The Copyright Royalty Board recently released its 200+-page decision backing up its rate changes for streaming royalties that became effective in January.
Both NAB and iHeartMedia made several arguments for lower rates, and while the CRB did lower the amounts (to 17 cents per 100 streams for commercial non-subscription streams) as we’ve reported, it rejected arguments to go even lower as RBR+TVBR learned from examining the decision.
NAB argued that simulcasting a Web stream is different than pure-play forms of Webcasting and therefore the broadcast trade lobby advocated for a separate and lower rate for simulcasters than for other commercial Webcasters. “The NAB avers that simulcasting constitutes a distinct submarket in which buyers and sellers would be willing to agree to lower royalty rates than their counterparts in the commercial webcasting market,” stated the CRB in the decision.
Because NAB was the only party in the rate proceeding making this argument, it was on them to demonstrate not only that simulcasting differs from other forms of commercial webcasting, but also that it differs in ways that would cause willing buyers and willing sellers to agree to a lower royalty rate in the hypothetical market, according to the CRB. The judges looked at direct agreements between iHeartMedia and independent record labels, but said they couldn’t compare them to each other and it wasn’t enough to persuade them. In fact, they point to “the 2015 rate of $0.0025 per performance is five times the rate that the NAB proposes for the 2016-2020 rate period ($0.0005).”
The CRB redacts financial figures for iHeart’s agreements and the judges said they didn’t have enough information to convert those into a per-performance rate, so they concluded the iHeart deals didn’t give enough support for NAB’s proposal.
NAB offers several qualitative arguments why willing buyers and sellers would agree to lower simulcasting rates. Each argument proceeds from two basic premises: (1) the programming content on a simulcast stream is the same as programming content on terrestrial radio; and (2) terrestrial radio is fundamentally different from music services. Because radio stations are licensed by the FCC and must act in the public interest, they are different from pure-play Webcasters; the judges found these witnesses (like Commonwealth’s Steve Newberry) persuasive. But the CRB didn’t find a clear connection between this premise and the argument that stations should pay lower royalties than pure-plays because stations are only simulcasting their streams.
NAB cited a survey that concludes 12.2% of the value that simulcast listeners derive from listening to music-formatted stations is attributable to “hosts, DJs, and other on-air personalities.” However the way the judges see it, By including non-music content in their transmissions, simulcasters reduce the number of performances of recorded music, thus reducing their royalty obligation under a per-performance rate structure. The NAB failed to present any evidence that the value of non-music content is not fully accounted for in this reduction of royalties.”
As far as the worth of air-play as promotion, the judges conceded here was agreement between broadcasters and labels that terrestrial air-play is valuable for introducing new artists and new songs to the public and “stimulating” the sale of sound recordings. NAB argued that “simultaneous retransmission of the content of a terrestrial radio broadcast over the Internet; it is, therefore, the same as radio; therefore, it must have the same promotional impact as terrestrial radio.” But SoundExchange disagreed, pointing out local broadcasts can be heard locally but streams can be heard overseas and because TuneIn and other aggregation sites offer listeners the ability to pause, or playback, for example, they offer more features than broadcast radio and “may affect listening habits in a way that diminishes the promotional effect of simulcasting,” concluded the judges.
Overall, the judges said whether or not simulcasting is as promotional as terrestrial radio is not relevant. “The relevant questions are (1) whether simulcasting is more promotional than other forms of commercial webcasting and, if so, (2) whether such heightened promotional impact justifies a discounted rate for simulcasters.”
In the end, the judges were not persuaded and did not adopt a lower and separate rate structure for simulcasters than for pure-plays.
