For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34411 ------------------------------------------------------------------------------ Order Code RL34411 Expanding the Scope of the Public Performance Right for Sound Recordings: A Legal Analysis of the Performance Rights Act of 2007 (H.R. 4789 and S. 2500) Updated July 9, 2008 Brian T. Yeh Legislative Attorney American Law Division Expanding the Scope of the Public Performance Right for Sound Recordings: A Legal Analysis of the Performance Rights Act of 2007 (H.R. 4789 and S. 2500) Summary The transmission of copyrighted sound recordings to the public by over-the-air AM/FM radio stations is an activity that implicates the right of public performance under the Copyright Act. However, under current law, terrestrial radio broadcasters who play copyrighted music need only compensate songwriters for the performance of their musical compositions and not the holders of the copyright in the sound recording (who may include the recording artist, musicians, and record label). Yet if music is publicly performed by digital audio transmission, such as by Internet radio stations ("webcasters") or satellite digital radio companies, both the songwriter and the recording artist are entitled by law to receive royalty payments from the transmitting entity. Sound recording copyright holders assert that there is no justifiable reason for the copyright law to treat sound recordings differently from other categories of performable copyrighted works. They maintain that recording artists deserve to be fairly compensated by broadcast radio for public performance of their works just as songwriters and music publishers are currently being paid for such activity. They also believe that the copyright law should require the same royalty obligations for terrestrial broadcasters and digital music services, so as not to advantage some of these commercial competitors over others. The broadcast radio industry, however, has defended its statutory exemption from paying royalties to recording artists for non-digital public performances, by arguing that radio broadcasts serve as free publicity and promotion of the sound recordings, and that performers and record producers are compensated through sales of compact discs or MP3 music download files, concert tickets, and merchandise. Furthermore, the broadcasters are concerned that any new royalty obligation imposed on radio stations could result in less copyrighted music being performed (either because stations may change their format to talk radio or they may need to broadcast an increased number of advertisements), or that the additional royalties could adversely impact the financial health and existence of smaller radio stations. The Performance Rights Act of 2007 (H.R. 4789 and S. 2500) would amend the Copyright Act to expand the public performance right of sound recording copyright holders to include analog audio transmissions, a change that would require terrestrial radio stations to begin making royalty payments to performers. In contrast, resolutions have been introduced in both houses, the Supporting the Local Radio Freedom Act (H.Con.Res. 244 and S.Con.Res. 82), that express that Congress should not impose any new performance fees, royalties, or other charges for over-the-air broadcasts of sound recordings by local radio stations. These opposing legislative measures reflect the contentious debate between the recording industry that desires compensation from AM/FM radio stations for performers and producers of sound recordings, and the broadcast industry that opposes changes to the status quo. Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 History of the Sound Recording Performance Right . . . . . . . . . . . . . . . . . . . 3 Licenses for Public Performance of Copyrighted Music . . . . . . . . . . . . . . . . 5 The Debate Over Altering the Existing Performance Royalty System . . . . . 6 Legislation in the 110th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Performance Rights Act of 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Supporting the Local Radio Freedom Act . . . . . . . . . . . . . . . . . . . . . . 11 Appendix. License Fees for Public Performance of Music . . . . . . . . . . . . . . . . . 12 Expanding the Scope of the Public Performance Right for Sound Recordings: A Legal Analysis of the Performance Rights Act of 2007 (H.R. 4789 and S. 2500) Introduction The scope of the public performance right granted by the Copyright Act is broader for musical works than for sound recordings. This difference accounts for the current structure of the royalty obligations of terrestrial radio stations that publicly perform copyrighted music: whereas the musical work copyright holders (songwriters and music publishers) are entitled to receive royalty fees from the radio broadcasters, the sound recording copyright holders (singers, musicians, and record labels) lack any right to demand payment for over-the-air broadcasts of their work. However, since 1995, sound recording copyright holders have possessed a limited public performance right -- the right to control public performance of their work by means of a digital audio transmission. Thus, the royalty obligations for Internet radio broadcasters, satellite radio broadcasters, and cable television operators that transmit copyrighted music to their audiences are different than those of terrestrial AM/FM radio stations: entities that digitally transmit music to their listeners must pay royalties not only to the songwriters, but also to the recording artists. Several hearings have been held in the 110th Congress examining whether the performance right should be expanded for sound recordings to encompass non-digital audio transmissions, in order to allow performers and record companies to receive compensation when broadcast radio stations play their sound recordings.1 This report offers information regarding this issue and a legal analysis of two bills currently pending, H.R. 4789 and S. 2500 (the Performance Rights Act of 2007), that would amend the Copyright Act to provide sound recording copyright holders with a right to receive royalties from terrestrial radio stations that publicly perform their work. 1 Ensuring Artists Fair Compensation: Updating the Performance Right and Platform Parity for the 21st Century: Hearings Before the House Subcomm. on Courts, the Internet, and Intellectual Property, 110th Cong., 1st sess. (2007); Exploring the Scope of Public Performance Rights: Hearings Before the Senate Comm. on the Judiciary, 110th Cong., 1st sess. (2007); H.R. 4789, the "Performance Rights Act:" Hearings Before the House Subcomm. on Courts, the Internet, and Intellectual Property, 110th Cong., 2d sess. (2008). CRS-2 Background Copyright is a federal grant of legal protection for certain works of creative expression, including books, movies, photographs, and music.2 A copyright holder possesses several exclusive legal entitlements under the Copyright Act, which together provide the holder with the right to determine whether and under what circumstances the protected work may be used by third parties.3 Generally, a party desiring to reproduce, adapt, distribute, publicly display, or publicly perform a copyrighted work must either (1) obtain the permission of the copyright holder (usually granted in the form of a license agreement that establishes conditions of use and an amount of monetary compensation known as a royalty fee), (2) comply with the terms of compulsory licenses established by law,4 or (3) assert that such use falls within the scope of certain statutory limitations on the exclusive rights such as the "fair use" doctrine -- but the validity of such claim may be subject to the judgment of a federal court.5 The unauthorized use of one of the exclusive rights of the copyright holder constitutes infringement.6 Federal law recognizes copyright protection for two separate categories of works in the musical realm: "musical works" and "sound recordings."7 A musical work refers to the notes and lyrics of a song, while a sound recording is a recorded version of a musician singing or playing a musical work, as that rendition is captured in a tangible medium of expression such as a compact disc, cassette tape, vinyl album, or MP3 file. Thus, there are potentially two different creative artists (and two different copyrights) when it comes to a single piece of recorded music: the holder of the copyright in the underlying musical work embodied in the sound recording, and the holder of the copyright in the sound recording itself. The musical work copyright holder is typically the individual who writes the notes and lyrics of a musical composition, or a music publisher who purchases or licenses copyrights from song composers. The sound recording copyright holder may include the recording artist, the background musicians, and the record label that helps with the production of the sound recording. It is possible that one individual can be both the sound recording copyright holder as well as the holder of the copyright in the musical work; for example, someone who is both a singer and songwriter may hold two independent copyrights to a piece of recorded music. However, many songwriters are not performers, and many performers are not songwriters. 2 17 U.S.C. § 102(a). 3 17 U.S.C. §§ 106. For a detailed description of the major provisions of the Copyright Act, see CRS Report RS22801, General Overview of U.S. Copyright Law, by Brian T. Yeh. 4 A detailed explanation of compulsory licenses is offered infra. 5 17 U.S.C. § 107. 6 17 U.S.C. § 501. 7 17 U.S.C. §§ 102(a)(2), (7). For more information regarding copyright law and music, see CRS Report RL33631, Copyright Licensing in Music Distribution, Reproduction, and Public Performance, by Brian T. Yeh. CRS-3 While both musical works and sound recordings are eligible for copyright protection, the Copyright Act does not provide the same degree of public performance8 protection to sound recordings that it grants to the underlying musical composition contained in the sound recording. The holder of a copyright in the musical work has a more robust right to control public performance in a wide variety of situations, while the sound recording copyright holder has a far more limited right to control public performance of sound recordings -- only when the sound recording is transmitted to the public through digital means.9 The difference in the scope of the public performance right under the Copyright Act for these two copyright holders, and its impact on royalty obligations for third parties wishing to publicly perform sound recordings, may be illustrated by the following scenarios: ! An entity that wants to broadcast a sound recording for the public through non-digital transmissions, such as a terrestrial AM/FM broadcast radio station,10 must pay royalties to the musical work copyright holder (e.g., the songwriter) for the right to publicly perform the musical work, but the radio station does not have to pay royalties or otherwise get permission from the sound recording copyright holders (the recording artist, musicians, and record label). ! In contrast, if the music is transmitted to the public through digital means, the two music copyright holders' public performance rights (and the transmitting entity's royalty obligations) are different. If the public performance of the sound recording involves a digital audio transmission -- as used by an Internet radio broadcaster (or "webcaster"), satellite digital radio company, or a traditional AM/FM radio station offering a simultaneous Internet stream of its over-the-air programming -- then both the songwriters and recording artists have the legal entitlement to be paid for that activity. Stated differently, the webcasters and satellite radio companies, because they transmit audio using digital technologies, are required to pay royalties to both the musical work copyright holder and the sound recording copyright holder. History of the Sound Recording Performance Right A review of the history of the performance right in the Copyright Act is helpful in understanding why the scope of public performance protection differs for sound recordings and musical works. While musical works have enjoyed a full right of public performance for over 100 years, the Copyright Act did not offer any legal protection to sound recordings until 1971, when Congress enacted a law that granted exclusive rights to reproduction and distribution to sound recording copyright holders 8 According to the Copyright Act, to "perform" a work means to recite, render, play, dance, or act it, either directly or by means of any device or process. 17 U.S.C. § 101. 9 17 U.S.C. § 106(6). 10 A "broadcast" transmission is defined as a transmission made by a terrestrial broadcast station licensed by the Federal Communications Commission. 17 U.S.C. § 114(j)(3). CRS-4 as a response to the increased amount of unauthorized duplication of records and tapes.11 However, at that time, Congress decided not to grant sound recording copyright holders the right to control public performance, partly due to opposition by television and radio broadcasters and jukebox operators who resisted any changes to the Copyright Act that would require any additional royalty payments beyond those already mandated for songwriters and music publishers, and also because Congress considered the rights to control reproduction and distribution to be sufficient enough to address the immediate problem of record piracy.12 In the most recent general revision of the Copyright Act in 1976, Congress directed the U.S. Copyright Office to submit a report by January 8, 1978, that would recommend whether Congress should grant a public performance right for sound recordings. In that report, the Register of Copyrights believed that a public performance right for sound recordings was warranted: Broadcasters and other users of recordings have performed them without permission or payment for generations. Users today look upon any requirement that they pay royalties as an unfair imposition in the nature of a "tax." However, any economic burden on the users of recordings for public performance is heavily outweighed ... by the commercial benefits accruing directly from the use of copyrighted sound recordings.... To leave the creators of sound recordings without any protection or compensation for their widespread commercial use can no longer be justified.13 However, at the time, Congress took no action in response to the advice of the Register. Technological advances in music transmission methods in the early 1990s helped persuade Congress to reexamine the issue of public performance rights for sound recording copyright holders. Record companies were concerned that consumers would use certain new technologies such as on-demand digital cable music services and other interactive services to listen to music and potentially record the digital audio transmissions, thereby eliminating their need to purchase physical sound recording media.14 In response, in 1995, Congress passed the Digital Performance Right in Sound Recordings Act,15 which for the first time ever granted copyright owners of sound recordings an exclusive right to perform their works publicly -- although the right 11 Sound Recording Amendment, P.L. 92-140, 85 Stat. 391 (1971). By its terms, the law was effective on February 15, 1972, and applies to sound recordings made on or after that date. 12 Internet Streaming of Radio Broadcasts: Balancing the Interests of Sound Recording Copyright Owners with Those of Broadcasters: Hearings Before the House Subcomm. on Courts, the Internet and Intellectual Property, 108th Cong., 2d sess. (2004) (statement of David Carson, General Counsel, U.S. Copyright Office), at 3. 13 U.S. Register of Copyrights, Report on Performance Rights in Sound Recordings, H.R. Doc. No. 15, 95th Cong., 2d sess. 1063 (1978). 14 William H. O'Dowd, The Need for a Public Performance Right in Sound Recordings, 31 HARV. J. LEGIS. 249, 254-59 (1993). 15 P.L. 104-39, 109 Stat. 336 (1995). CRS-5 was limited only to digital audio transmission of their sound recordings. However, the law specifically exempted traditional over-the-air radio broadcasts from the newly created right to control digital public performances of sound recordings.16 The Senate report accompanying the Digital Performance Right in Sound Recordings Act noted that The Committee, in reviewing the record before it and the goals of this legislation, recognizes that the sale of many sound recordings and the careers of many performers have benefitted considerably from airplay and other promotional activities provided by both noncommercial and advertiser-supported, free over-the-air broadcasting. The Committee also recognizes that the radio industry has grown and prospered with the availability and use of prerecorded music. This legislation should do nothing to change or jeopardize the mutually beneficial economic relationship between the recording and traditional broadcasting industries.17 In 1998, with the passage of the Digital Millennium Copyright Act,18 Congress clarified that the digital performance right also applied to sound recordings performed by noninteractive, nonsubscription Internet radio broadcasters (webcasters).19 As a result of these two laws, webcasters, satellite radio broadcasters, and cable broadcasters are now required to pay royalties to sound recording copyright holders when they digitally transmit their recordings, in addition to the royalties that are due to the musical work copyright holders. Terrestrial radio stations that stream (simulcast) their programming on the Internet also are required to pay royalties to sound recording copyright holders because that activity involves a digital audio transmission. Radio stations that only broadcast copyrighted sound recordings over- the-air, however, are not subject to the digital performance right for sound recordings and thus need only compensate the musical work copyright holder for the public performance. Licenses for Public Performance of Copyrighted Music A license is a form of legal permission in which the copyright owner authorizes third parties to use the work, in exchange for a payment of royalty fees and compliance with certain conditions specified in the license. Some licenses are negotiated voluntarily between a copyright owner and the third party wishing to use the work. Other licenses are created by Congress and appear in the Copyright Act. These "statutory" or "compulsory" licenses compel copyright owners to allow third parties to use creative works under certain conditions and according to specific requirements, in exchange for payment of royalty fees at a rate determined by a federal government body known as the Copyright Royalty Board.20 Therefore, a user 16 Section 3 of P.L. 104-39. 17 S.Rept. 104-128, at 4 (1995). 18 P.L. 105-304 (1998). 19 Section 405 of P.L. 105-304. 20 For more background on the Copyright Royalty Board, see CRS Report RS21512, The (continued...) CRS-6 of a statutory license need not obtain or negotiate permission for using a copyrighted work from the copyright owner; that permission is "compulsory." When copyrighted sound recordings are transmitted through either analog or digital means, the songwriter who composed the underlying musical composition contained in that sound recording is compensated according to a voluntary license agreement that was the product of private negotiations between the transmitting entities and the musical work copyright holders, who are represented by performing rights organizations such as the American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music, Inc. (BMI), and the Society for European Stage Authors and Composers (SESAC). A broadcast radio station, webcaster, or satellite radio company must pay license fees to ASCAP, BMI, and/or SESAC for the right to publicly perform the copyrighted musical works made by composers, songwriters, and music publishers who are represented by those organizations. However, public performance of sound recordings through digital transmission is subject to a compulsory license created by Congress and found in Section 114 of the Copyright Act. Webcasters and satellite radio companies need not negotiate with recording artists for permission to digitally transmit their sound recordings; they only have to comply with the terms of the Section 114 compulsory license and pay the royalty rate prescribed by the Copyright Royalty Board.21 Collection of royalty payments under the compulsory license for digital transmissions of sound recordings is handled on behalf of sound recording copyright holders by SoundExchange, a nonprofit entity originally created by the Recording Industry Association of America. The Debate Over Altering the Existing Performance Royalty System The broadcast radio industry has defended its statutory exemption from paying sound recording copyright holders for non-digital public performances, by arguing that radio broadcasts serve as free publicity and promotion of the music, and that performers and producers of sound recordings are compensated through sales of compact discs or MP3 music download files, concert tickets, and merchandise.22 Furthermore, radio broadcasters observe that the broadcaster exemption reflects a balanced, symbiotic economic relationship between the broadcasting, music, and sound recording industries, that Congress has chosen not to disturb for over 80 years despite repeated appeals by the recording industry to alter the existing performance 20 (...continued) Copyright Royalty and Distribution Reform Act of 2004, by Robin Jeweler. 21 For Internet radio broadcasters, see Library of Congress, Copyright Royalty Board, Digital Performance Right in Sound Recordings and Ephemeral Recordings, 72 Fed. Reg. 24084 (May 1, 2007); for satellite radio companies, see Library of Congress, Copyright Royalty Board, Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4080 (Jan. 24, 2008). 22 Ensuring Artists Fair Compensation: Updating the Performance Right and Platform Parity for the 21st Century: Hearings Before the House Subcomm. on Courts, the Internet, and Intellectual Property, 110th Cong., 1st sess. (2007) (statement of Charles M. Warfield, Jr., President, ICBC Broadcast Holdings, Inc.), at 2. CRS-7 royalty system.23 The broadcasters also predict that any new royalty obligations imposed on radio stations could result in less copyrighted music being performed, either because stations may change their format to talk radio or they may need to broadcast an increased number of advertisements to pay for the additional royalty fees.24 They are also concerned that any new royalty fees will adversely impact financially strapped radio stations' ability to provide non-music services such as local news reporting, weather information, and public service announcements, or even force them to cease operations entirely.25 Finally, they object to comparisons between the United States and other countries with respect to royalty obligations for public performance of sound recordings because of important differences in the intellectual property law of all countries as well as the fact that many foreign broadcasters are owned or heavily subsidized by their governments.26 Sound recording copyright holders have advanced several arguments in support of expanding their performance right. First, they argue that recording artists deserve to be compensated for public performance of their works by broadcast radio just as songwriters and music publishers are currently being paid for such activity.27 They point out that "simple fairness" requires terrestrial radio to pay them for performing their work, as the artists are the ones "who bring the music to life, who attract listeners to a station, and who make it possible for radio to make money by selling advertising."28 Second, they claim that the promotional value offered by terrestrial radio for the performance of their sound recordings has been diminished by listeners seeking out alternative sources of music distribution such as satellite radio and Internet music services.29 Third, they observe that all developed countries in the world except the United States require their radio broadcasters to compensate 23 Id. 24 Exploring the Scope of Public Performance Rights: Hearings Before the Senate Comm. on the Judiciary, 110th Cong., 1st sess. (2007)(statement of Steven W. Newberry, President, Commonwealth Broadcasting Corporation). 25 Free Radio Alliance, Frequently Asked Questions, at [http://www.freeradioalliance.org/ faq/faq.html]. 26 Exploring the Scope of Public Performance Rights: Hearings Before the Senate Comm. on the Judiciary, 110th Cong., 1st sess. (2007)(statement of Steven W. Newberry, President, Commonwealth Broadcasting Corporation). 27 Exploring the Scope of Public Performance Rights: Hearings Before the Senate Comm. on the Judiciary, 110th Cong., 1st sess. (2007)(statement of Lyle Lovett) ("[T]he songwriter who created the song deserves to be compensated when that work generates value for another business, as it does for radio. I'm proud to be an ASCAP member, and grateful for the performance royalties that have helped me to earn my living as a songwriter. But the musicians and singers who perform the song are also creators and deserve to be compensated as well.") 28 MusicFirst, Frequently Asked Questions About the Performance Right, at [http://www.musicfirstcoalition.org/#/faq/]. 29 MusicFirst, Get Smart on the Performance Right, at [http://www.musicfirstcoalition.org/ php/print.php?section=mediakit]. CRS-8 performers and record labels.30 However, because the United States does not require U.S. radio broadcasters to compensate foreign performers when they play their sound recordings, reciprocity allows foreign broadcasters to deny paying royalties to U.S. performers when they play their works in their countries.31 Industry estimates suggest that the loss to U.S. artists in potential foreign performance royalties is about $70 million.32 The Register of Copyrights has also offered Congress her opinion on this issue, asserting that there is no legal justification for why the copyright law should treat sound recordings differently from other categories of performable copyrighted works, such as books, plays, and movies.33 She also believes that the copyright law should require the same royalty obligations for both terrestrial broadcasters and digital music services, to provide a more level playing field for these commercial competitors.34 Legislation in the 110th Congress Performance Rights Act of 2007. Legislation has been introduced in the 110th Congress that would expand the scope of the public performance right for sound recording copyright holders. The changes proposed by the Performance Rights Act, H.R. 4789 (introduced by Representative Howard Berman) and S. 2500 (introduced by Senator Leahy), would require terrestrial radio broadcasters to begin paying a royalty to recording artists and record labels when they play their sound recordings.35 Section 2 of the bills would amend sections of the Copyright Act that currently relate to digital audio transmission of sound recordings by deleting the qualifying term "digital."36 The bills also remove the express statutory exemption for nonsubscription broadcast transmissions (which are the type made by traditional AM/FM radio stations) from the Section 114 compulsory license for public performance of sound recordings.37 Therefore, if this legislation is enacted, copyright owners of sound recordings would be granted a performance right for all types of audio transmissions, both analog and digital. This right would be subject to a Section 114 compulsory license available to entities that transmit sound recordings both 30 MusicFirst, Frequently Asked Questions About the Performance Right, at [http://www.musicfirstcoalition.org/#/faq/]. 31 Id. 32 Ensuring Artists Fair Compensation: Updating the Performance Right and Platform Parity for the 21st Century: Hearings Before the House Subcomm. on Courts, the Internet, and Intellectual Property, 110th Cong., 1st sess. (2007) (statement of Marybeth Peters, Register of Copyrights), at 14. 33 Id. at 2, 4. 34 Id. at 8-9. 35 The Copyright Act requires the following division and distribution of the royalty payments made pursuant to a Section 114 compulsory license: 45% of the fee is to be paid to the recording artist, 5% to the background musicians, and 50% to the record label. 17 U.S.C. § 114(g)(2). 36 17 U.S.C. §§ 106(6), 114(d)(1), 114(j)(6). 37 17 U.S.C. § 114(d)(1)(A). CRS-9 digitally and over the air. The Copyright Royalty Board would be responsible for determining the royalty rate that radio stations would have to pay to sound recording copyright holders.38 H.R. 4789 and S. 2500 would provide special treatment for certain small or noncommercial radio stations by permitting them not to pay the royalty fee established by the Copyright Royalty Board; rather, qualifying stations would only pay a flat annual rate for a blanket license. Commercial radio stations that have annual revenue of less than $1.25 million could elect to pay a fixed royalty amount of $5,000 per year, while public broadcasting entities (noncommercial educational broadcast stations, including college radio stations) -- regardless of their revenue or number of listeners -- could choose to pay a flat fee of $1,000 a year. The sponsors of the bills claim that 77% of existing broadcasting stations in the country (which includes college stations and public broadcasters) would be eligible for either of these flat fee, blanket license options.39 In addition, the bills statutorily exempt from the Section 114 compulsory license a nonsubscription radio broadcast of religious services at a place of worship or other religious assembly, and any incidental uses of a musical sound recording (for example, talk radio, including news and sports programming, that uses brief musical transitions in and out of commercials or program segments would be exempt from paying a sound recording performance royalty).40 Finally, Section 5 of the bills states that nothing in the Performance Rights Act shall adversely affect the public performance rights or royalties payable to songwriters or copyright owners of musical works. This provision is intended to preserve songwriters' existing public performance rights and clarify that the provisions of the Performance Rights Act shall not diminish them.41 The two bills are nearly identical in language, although the House bill would require that traditional radio stations adhere to certain performance limitations that are currently imposed on webcasters and satellite radio (referred to as the "sound 38 The standard that would be used by the Copyright Royalty Board in determining this rate would be the "willing buyer, willing seller" standard, which is the same one used in calculating the rate applicable to webcasters. For more information on the use of this standard in setting royalty rates for webcasters, see CRS Report RL34020, Statutory Royalty Rates for Digital Performance of Sound Recordings: Decision of the Copyright Royalty Board, by Robin Jeweler and Brian T. Yeh. The so-called "801(b) standard," used by the Board to determine the royalty rate for cable audio and satellite radio companies, would not be used for the rate applicable to terrestrial radio. The 801(b) standard requires the Board to develop a rate that reflects consideration of several factors beyond strictly market-rate calculations. Among those objectives include "to minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices." 17 U.S.C. 801(b)(1)(D). 39 153 CONG. REC. E2606 (extension of remarks, Dec. 19, 2007) (statement of Rep. Howard Berman). 40 153 CONG. REC. E2605 (extension of remarks, Dec. 19, 2007) (statement of Rep. Darrell E. Issa). 41 153 CONG. REC. S15918 (daily ed. Dec. 18, 2007) (statement of Sen. Leahy). CRS-10 recording performance complement"), such as restrictions on their ability to pre- announce the titles of songs that are to be played at a specific time, and limiting the transmission of songs from the same sound recording or by the same artist within a certain period of time. The Senate bill, however, would not subject traditional radio stations to these same conditions.42 On June 26, 2008, the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property passed H.R. 4789 by voice vote along with a manager's amendment offered by Representatives Howard Berman and Sheila Jackson-Lee.43 The manager's amendment amends Section 5 of the bill to further clarify that the license fees payable for the public performance of sound recordings are not to be cited, taken into account, or otherwise used to adjust the license fees payable to musical work copyright owners for public performance of their works; for the purpose of reducing or adversely affecting such license fees; in any administrative, judicial, or other governmental forum or proceeding; or otherwise. In addition, license fees paid by terrestrial broadcast stations for the public performance of musical works "shall be independent of license fees paid for the public performance of sound recordings." Essentially, this provision of the amendment is intended to ensure that the royalties currently being paid to songwriters are not reduced by radio broadcasters in order to pay the new, additional license fees to recording artists, musicians, and performers. The amendment also adds a new Section 6 that expressly states that a "music user" may not publicly perform a sound recording unless he has also obtained a license for the public performance of any copyrighted musical work contained in the sound recording (from the songwriters or the performing rights society representing the musical work copyright owners). Finally, the amendment adds a new Section 7 that establishes the following requirements for the payment of royalties: ! A featured recording artist who performs on a sound recording that has been licensed for public performance by means of a digital audio transmission is entitled to receive payments from the copyright owner of the sound recording in accordance with the terms of the artist's contract. ! Sound recording copyright owners must deposit 1% of the receipts from their licensing of public performance rights by means of a digital audio transmission, into a fund established by the American Federation of Musicians and American Federal of Television and 42 Section 2(d) of S. 2500. 43 Andrew Noyes, Subcommittee Passes Bill Ending Radio Royalties Loophole, CONGRESSDAILYPM, June 26, 2008. CRS-11 Radio Artists, for the benefit of nonfeatured performers who also perform on sound recordings.44 ! Radio broadcasters must pay 50% of the total royalties owed for the public performance of sound recordings directly to featured and nonfeatured artists.45 Supporting the Local Radio Freedom Act. Introduced by Representatives Gene Green and Mike Conaway on October 31, 2007, the Supporting the Local Radio Freedom Act, H.Con.Res. 244, expresses that Congress should not impose any new performance fees, royalties, or other charges relating to the over-the- air broadcasts of sound recordings by local radio stations or by any business engaged in such activity. Representative Green stated that "[r]adio provides free exposure and promotion for record labels' acts; broadcasters shouldn't have to pay labels for the privilege of supporting them. If the stations `pay to play,' the cost will go up for everyone and free over-the-air radio could be hurt."46 As of the date of this report, over 220 Members of the House have signed onto the non-binding resolution as co- sponsors, a number that represents a majority of House members. A similar resolution, S.Con.Res. 82, was introduced on May 12, 2008, by Senator Blanche Lincoln, along with Senator Roger Wicker, and has been referred to the Senate Committee on Commerce, Science, and Transportation. Senator Lincoln commented that "[t]his resolution will ensure that local radio stations across the country can continue to serve listeners without being subjected to additional fees that could diminish the quality of radio programming, including news, weather and AMBER Alert information that at times proves lifesaving."47 44 The manager's amendment specifies that the fund shall be distributed 50% to nonfeatured musicians and 50% to nonfeatured vocalists. 45 Under the Copyright Act, the distribution of payments to all artists who performed on sound recordings are to be made as follows: 2.5% to nonfeatured musicians, 2.5% to nonfeatured vocalists, and 45% to featured artists. 17 U.S.C. § 114(g)(2)(B)-(D). 46 Press Release, Rep. Green Introduces Resolution Against Radio Performance Taxes, available at [http://www.house.gov/apps/list/press/tx29_green/ 20071031RadioFreedom.html]. 47 Public Statement, Lincoln Introduces Resolution Recognizing Value of Radio Airplay, available at [http://lincoln.senate.gov/press_show.cfm?id=297700]. CRS-12 Appendix. License Fees for Public Performance of Music Publicly Performing a Publicly Performing a Work Work Through Analog Through Digital Transmission Transmission Royalties As an example, ASCAP ASCAP offers several types of Due to the offers two types of license licensing agreements for Internet Musical agreements:48 music uses, the fees for which vary Work depending on the size of the audience, Copyright 1) A "blanket license" is revenue, whether the Internet service Holder -- available for radio stations is interactive or non-interactive, the includes the that broadcast music number of music performances, songwriter frequently. The annual fee among other things.50 The minimum and the is a percentage of the fee for non-interactive Internet music station's annual revenues; websites is $288, while the minimum publisher the rate for 1996 through fee for interactive sites is $340. 2000 was 1.615% for stations with annual gross revenue over $150,000, or a minimum of 1% of adjusted gross income.49 For stations that have less than $150,000 in annual revenue, there is a flat fee schedule that ranges from $450 to $1,800. 2) A "per program license" is available for talk and news radio stations that use less copyrighted music; the fee is 0.24% of Adjusted Gross Revenue and covers incidental uses of music. 48 The fee examples on this page are the product of private, voluntary negotiations between ASCAP and the radio broadcasters. No government entity is involved in setting these rates. 49 ASCAP, Customer Licensees, Radio Licensing FAQs, at [http://www.ascap.com/ licensing/radio/radiofaq.html]. These are the rates now shown on ASCAP's website; more up-to-date rates are not available. 50 ASCAP, Customer Licensees, New Media & Internet Licenses, at [http://www.ascap.com/ weblicense/feecalculation.html]. CRS-13 Royalties None. The Copyright Royalty Board has Due to the established the following rates: Sound Recording Commercial webcasters:51 $.0008 Copyright However, the Performance per performance52 for 2006, $.0011 Holder -- Rights Act (H.R. 4789, S. per performance for 2007, $.0014 per includes the 2005), introduced in performance for 2008, $.0018 per performing the110th Congress, would performance for 2009, and $.0019 per artist, require terrestrial performance for 2010. musicians, broadcasters to pay artists and record and record labels for the Noncommercial webcasters: label right to play sound (1) For Internet transmissions totaling recordings over the air. less than 159,140 Aggregate Tuning Hours (ATH)53 a month, an annual per The royalty rate would be channel royalty of $500. determined by the Copyright Royalty Board in a (2) For Internet transmissions totaling ratemaking proceeding. more than 159,140 ATH a month, a royalty of $.0008 per performance for In lieu of this rate, the bills 2006, $.0011 per performance for permit commercial 2007, $.0014 per performance for broadcasters that have an 2008, $.0018 per performance for annual revenue of less than 2009, and $.0019 per performance for $1.25 million to elect to pay 2010. a fixed $5,000 royalty fee per year, and public All webcasters must also pay an broadcasting entities, annual minimum fee of $500 per including college radio channel. stations, could choose to pay $1,000 a year, Satellite radio:54 regardless of their annual 6 % of gross revenues for 2007 & revenue. 2008; 6.5% for 2009; 7% for 2010; 7.5% for 2011; and 8% for 2012. 51 Copyright Royalty Board, Digital Performance Right in Sound Recordings and Ephemeral Recordings, 72 Fed. Reg. 24084 (May 1, 2007). 52 A performance is a single sound recording publicly performed by digital audio transmission, heard by a single listener. For example, if a webcaster streams 30 songs to 100 listeners in the course of a day, the total would be 3,000 performances for that day. 53 ATH is the total hours of programming transmitted during a certain period of time to all listeners. For example, if a webcaster streamed one hour of music to 1 listener, the ATH for that webcaster would be 1. If 2 listeners each listened for half an hour, the ATH would also be 1. If 10 listeners listened to 1 hour, the ATH would be 10, and so forth. 54 Copyright Royalty Board, Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4080 (Jan. 24, 2008). ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RL34411