SoundExchange Receives Higher Rates in Copyright Royalty Board Decision Following Brattle Analyses
Summary
In concluding a multi-year proceeding involving certain digital music services, the US Copyright Royalty Board (CRB) decided to increase the royalty rates that non-interactive webcasting services such as Pandora must pay to recording artists and copyright owners of sound recordings from 2021 to 2025. A Brattle team led by Principal Dr. Steve Herscovici and Senior Associate Dr. Haris Tabakovic supported expert testimony on behalf of copyright holders, and assisted counsel for digital performance rights organization SoundExchange in evaluating economic arguments made by music webcasters that sought to lower the rates from their current levels. The CRB decision rejected the webcasters’ arguments, opting to increase the existing rates by 8–17%.
Background
Every five years, the CRB reviews sound recording royalty rates in a statutory proceeding to determine the appropriate license fee that webcasting services pay recording artists and record labels for rights to stream sound recordings. These rates apply to all commercial webcasters streaming recorded music – including commercial radio stations streaming the music over the internet, subscription-based services, and ad-based webcasters – and will apply for 2021 through 2025.[1] The collected royalties are distributed by SoundExchange to the artists and applicable copyright holders, including many record labels.
In the 2019/2020 proceeding, Determination of Rates and Terms for Digital Performance of Sound Recordings and Making of Ephemeral Copies to Facilitate those Performances (Web V), 19-CRB-0005-WR (2021–2025), SoundExchange – a nonprofit digital performance rights organization that collects digital sound recording royalties and distributes them to the respective artists and copyright owners – advocated on behalf of artists and record labels for higher rates. SoundExchange noted that higher rates are commensurate with the rapid evolution and growth of the webcasting industry in recent years and would ensure fair compensation to artists whose music is webcast on various platforms. Alternatively, webcasters argued that lower rates would be more representative of the current market conditions, and proposed adjustments to decrease the rates.
Brattle was retained by SoundExchange and its outside counsel at Jenner & Block to design and implement a survey that would provide evidence on substitutes for webcasting services. We supported Professor Gal Zauberman, the Joseph F. Cullman 3rd Professor of Marketing at the Yale School of Management, in designing a survey that elicited information on what users of music streaming and webcasting services would do if those services were no longer available. We also worked closely with Professor Zauberman and counsel in evaluating surveys and economic analyses conducted by the webcasting services.
Outcome
In its decision, the CRB increased royalty rates that webcasters will pay during the license period from 2021 through 2025. For 2021, the rate for subscription-based services was set at $0.0026 per performance (one stream of a song to one listener) and, for ad-based webcasters, at $0.0021 per performance. These rates represent an 8% increase for subscription-based webcasters and a 17% increase for ad-based webcasters over the rates they paid in 2020, and are subject to adjustments based on changes in the Consumer Price Index (CPI). These rates will result in musical artists earning more from these services than they otherwise would have earned during the license periods. The new rates are retroactive to January 1, 2021.
[1] The webcasters comprised streaming platforms, ad-based providers, and broadcasters (excluding parties that filed petitions to participate in the CRB proceedings, but settled or withdrew), including Pandora Media LLC (Pandora), Sirius XM Radio, National Religious Broadcasters Noncommercial Music License Committee (NRBNMLC), National Association of Broadcasters (NAB), iHeart Media Inc., and Google Inc.
