
taking into consideration the proposed Settlement. Mr. Price offers
that NMPA represents less than 2% of U.S. (and rest of the world) music
publishers and suggests that NMPA's interests are not aligned with 98%
of music publishers. Mr. Price goes on to indicate that major labels,
Sony, Universal and Warner, control equity positions in music services,
and that these three entities own and/or control the major record
labels, the associated sound recordings, the major music publishers,
and the associated musical composition copyrights. Mr. Price offers
that the intertwined relationships create conflicts of interest.
Specifically, Mr. Price points to conflicts of interests that were
noted in relationship to a prior proposed settlement in this
proceeding, and a suggested conflict of interest in relationship to
SoundExchange (the designated collective for royalties under specific
statutory licenses for sound recordings). Word Collections' Jeff Price
at 1-2.
Mr. Price suggests that the NMPA and or its members have self-
negotiated to some degree to determine what musical work copyright
owners should be paid in the future. Word Collections' Jeff Price at 2.
Mr. Price then addresses issues surrounding the scope or availability
of the section 115 license, in relation to certain licensees,
suggesting that in the future there may be an informative and robust
market for willing buyer willing seller negotiations for mechanical.
Id. at 2-6.
Songwriters Guild of America, Inc. (SGA), Society of Composers &
Lyricists (SCL), and Music Creators North America (MCNA), and the
individual music creators Rick Carnes and Ashley Irwin (together
Independent Music Creators) \13\ comment in opposition, asking the
Judges to modify or reject the Settlement in its present form as a
necessity for providing economic justice for music creators.
Independent Music Creators at 2. Independent Music Creators opine that
the Settlement represents insufficient and unreasonable limited
increases in streaming rates over the next five years, especially in
light of anticipated inflation. Id. at 10. Independent Music Creators
acknowledge that the Settlement includes elements other than a headline
percentage of revenue, and that these other elements, such as the total
content cost (TCC) component and fixed per subscriber elements, have
increased far more than the headline rate. However, Independent Music
Creators criticize these details as complex ancillary terms, which lack
plain language explanations. Furthermore, Independent Music Creators
offer that the possibility of increases in licensees' subscription
revenue that may positively impact mechanical royalties under the
settlement, or offset inflationary losses, are at best speculative and
at worst specious. Id. at 12. They instead voice preference for an
approach based on cost of living adjustment principles, including what
they offer as a necessary application of cost of living adjustments to
royalty pools within the existing greater than/lesser of rate
structure. Id.
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\13\ The Independent Music Creators' state that their comments
are endorsed by Alliance for Women Film Composers (AWFC), Screen
Composers Guild of Canada (SCGC), Songwriters Association of Canada
(SAC), Asia-Pacific Music Creators Alliance (APMA), Music Answers
(M.A.), Fair Trade Music International (FTMI), Pan-African Composers
and Songwriters Alliance (PACSA), and Alliance of Latin American
Composers & Authors (AlcaMusica).
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Independent Music Creators warn of conflicts and complications
surrounding the streaming royalty rate negotiations, and potential
self-dealing. They offer their suspicion that major music publisher-
affiliated record companies exercised undue influence on the
Settlement. Id. at 14. Independent Music Creators criticize music
publishers' silence regarding the traditional ratio of label versus
publisher share of revenue, and point to the opinions of Merck
Mercuriadis, an executive at the music publisher, Hipgnosis, that major
music publishers are not free to do what's in the best interests of
their constituency, because they're owned and controlled by their
respective major recorded music companies. Id. at 15.
Ultimately, Independent Music Creators do not indicate that
specific undue influence or conflicts of interest impacted the
Settlement but suggest that the possibility raises questions as to
whether the Settlement can reliably be shown to have been arrived at
with adequate and unconflicted representation of music creator and
publisher interests, and whether the results reached following such
negotiations are reasonable. Id. at 17. Independent Music Creators also
urge that the Judges address (1) whether the Settling Parties should be
required to explain in plain language how their streaming royalty rate
settlement terms will avoid catastrophic losses in value due to
inflation over the next five years; (2) whether a cost of living
adjustment provision is warranted, as such provisions have been
included in several other recently negotiated rate agreements approved
by the CRB, and; (3) whether the proposed settlement agreement was
negotiated with adequate and unconflicted representation of music
creator and publisher interests, leading to results that provide a
reliably reasonable basis for the setting of fair and equitable
statutory streaming rates and terms. Id. at 18.
Songwriters Helienne Lindvall, David Lowery, and Blake Morgan
(Writers) \14\ support the Settlement as far as it goes
[[Page 80451]]
but with some reservations. Writers at 1. Writers express concern that
inflation may diminish the rates for copyright owners. They argue that
the lack of a cost of living adjustment within the rate structure is
wrong and arbitrary, particularly since they do not perceive any
justification has been given. Writers dispute the view that because
copyright owners receive a share of revenue from the statutory
licensees that increasing revenue from increases in subscription prices
or number of subscribers will accrue to copyright owners benefit. They
argue that a cost of living adjustment would provide more effective
protection against inflation. Writers suggest that the Judges could add
a new step in the proposed settlements regulations, where a cost of
living adjustment would be applied after the per work royalty
allocation is determined. Id. at 5-7.
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\14\ Writers' comment was submitted by Christian L. Castle as
Counsel.
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Writers posit that the rate calculation formula in the Settlement
is unduly complex. While Writers acknowledge some compelling reasons as
to why complexity developed, they refer to the calculation of streaming
mechanicals set forth in the Settlement as mind-numbing in complexity.
They go on to allege that the complexity is nonsensical. Id. at 8-
11.\15\
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\15\ Writers also take issue with a number of procedures in CRB
proceedings, which are beyond the scope consideration of the
settlement at issue.
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Writers then address late fees, which they deem similar to credit
card interest. They argue that late fees should be treated as an
additional royalty payment under any publishing agreement. Otherwise,
the Writers allege, a late fee might be treated as a catalog-wide
penalty and that a copyright owner collecting the late fee could argue
should be retained for its own account, without attribution to specific
works or songwriters. Id. at 12.
Writers argue for the clarification of the ``overtime adjustment''
language such that the long-song adjustment is a bonus and not a
penalty. They cite to the version of section 115 that was in force
prior to the enactment of the MMA for the principle that copyright
owners should not bear the cost of the long song bonus through a
reduction in the statutory rates that may otherwise be applicable to
songs that fall below the overtime adjustment. Id. at 13-15.
Writers request that the Judges address the possibility that the
Settlement would allow licensees to include activity in the denominator
(in step 4) that should not be there (such as podcasts or spoken word
recordings). They offer that once such undue plays are included in that
denominator it is very difficult to remove these non-royalty bearing
tracks and restate all earnings. Id. at 15-16.
Abby North expresses some favorable views toward the settlement,
but offers her criticism of the delays in the final implementation of
rate setting proceedings, in the current proceeding and others. She
takes issue with the lack of transparency regarding to submissions
related to the Settlement and resulting delays. Abby North at 1. Ms.
North states that the section 115 rates and terms must include a cost
of living adjustment and that the Settling Parties should agree to
including such adjustments. She disputes that music services'
subscription prices and number of subscribers would provide an organic
cost of living adjustment. Id. at 2.
Gwendolyn Seale, a music lawyer who represents songwriters, offers
comments on her own behalf opposing the settlement. Ms. Seale takes
issue with adoption of the Settlement as it would thwart application of
the willing buyer, willing seller rate setting standard that would have
been applied in a determination made by the Judges absent settlement.
Gwendolyn Seale at 2-3. She also alleges that the Settlement is unduly
complex and results in troubling trends in resulting the per play
allocations. Id at 3-4.
Ms. Seale suggests that while the Judges may not be able to fix the
rate formula, the Judges should integrate a cost of living adjustment
to be applied to the ``payable royalty pool.'' She suggests adding a
cost of living adjustment at the end-result following all of the
greater and lesser of calculations and the removal of the performance
royalties from the ``all-in royalty pool.'' Id. at 5. Ms. Seale also
takes issue with several procedures and delays occurring within the
proceeding process. Id at 3, 5-6.
Michelle Shocked submits comments that ``agree with Participant
George Johnson's September 6, 2022 objections for the same following
reasons.'' Michelle Shocked at 1-4. Those objections from George
Johnson are set forth in the next section below. In addition, Ms.
Shocked raises issues about certain music services' alleged lack of
compliance with the section 115 license and other alleged piracy of her
works. Id. at 4-6.
Austin Texas Musicians request that the Judges include a cost of
living adjustment. Austin Texas Musicians at 1. Eugene ``Lambchops''
Curry, William Evans and Upward Bound Music Company do not pointedly
address the Settlement, but instead propose various alternative rates
ranging from 0.12 cent per stream to $3.00 per stream. Eugene Curry at
1-2; William Evans at 1; Upward Bound at 1-3.
Mr. Johnson's Opposition to the Settlement
Proceeding participant George Johnson (GEO) objects to the
Settlement in part because, in his view, it suffers from the same
issues that the Judges found to be a basis for their March 30, 2022
withdrawal and refusal to adopt another proposed settlement, namely
that a) the settlement has no inflation adjustment for what he deems to
be a static rate; b) it suffers from same self-dealing and conflicts of
interest concerns; and c) the settlement may possibly be related to an
undisclosed side deal. GEO Second Opposition at 15.
While GEO refers to the Settlement offer as the bare minimum, he
also asserts that the 15.35% percent of revenue element within the
Settlement for 2027 is too low, and that 20% to 25% would be a
reasonable percent of revenue element. GEO Second Opposition at 29, 13.
GEO maintains that the 15.1% percent of revenue element within the
Settlement for 2023 is not an increase in value, and that the 15.1% to
15.35% percent of revenue elements for the rate period is essentially a
static rate, which GEO indicates is in tension with the Judges' March
30, 2022 withdrawal and refusal to adopt another proposed settlement.
Id. GEO questions why neither the percent of revenue element nor the
per-subscriber elements are indexed for inflation, suggesting that is
also in tension with the Judges' March 30, 2022 decision. Id.
GEO expresses concern that adoption of the Settlement may thwart
application of the willing buyer, willing seller rate setting standard
that would have been applied in a determination made by the Judges
absent settlement. Id. at 14.
GEO also includes several broad criticisms regarding value realized
by investors in affected businesses as well as the salaries of
executives at such businesses. Id. at 15. He adds accusations of price
fixing and antitrust concerns across the music business. Id. at 16. GEO
suggests that the Settlement does not adequately account for revenue
that licensees may realize through their sale of data and advertising.
Id.
GEO alleges that Google and NMPA's Joint Notice of Public Lodging,
filed to update their response to Order 63 to File Certification or
Provide Settlement Agreements, shows that ``the 3 record labels'' are
using direct licenses for themselves with music services while using
the CRB process to price-fix all of
[[Page 80452]]
their competitors. Id. at 17-18, 20-21. GEO suggests that major
publishers' direct licenses reflect different rates and terms than the
statutory rates proposed in the Settlement. He also claims that non-
disclosure agreements prevent anyone from knowing the rates and terms
in those direct licenses. Id. at 18.
GEO attempts to compare the Settlement to a vaguely referenced
direct deal involving Sony from 2011, covering unspecified rights with
an unknown party, which apparently is not in the record of this
proceeding. GEO's cryptic reference to a 2011 deal for unspecified
rights is apparently meant to suggest that there might be additional
undisclosed consideration in relation to the Settlement. Id. at 19-20.
GEO also includes alternative rate proposals and urges the Judges
to abolish what he refers to as a ``free limited download loophole'' or
a ``free and unlimited limited downloads loophole.'' Id at 2, 3. GEO
further addresses this matter as an element within his WDS which
proposes to plug the free and unlimited limited downloads loophole. Id.
at 2, 11-15.\16\
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\16\ GEO's opposition to the ``free and unlimited limited
downloads loophole'' may, on its face, appear somewhat vague.
However, GEO's proposal appears to relate to an issue and proposal
raised more precisely in Copyright Owners' WDS, intended to close a
hole in the terms that could be seen as leaving some uses without a
rate. Restricted Downloads have been defined as any downloads that
are not permanent, including Eligible Limited Downloads. However,
past regulations (and seemingly those set forth in the Settlement)
do not provide a rate for Restricted Downloads. Copyright Owners'
WDS proposed revising the definitions to maintain the allowance for
zero rate Restricted Downloads solely in connection with Purchased
Content Locker Services and set a rate for other Restricted
Downloads equal to the penny rate for Permanent Downloads. Copyright
Owners WDS at 23-24.
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Judges' Analysis and Conclusions
Chapter 8 of the Copyright Act encourages parties to enter into
settlement negotiations, ultimately the decision as to whether a
contested settlement should be approved on motion is subject to the
Judges' discretion, informed by the submissions of the Settling Parties
and the commenters, and by the Judges' application of the law to the
facts. Section 801(b)(7)(A) is clear that the Judges have the authority
to adopt settlements between some or all of the participants to a
proceeding at any time during a proceeding, so long the relevant
parties are given an opportunity to comment and object. 17 U.S.C.
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. at 801(b)(7)(A).
The Judges provided the requisite opportunity for comment and
received GEO's opposition as well as the above-noted comments for and
against the Settlement. Having considered these submissions in their
entirety, the Judges find no persuasive legal or economic arguments
that convince the Judges to reject the proposed settlement reached
voluntarily between the Settling Parties.
Only one participant in this proceeding, GEO, objected to the
Settlement. As shown by the foregoing synopsis, however, GEO's
objections did not come to the Judges in a vacuum. The statute requires
publication of a settlement proposal and solicitation of comments from
interested parties--parties who would be bound by the proposed rates
and terms. Interested parties' comments are filed in the record of the
proceeding and the Judges analyze those comments even though the Judges
do not base rejection of a settlement solely on negative comments from
non-participants.
From the perspective of some independent songwriters and copyright
owners, the proposed rates might seem inadequate. The Judges recognize
that several commenters proposed alternative rates that they prefer,
including alternative methods for inserting inflation adjustments.
However, while the Judges may decline to adopt a settlement, the Judges
are not empowered to modify the Settlement, such as by adding requested
adjustments. The Settlement is what is before the Judges for
consideration, not alternative rates or proposals for alternative
procedures.\17\ The Judges specifically recognize that some comments
take issue with existing aspects of participation in rate proceedings
before the Judges.\18\ Additionally, the present settlement
consideration process is not the forum to fully consider and address
matters involving statements of account,\19\ an area which the U. S,
Copyright Office and the Judges share an interest.\20\
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\17\ Concerns about enforcement of infringement of licensable
works or eligibility for the section 115 license are also outside
the scope of the consideration of the Settlement.
\18\ Certain of the procedural issues raised by commenters have
been addressed in part through a recent response to an inquiry from
the Senate Judiciary Committee. See, <a href="https://www.crb.gov/docs/CRB-Response-2022-11-25-Letter-to-Senators-FINAL.pdf">https://www.crb.gov/docs/CRB-Response-2022-11-25-Letter-to-Senators-FINAL.pdf</a>.
\19\ Absent specific briefing in relation to any requested
clarification or correction, the Judges interpret the regulations to
clarify that Plays in the denominator (in step 4) is limited to
Covered Activity, as used in the regulatory definitions and
references to the term as defined section 115(e)(7).
\20\ The Judges specifically find that the application and
allocation of the overtime adjustment and late fees as set forth in
the Settlement is not unreasonable. The Judges further observe that
allocation of late fees may be addressed through the contracts
between songwriters and their publishers.
---------------------------------------------------------------------------
While there may be dispute as to the extent to which the Copyright
Owners as Settling Parties represent the copyright owner community
overall, the Judges accept that the Copyright Owners have an interest
in the vast majority of the uses of rights under section 115 for
Subpart C & D Configurations. Furthermore, the Judges accept that the
proposed rates and terms were negotiated on behalf of the vast majority
of parties that historically have participated in section 115
proceedings before the Judges. The Settling Parties clearly concluded
that the rates and terms were acceptable to both sides. Furthermore, as
addressed below, the negotiations occurred absent several of the
aspects that led the Judges to refuse to adopt a separate proposed
settlement.
The facts and analysis that led the Judges to conclude that another
proposed settlement in this proceeding did not provide a reasonable
basis for setting statutory rates and terms are distinguishable from
those surrounding the Settlement before them now. In the current
consideration of the Settlement, the mechanical rates represent an
increase from prior rates across significant steps of the rate setting
formula, including the headline rate applicable to service revenue, the
percentage of Total Content Costs, and fixed per subscriber elements
within the Settlement, e.g. Royalty Floors. In other words, the rates
do not remain unchanged. They are not frozen, despite the fact that
they retain a rate structure, that some do not favor. The Judges
clarify that they do not consider the structure of the Settlement to be
unreasonable, and that they have found similar structure appropriate in
other proceedings.
While some songwriters or copyright owners may be confused by the
royalties or statements of account, the price discriminatory structure
and the associated levels of rates in settlement do not appear
gratuitous, but rather designed, after negotiations, to establish a
structure that may expand the revenues and royalties to the benefit of
copyright owners and music services alike, while also protecting
copyright owners from potential revenue diminution. This approach and
the resulting rate setting formula is not unreasonable. Indeed, when
the market
[[Page 80453]]
itself is complex, it is unsurprising that the regulatory provisions
would resemble the complex terms in a commercial agreement negotiated
in such a setting. For the Judges to demand simplicity in this context
would be to sacrifice the specificity that an effectively competitive
market requires. The Judges also observe that one of the benefits of a
collective entity (the MLC in this case) is that it possesses the
expertise and resources to identify and explain how royalties are
computed and distributed.
In the current consideration of the Settlement, the Judges ordered
disclosure of relevant supplemental agreements. The Judges took
appropriate steps to ensure that such agreements have been properly
revealed to the Judges and to the public. This is an important
distinction from the Judges' consideration a settlement where related
agreements were hidden or opaque.\21\
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\21\ As the Judges have noted, 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.
---------------------------------------------------------------------------
The issue of potential conflicts of interest remains to some
degree, as some publishers represented by NMPA have cross ownership
relationships with record labels, some of which have or had equity
interests with music services. However, as the Judges have repeatedly
observed, conflicts are inherent if not inevitable in the existing
composition of certain negotiating parties. No party opposing the
Settlement has presented persuasive evidence of misconduct or conduct
that would sufficiently indicate that rates or terms are inconsistent
with those that would be set in an effectively competitive market. The
corporate relationships alone do not suffice as probative evidence of
wrongdoing or of rates or terms that are inconsistent with the
performance of an effectively competitive market. Indeed, the Judges
have observed zealous advocacy throughout the proceeding, which has
appeared to affect the settlement, thus mitigating the effect of any
possible collusion such as suggested in the comments and the objection.
The Judges, therefore, do not find that present alleged conflicts
present sufficient reason to doubt the reasonableness of the settlement
at issue as a basis for setting statutory rates and terms.
The Judges do not conclude that the Settlement agreement, reached
voluntarily between the Settling Parties, fails to provide a reasonable
basis for setting statutory terms and rates for licensing nondramatic
musical works to manufacture and distribute phonorecords. The entirety
of the record before the Judges, including the arguments GEO and other
commenters presented, is insufficient for the Judges to determine that
the agreed rates and terms are unreasonable.
In making this finding, the Judges are not indicating that
arguments for differing approaches to address inflation in the
Settlement are entirely without merit. However, the Judges find some of
the proposals for cost of living adjustments advanced in the comments
to be questionable. In short, the Judges do not find it unreasonable,
in this case, for the Settlement to not include yearly adjustments for
inflation.
In making this finding, the Judges observe the broad increases
within the Settlement, including the headline percentage rate
applicable to Service Revenue, the percentage of Total Content Costs,
and each of the fixed per subscriber elements. The Judges find that the
structure and increases are a reasonable approach to providing an
organic cost of living adjustment. The Judges also observe that
agreements such as the Settlement are arrived upon in part to avoid
costly and uncertain litigation, which would involve a number of
disputed issues. Securing specific inflation adjustments is but one of
several provisions that may be bargained for, and treatment of that
issue is bound-up with the entirety of the parties' negotiated
compromises. In this context, the Judges find no persuasive reason to
determine that the absence of yearly inflation adjustments is
unreasonable or should otherwise justify a rejection of the Settlement.
The Judges also note that while the willing buyer willing seller
standard was not expressly applied as it would be in a full proceeding,
the operable rate standard exists as a relevant factor surrounding the
Settlement.
The Judges also reviewed the Settlement with regard to whether any
portions would be contrary to provisions of the applicable license or
otherwise contrary to the statute, pursuant to the Register's prior
rulings. See, e.g., Review of Copyright Royalty Judges Determination,
74 FR 4537, 4540 (Jan 26, 2009). Upon such review, the Judges see no
basis to conclude that the Settlement is contrary to law. Therefore,
the Judges adopt the proposed regulations that codify the
Settlement.\22\
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\22\ The Judges observe that GEO appears to have requested a
rate setting for activity that may not be addressed in the
Settlement, which he describes as an ``unlimited limited download.''
The Judges intend to request additional briefing from the
Participants as to whether and how this proceeding may address such
activity.
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The Judges adopt the proposed rates and terms industry-wide for
Subparts C and D Configurations.
List of Subjects in 37 CFR Part 385
Copyright, Phonorecords, Recordings.
For the reasons set forth in the preamble, the Copyright Royalty
Judges 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:
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.
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
[[Page 80454]]
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 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.
[[Page 80455]]
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--
(2) 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
(3) In the case of physical phonorecords:
(i) 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 phonorecord and
offer the integrated locker service; or
(ii) 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.
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.
[[Page 80456]]
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 (a) each
component of the Bundle is a product or service of the Service Provider
(including Affiliates) and (b) 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 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 paragraph (1)
through (3).
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
[[Page 80457]]
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--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 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 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, 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 section 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
[[Page 80458]]
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 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.
385.21 Royalty rates and calculations.
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:
(i) The applicable percent of Service Provider Revenue, as set
forth in Table 1 to this paragraph (b)(1), and
(ii) 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.
------------------------------------------------------------------------
(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
[[Page 80459]]
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--EachPlay = 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 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
[[Page 80460]]
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 to read as follows:
Subpart D--Promotional Offerings, Free Trial Offerings and Certain
Purchased Content Locker Services
Sec.
385.30 Scope.
385.31 Royalty rates.
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.
David R. Strickler,
Copyright Royalty Judge.
Steve Ruwe,
Copyright Royalty Judge.
Approved by:
Dr. Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2022-28316 Filed 12-29-22; 8:45 am]
BILLING CODE 1410-72-P
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</html>Indexed from Federal Register on December 30, 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.