Saturday, November 03, 2007

Breaking News: Royalty Rates Set at 7.25% of Gross Revenues for Preexisting Subscription Services

The Copyright Royalty judges have made their proposal for the royalty rates for preexisting subscriptions services. There are two parts to the recent trial. One is for the royalty rates for pre-existing subscription services (such as Music Choice) and the other is for satellite radio. Music Choice and SoundExchange reached an agreement shortly before the trial ended. If we are interpreting this correctly, this only applies to the agreement reached between Music Choice and SoundExchange and not to satellite radio. However, one might argue that the rates will be similar for satellite radio. It is likely, at least, an upper limit or close to it.

The proposed rate is set at 7.25% of gross revenues. The proposal is now open for public comment until November 30, 2007. If you choose to comment, you must be prepared to participate in future proceedings.

Here is the summary:

37 CFR Part 382 [Docket No. 2006–1 CRB DSTRA] Adjustment of Rates and Terms for Preexisting Subscription and Satellite Digital Audio Radio Services AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Notice of proposed rulemaking. SUMMARY: The Copyright Royalty Judges are publishing for comment proposed regulations that set the rates and terms for the use of sound recordings by preexisting subscription services for the period January 1, 2008, through December 31, 2012.

DATES: Comments and objections, if any, are due no later than November 30, 2007.

Below are the relevant details:

§ 382.2 Royalty fees for the digital performance of sound recordings and the making of ephemeral phonorecords by preexisting subscription services.

(a) Commencing January 1, 2008, and continuing through December 31, 2011, a Licensee’s monthly royalty fee for the public performance of sound recordings pursuant to 17 U.S.C. 114(d)(2) and the making of any number of ephemeral phonorecords to facilitate such performances pursuant to 17 U.S.C. 112(e) shall be 7.25% of such Licensee’s monthly gross revenues resulting from residential services in the United States.

(b) Commencing January 1, 2012, and continuing through December 31, 2012, a Licensee’s monthly royalty fee for the public performance of sound recordings pursuant to 17 U.S.C. 114(d)(2) and the making of any number of ephemeral phonorecords to facilitate such performances pursuant to 17 U.S.C. 112(e) shall be 7.5% of such Licensee’s monthly gross revenues resulting from residential services in the United States.

(c) Each Licensee making digital performances of sound recordings pursuant to 17 U.S.C. 114(d)(2) and ephemeral phonorecords pursuant to 17 U.S.C. 112(e) shall make an advance payment of $100,000 per year, payable no later than January 20th of each year. The annual advance payment shall be nonrefundable, but the royalties due and payable for a given year or any month therein under paragraphs (a) and (b) of this section shall be recoupable against the annual advance payment for such year; Provided, however, that any unused annual advance payment for a given year shall not carry over into a subsequent year.

(d) A Licensee shall pay a late fee of 1.5% per month, or the highest lawful rate, whichever is lower, for any payment received after the due date. Late fees shall accrue from the due date until payment is received.

(e)(1) For purposes of this section, gross revenues shall mean all monies derived from the operation of the programming service of the Licensee and shall be comprised of the following:

(i) Monies received by Licensee from Licensee’s carriers and directly from residential U.S. subscribers for Licensee’s programming service;

(ii) Licensee’s advertising revenues (as billed), or other monies received from sponsors, if any, less advertising agency commissions not to exceed 15% of those fees incurred to a recognized advertising agency not owned or controlled by Licensee;

(iii) Monies received for the provision of time on the programming service to any third party;

(iv) Monies received from the sale of time to providers of paid programming such as infomercials;

(v) Where merchandise, service, or anything of value is received by Licensee in lieu of cash consideration for the use of Licensee’s programming service, the fair market value thereof or Licensee’s prevailing published rate, whichever is less;

(vi) Monies or other consideration received by Licensee from Licensee’s carriers, but not including monies received by Licensee’s carriers from others and not accounted for by Licensee’s carriers to Licensee, for the provision of hardware by anyone and used in connection with the programming service;

(vii) Monies or other consideration received for any references to or inclusion of any product or service on the programming service; and (viii) Bad debts recovered regarding paragraphs (e)(1)(i) through (vii) of this section.

(2) Gross revenues shall include such payments as set forth in paragraphs (e)(1)(i) through (viii) of this section to which Licensee is entitled but which are paid to a parent, subsidiary, division, or affiliate of Licensee, in lieu of payment to Licensee but not including payments to Licensee’s carriers for the programming service. Licensee shall be allowed a deduction from ‘‘gross revenues’’ as defined in paragraph (e)(1) of this section for affiliate revenue returned during the reporting period and for bad debts actually written off during reporting period.

(f) During any given payment period, the value of each performance of each digital sound recording shall be the same.

Update
It was called to my attention the the 7.25% rate set for the preexisting subscriptions services is the exact same rate as set by the library of congress in 1998. Perhaps this bodes well for the royalty rates for satellite radio remaining the same.


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1 comment:

MUSCLE13 said...

Excellent post Bert! Very informative.