Subject: [NEXTEL-1] Copyright Royalty Agreement Reached by Small Webcasters and Recording Industry

From: Marcel <[email-masked]>
Date: Fri, 03 Jan 2003 10:24:16 -0500

I know there has been some discussion regarding the legality of webcasting, Neil Lehto,
Esq. posted the following information that may be relevant.

Marcel-
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Copyright Royalty Agreement Reached by Small Webcasters and Recording Industry

On December 13, 2002, SoundExchange, the recording industry’s
royalty collection clearinghouse, and a coalition of small commercial webcasters
calling themselves the “Voice of Webcasters,” advised the Copyright Office that
they had negotiated an agreement on webcasting royalty fees for small commercial
webcasters. The agreement accounts for royalties from October 28, 1998 through
2004 for the digital performance of sound recordings and for the making of
ephemeral copies. On December 24, 2002, the Copyright Office published this
agreement in the Federal Register as required by the Small Webcaster Settlement
Act of 2002 (the “Act”).

The Act enables eligible small commercial webcasters to elect to perform
music pursuant to the rates and terms in the negotiated agreement in lieu of the
rates and terms established by the Librarian of Congress in an earlier proceeding.
(See CRB Updates dated June 25, 2002 and December 5, 2002 at
www.crblaw.com)  The Act specifies that the agreement has no precedential
effect on any future proceedings regarding royalty rates and terms pursuant to the
statutory webcasting license. The Copyright Office clarified that it has no
responsibility for administering the rates and terms in the agreement.

As expected, the rates and terms of the agreement are similar to those
included in an earlier version of the Act that did not pass the U.S. Senate. For the
royalty period beginning October 28, 1998 and ending December 31, 2002, eligible
small commercial broadcasters are those who did not have total gross revenues
exceeding $1 million from November 1, 1998 to June 30, 2002. For the 2003
royalty period, gross revenue cannot exceed $500,000 in 2003 and for 2004, gross
revenue cannot exceed $1.25 million.[1]  If, during the course of the agreement, a
participating webcaster exceeds the revenue limits, it shall pay royalties based on
the rates otherwise applicable under 17 U.S.C. sections 112 and 114 (i.e., the “per
performance” charge applicable to all other webcasters, summarized below).

For qualifying small webcasters, the agreement establishes a royalty rate
of 8% of gross revenue or 5% of expenses, whichever is higher, for the period
October 28, 1998 through December 31, 2002, subject to the following minimum
fees:  The minimum fee for the two month period October 28, 1998 through
December 31, 1998 is $500. For the years 1999 through 2002, the minimum fee is
$2,000 per year.

For 2003 and 2004, the small commercial webcaster royalty rate is 10%
of the webcaster’s first $250,000 in gross annual revenue and 12% thereafter, or
7% of annual expenses, whichever is greater. For these years, the minimum annual
fee will be $2,000 if the webcaster’s revenues during the preceding year were less
than $50,000 and it does not expect to exceed that amount during the applicable
year. The annual fee is $5,000 in 2003 or 2004 if the webcaster had gross
revenues during the preceding year exceeding $50,000 or expects to exceed that
amount during the applicable year. Minimum fee payments are creditable toward
the agreement's royalty fee obligations in the year in which the minimum fee is
paid.  Small webcasters who did not exceed $50,000 in revenues the preceding
year would be well advised not to anticipate an increase in revenues to exceed
$50,000 (requiring payment of the higher royalty fee), since there does not appear
to be any mechanism for refunding overpayments.  Ephemeral license fees for
temporary caching are included in the negotiated royalty rates.

In contrast to this negotiated agreement for small webcasters, the
statutory webcasting rate established by the Librarian of Congress is a per
performance charge.  The rate, 7/100 cents ($0.0007) per performance, was
widely believed to be prohibitively expensive for small webcasters.  The Librarian
of Congress also established a separate ephemeral license fee for webcasters of
8.8% of performance fees due.  Many small webcasters argued that they would
not be able to remain in business under the rate structure adopted by the Librarian
of Congress.  These concerns led to passage of the Act including the opportunity
for a negotiated agreement.

To be eligible for the rates and terms specified in the agreement, a
qualified small commercial webcaster must submit a completed election form to
SoundExchange. To be eligible for the period October 28, 1998 through November
30, 2002, the webcaster must submit the election form by January 15, 2003,
which is also the date the first of three equal installment payments for that period
is due.[2]  To be eligible for the rates and terms effective December 2002, a
“small” webcaster must submit the election form by January 31, 2003, the date the
first monthly royalty payment would be due.  Minimum fee payments for 2003 and
2004 are due in two equal installments during the applicable year, the first by
January 31 and the second by June 30.  The agreement also contains
record-keeping requirements for webcasters.

The Agreement is available at
http:///www.copyright.gov/fedreg/2002/67fr78510.html. If you need additional
details about the Agreement or desire additional information about the Act or
royalty calculations, please contact us.

[1] The calculation of revenues to determine eligibility for small commercial
webcasters includes the revenues of persons or entities affiliated with the
webcaster if that affiliate is engaged in a media or entertainment related business or
a business that primarily operates as an Internet or wireless service.

[2] If a webcaster's gross revenues from November 1, 1998 to November 30,
2002 did not exceed $100,000, it may pay its minimum fees in three equal
installments beginning on January 15, 2003.

http://www.crblaw.com/newsarticle.asp?year=2002&file=copyrightroyalty.htm

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