|
|
 |
|
|
BY KURT HANSON
The final version of H.R. 5469, now named the "Small
Webcaster Amendments Act of 2002," that was written
over the weekend, tweaked by the House Judiciary committee's staff
yesterday morning, and passed in a voice vote by the U.S. House
of Representatives yesterday afternoon, is now available on the
Clerk of the House's website (here).
(For a overview of the bill, see yesterday's lead RAIN
story here.)
The proposed amendments to the United States Code — a 28-page
document — cover many issues, and RAIN's summary of
the document, as best we can understand it from a layman's perspective,
follows in table form below.
Immediately following the table below is our "RAIN
Analysis" of some of the key points of the act.
| Royalty
rates for qualified "small webcasters" |
Retroactive
royalty rate |
For
the period from October 28, 1998, through December 31, 2002,
the royalty rate for qualified "small webcasters"
is set at 8% of gross revenues
or 5% of expenses. |
| Definition
of "gross revenues" (includes related businesses) |
For
the small webcaster
that is a "natural
person" (i.e., a human being, not a corporation), "gross
revenues" is defined to include revenues from any (A)
media or entertainment related business that provides audio
or other entertainment programming or (B)
business that primarily operates an Internet or wireless
service, in both cases including revenues from any company for
which the individual owns 5%
or more of the voting or non-voting stock. (NOTE:
Is this a typo? Should it be 50% of the stock?) |
| Royalty
rate for 2003 and 2004 |
For
2003 and 2004, the royalty rate increases to
10% of the webcaster's first $250,000 in gross revenues
and 12% of any gross revenues
in excess of $250,000 during the applicable year, or
7% of the webcaster's expenses during the applicable
year, whichever is greater. |
| Payment
due dates |
Retroactive
royalties shall be be paid in three equal installments,
with the first due by November 30, 2002, the second due by May
31, 2003, and the third due by October 31, 2003. Starting with
royalties for October 2002, payments for each month are due
on the 20th of the following month. |
| "Reasonable
assumption" |
Webcasters
may pay royalties at the small webcaster rate if
they have qualified under the definition in the past and if
they expect to qualify for the year in question "for so
long as that assumption is reasonable." |
| Deadline
to elect "small webcaster" rate |
An
election to pay the "small webcaster" rate for
any of the three periods (October 1998 through December 2002;
calendar year 2003, and/or calendar year 2004) must be filed
with the Copyright Office and the royalty distribution entities
(e.g., SoundExchange) no later than the
first date that a royalty payment for that period is due.
|
| Evidence
of qualifying must be made available |
Those
who elect to pay the "small webcaster" rate must
make available to [SoundExchange], on
request at any time
during the 3 years following the applicable period, sufficient
evidence to support its eligibility as an eligible small webcaster.
(They must also submit a report of "third
party participation revenues" for each period by
January 31 of the following year.) |
| Minimum
payments |
Minimum
royalty payments are as follows:
(A) For
any part of 1998, $500,
(B) for any part of 1999, 2000, 2001, and
2002, $2,000 each,
(C) for any part 2003 and 2004, $2,000
if the webcaster's past years' and expected current year's revenues
are less than $50,000, or $5,000 otherwise. |
| Payment
due dates for minimums |
Minimum
payments for 1998 through 2002 are due
30 days after enactment of the act. (Exception: Webcasters
who have had total revenues through December 31, 2002, of not
more than $100,000 may remit their minimum payments on the schedule
of the three equal installments described above.) |
| New
category of webcaster defined |
| Noncommerical,
non-FCC broadcasters |
"Noncommercial,
non-FCC webcasters" (i.e., carrier-current college
stations, non-profit organizations, etc.) may elect to pay a
royalty rate of $.0002/performance,
with a minimum payment of $500
for each calendar year or portion thereof, with the retroactive
amounts due 30 days after enactment
of the act. |
| This
is not "willing buyer"/"willing seller" |
| Not
evidence |
"The
rates and terms set forth in this subparagraph shall not
constitute evidence of rates and terms that would have been
negotiated in the marketplace between a willing
buyer and a willing seller." |
| Definition
of "small webcaster" |
Definition
of "eligible"
for 1998-2002 |
Definition
for the period through December 31, 2002: Gross revenues
for the period from November 1, 1998 through June 30, 2002,
of no more than $1,000,000
(for the 44-month period). |
Definition
of "eligible"
for 2003 |
Definition
for 2003: Gross revenues for the year of not more than $500,000,
including revenues of (A) affiliates
(see below for definition). |
Definition
of "eligible"
for 2004 |
Definition
for 2004: Gross revenues for the year of not more than
$1,250,000, including revenues of (A) affiliates,
(B) third party participation revenues, and (C) revenues from
the operation of new subscription services. |
| Definition
of "affiliate" |
Any
person or entity that (A) owns more
than 50% (or
controls) the webcaster or (B) is more
than 50% owned by (or controlled by) the webcaster.
Revenues of affiliates count against the definition of "small
webcaster" (in 2003 and 2004 only) if the affiliates are
"a media or entertainment related business that provides
audio or other entertainment programming, or a business that
primarily operates an Internet or wireless service." |
| Definition
of expenses |
Expenses
are defined to include
(A) costs "whether actually paid or not," (B) the
fair market value of goods and services provided on a non-cash
basis, (C) only the depreciation/ amortization portion of capital
costs. Expenses do not
include (A) the imputed value of services provided
by up to 5 unpaid owners, (B) the imputed value of a home office
unless claimed as a business expense for tax purposes, or (C)
the cost of buying phonorecords. |
| Definition
of revenues |
Revenues
are defined to include all
revenues except (A) sales
of records and digital music downloads, (B) the actual costs
of products or services sold by the webcaster, (C) revenue from
new subscription services for which royalties are paid under
other provisions (although note that subscription revenues do
count against the definition of "eligible small webcaster"
in 2004), and (D) proceeds from the sale of assets. "Revenues"
does include the fair market
value of non-cash consideration (e.g., trade) and amounts earned
by the entity but paid to an affiliate of the entity. Revenues
must be recognized on an accrual basis unless the webcaster
is a cash-basis taxpayer. |
| Definition
of "Noncommerical, non-FCC broadcaster" |
Such
"broadcasters" (i.e., webcasters) must be tax-exempt
under section 501 of the Internal Revenue Code of 1986.
|
| Definition of
"third party participation revenues" |
"Revenues
of any kind earned by a person or entity, other than the
transmitting entity" relating to the transmissions, including
ad sales revenues earned by such parties. |
| Notice
and recordkeeping |
| Recordkeeping
requirements |
For
either or both of calendar years 2003 and 2004, an eligible
small webcaster that makes this election shall, for that year,
keep records, and make available to copyright owners of sound
recordings reports of use, covering the following on a channel
by channel basis: (1) Artist, (2) song title, (3) album title,
(4) label*, (5) ISRC code**, (6) copyright owner information**,
(7) monthly ATH for each channel, and (8) channel, (9) start
date, and time of each transmission of each song.
======
* Data required for all new releases, and for 67% of catalog
product in 2003 and 100% in 2004.
* Data required for all new releases, and for 50% of catalog
product in 2003 and 75% in 2004, to the extent that such information
can be provided using commercially reasonable efforts. |
| Re:
SoundExchange |
| Rationale |
"[Because]
regulations issued by the Librarian of Congress were inconsistent
with the voluntarily-negotiated arrangements by such parties
concerning the deductibility of certain costs incurred for licensing
and arbitration... the Congress is therefore restoring those
terms as originally negotiated among the parties..." |
| Deductibility
of costs |
SoundExchange
gets to deduct costs (since 1995) of collection, distribution,
calculation, settlement of disputes (i.e., legal costs), arbitration,
licensing, enforcement, etc. before distributing royalties. |
| Direct payments
to artists |
SoundExchange
shall distribute 50% of
net royalties to copyright owners, 2-1/2%
into an escrow account managed by an independent administrator
jointly appointed by copyright owners of sound recordings and
the American Federation of Musicians (for non-featured musicians),
2-1/2% into an escrow account
managed by an independent administrator jointly appointed by
copyright owners of sound recordings and AFTRA (for non-featured
vocalists), and 45% to featured
recording artists. |
| Report
to Congress |
| Required
report |
"By
not later than June 1, 2004, the Register of Copyrights
and the Comptroller General of the United States shall prepare
and submit to the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the Senate
a joint report concerning" third-party relationships (e.g.,
Hiwire and Lightningcast?) and how percentage-of-revenues royalty
rates may be to the detriment of artists and copyright holders.
|
 |
...
 Key
points include the following:
(1)
Webcasters who are individuals have to include any
other media, entertainment, and "Internet
services" revenues they may have received as
the base against which to calculate their royalty payment due.
(2)
It appears that a large number of webcasters may
be able to qualify as a "small webcaster" rate for
the retroactive period,
as revenues of a corporation's parent companies does not become
part of the definition of "gross revenues" for the
periods of 2003 and 2004.
(3) Currently, the Librarian of Congress's discounted
royalty rate of $.0002/performance
only applies to FCC-licensed noncommercial radio stations. This
act would extend the rate to other
tax-exempt entities (e.g., carrier-current college
stations, museums, etc.)
(4) Webcasters paying the "small webcaster"
rate must agree to conform with significantly tougher recordkeeping
and reporting requirements than those floated earlier
this year by the Copyright Office — including "the
start date and time of each transmission of each song."
(5) AFTRA got its clause "codifying" the understanding
that SoundExchange will make payments directly
to artists (or an independently-managed escrow account).
The RIAA got its clause codifying the understanding that most
or all costs associated
with collecting and administering royalties can be deducted
from the royalties received before any are distributed.
(6) The act requires the Copyright Office and the Comptroller
General to prepare a study
for the House and Senate Judiciary Committees on the financial
effects of third-party ad sales. (In this act, those revenues
count against the definition of "small webcaster"
in 2004 but are not included in the base against which royalty
payments are calculated.)
... |
|
| |
|
[an error occurred while processing this directive]
|
| |
|
BY PAUL MALONEY
 College
radio has yet to get the break they were looking for on webcasting
royalties. Joel Willer, general
manager of KXUL at the
University of Louisiana at Monroe told the Chronicle of Higher
Education that stations like his won't benefit from H.R. 5469,
the "codified" version of the agreement hammered out by
small commercial webcasters and the record industry.
The bill passed the House yesterday, and goes to the Senate
for a vote next week.
Willer told the publication that the legal definition of
"small business" won't apply to most college radio stations,
because
of their association with the college or university. He said college
stations were not allowed to participate in negotiations, led by
the House Judiciary Committee, that led to the agreement late Sunday
night.
This leaves the original Librarian of Congress determination
for college radio webcasters.
Willer said, "My fear is that now many people in Washington
will be of the opinion that this situation has been taken care of
when in fact it has not been taken care of. We're still going to
see some Webcasters forced out of business because of this."
Willer and others in educational radio say they will continue
to lobby Congress for relief from the Librarian determination, which
would have college stations paying $0.0002 per song per listener
to the record labels, plus an 8.8% charge for ephemeral recordings.
That's not to mention the recordkeeping that copyright owners are
demanding, a requirement that college stations see as at least as
damaging as the fees themselves.
One group representing educational webcasters, the Intercollegiate
Broadcasting System, filed a court appeal of the Librarian's
determination. It's not yet known exactly when the appeal will be
heard.
You can read the article in the Chronicle here.
|
| |
| |
|
|
| |
|
 |
"This
deal forces them to never become REAL businesses...
"
|
 Willing
Buyer Willing Seller -- how about willing negotiation? It's hard
to feel that you are able to make the best decision when you are forced
to battle the RIAA and AFL-CIO and you are about to lose your house
in 10 days -- add to that Congress telling you, "This is good
for you we are doing you a favor -- now enjoy this."
This was a lousy deal for all parties, especially the webcasters
who were forced to sell out the industry they love to keep their homes.
This deal forces them to never become REAL businesses and could kill
the companies who had a chance.
As for the long term effects for the growth of the industry?
It's kind of like witnessing an assisted suicide.
|
"It's
not much good if they can't pay the retro's... "
|
Kurt and Paul, I believe it must be noted that although some
webcasters have been given a reprieve, and the ability to live  another
day, someone should point out that since the CARP, and this bill,
have kept the retro fee minimums at a fairly high rate, it will effectively
still KILL thousands of the hobbyists.
Even though the go-forward rate of the CARP would keep the
hobbyists alive, it's not much good if they cannot pay for the retro's.
I've already seen one death since the announcement of the passage
of 5469, and I'm afraid we'll see many more.
| |
Mark
D. Glynn
NewOrleansRadio.com |
|
"Snuffed
out because of big corporate greed... "
|
Seems to be another venue that is forgotten in all these congressional
hearings are the hobbyists. Being a hobby, there is no
income, however, I do my part to contribute to ASCAP/BMI/SESAC, and
will do so to CARP rulings, just to keep myself out of trouble.
Now it is bad enough that 99% of my expenses are to licensing
fees. They really have left no provisions to groups that are $0 income.
Another factor that will kill the hobbyist is that recordkeeping.
As a hobbyist, we use cutting edge technology to make our
broadcast, seeking out free transmission mediums and the like.
What disturbs me is the RIAA's thinking that everyone can just generate
these records. I cannot determine at any given moment in time who
is watching what, and when. It is not in the software to do so. What
happens if we can't comply with this ridiculous recordkeeping? We
get dragged into court? Fined? Even though we do what we can to pay
them financially?
Of ASCAP/BMI/SESAC, BMI is the most "record-keeping intensive"
of the three, and they seem to only need Title, Artist, Album, and
total page impressions. I fear, as a hobbyist, I may get snuffed out
because of the big corporate greed.
|
"The
penalty will be substantial... "
|
If by protecting their work, the artists mean to lock it up
so it is not accessible to anyone at all, then, unfortunately, they
will get just what they are asking for. Web radio will not survive,
and the promotional value which trickles down to major record labels
and independent artists alike will be missed.
The RIAA's demands are unreasonable because they insist that
small webcasters do promote their material along certain strict guidelines,
but instead of getting paid for this distribution service, webcasters
are then punished with outrageous royalties, which exceed terrestrial
radio, which tends to reach more listeners, all in a concentrated
area).
The royalties that my college radio station may pay will not
even help individual artists, since we often play local bands not
affiliated with the RIAA. Our playlist is so diverse and unique, that
each artist could not possibly see any compensation.
For example, we play a mainstream song such as "The Macarena"
during a sports broadcast halftime, and a hundred other rare-to-radio
songs during the football season, perhaps once each this year. The
promotional value of this exposure is good. The royalty payment that
Los Del Mar will receive because we were the only station which played
"The Macarena" once is nonexistent, while the penalty for
playing 100 such songs in one day on our station will be substantial.
Therefore, in the case of a non-mainstream college radio at
least, the CARP is a detriment that does not even accomplish what
it was supposed to do, which is to help the artists protect their
work.
|
| |
|
|
| |
Other public
stations now off line
This is from the SOS:
Save Our Streams website, which focuses the struggle
against thewebcasting royalty rates as they pertain to independent
educational and noncommercial stations. |
| KAPU-CA; KSDS-CA; KTAI-TX; KTSW-TX; KWJC-MO; KXCI-AZ;
KXRJ-AR; WEBR-VA; WERS-MA; WEVL-TN; WMHW-MI; WMUA-MA; WNYU-NY;
WONB-OH; WPTS-PA; WRMC-VT; WSRN-PA; WSTB-OH; WSUM-WI; WSUW-WI;
WUTK-TN; WXOU-MI |
|
| |
|
|
 |
|
|
|
|
|
