DMCA

Billboard cites "a source" and reports:

"Major labels have made a commitment with SoundExchange to pay half of royalties from a statutory service in the event they have negotiated a direct deal. In other words, a major label with a direct deal with Pandora would still pay to SoundExchange the 50% of royalties afforded to artists under the statutory license. The label would not keep 100% of royalties and pay artists a royalty -- after recoupment -- as it does with royalties from purchases and non-statutory services."

Earlier this week (here) we discussed the fact that sound recording copyright owners are only legally required to split U.S. Internet radio royalties 50/50 with performers when the webcaster operates under the "statutory" webcast licenses (those are the deals which cover all recorded copyright music, with royalties payable to SoundExchange). In other words, copyright owners striking "marketplace" deals directly with webcasters (which is perfectly legal to do) are not under the 50/50 split requirement, and only need compensate performers under the terms of the individual artist/label contract.

This fact led some to speculate that direct license deals could benefit webcasters and copyright owners (labels) alike, to the detriment of artists. For example, a label and operator could negotiate a deal which pays the label just 67% of what it would have under the statutory. The webcaster gets a one-third discount, and the label earns more than the 50% of the statutory royalty.

Industry expert David Touve most recently examined this situation in light of Apple's direct label negotiations for its updcoming streaming radio service. He wrote, "it didn’t take a rocket scientist to anticipate that direct licenses for an iRadio service could get negotiated at rates below the webcaster rates formally established through the Copyright Royalty Board (CRB) or published Settlement agreement." Read more here.

Satellite radio operator SiriusXM and broadcasters like Clear Channel and Entercom have forged direct webcast royalty deals with several independent labels over the past months. Billboard says its source "does not know if independent labels have made a similar commitment with SoundExchange."

Read Billboard's story here.

We've heard recently that Apple's "iRadio" webcasting service has hit snags in licensing discussions with rights owners (most recently here).

It's important to note that any such deals that result from negotiation with labels mean Apple will not operate under the statutory webcast license (any service willing to operate within the statutory's requirements can pay that rate -- no negotiation needed). A direct license with labels could allow Apple to avoid the statutory's specific limitations on the use of music (its prohibition on "on-demand" and other measures known as the "sound performance complement"). It might even grant Apple a preferred royalty rate.

Such an arrangement would also free the labels from the statutory's required 50/50 split of the royalties with performers. As per the DMCA, the royalties SoundExchange collects from webcasters operating under the statutory license get split between copyright owners (record labels, who get 50%) and performers (the featured performer gets 45%, with 5% going to musicians unions for backup performers).

But the DMCA also allows for copyright owners to negotiate directly with webcasters, which is what appears to be happening with Apple. In such a case, the DMCA's requirements (like the "sound performance complement" and the "50/45/5" split) don't apply. Performers would still most likely earn something from webcast plays on a service with a direct license, under the terms of their particular contract with their record label. But if some artists are chafing at what they're paid by webcasters paying the statutory, they'll likely make far less from Apple iRadio plays.

"And so, it didn’t take a rocket scientist to anticipate that direct licenses for an iRadio service could get negotiated at rates below the webcaster rates formally established through the Copyright Royalty Board (CRB) or published Settlement agreement," writes Washington and Lee University assistant professor David Touve in Rockonomic here.

It's feasible to imagine that a record label, no longer required to share 50% of the webcasting royalties, could grant a major licensee like Apple a significant discount, and still earn more than it would under that statutory. Apple's savings, and the labels' bonus, would come from what performers would have earned under the statutory license.

House Judiciary Committee Chairman Bob Goodlatte (pictured) says he'll lead his panel to "conduct a comprehensive review of U.S. copyright law over the coming months," likely (at least partially) in response to Register of Copyrights Maria Pallante's copyright reform (reported in RAIN here). Goodlatte spoke at the World Intellectual Property Day at the Library of Congress.

"The goal of these hearings will be to determine whether the laws are still working in the digital age," Goodlatte said.

Among other issues, "there are concerns about statutory license and damage mechanisms. Federal judges are forced to make decisions using laws that are difficult to apply today. Even the Copyright Office itself faces challenges in meeting the growing needs of its customers - the American public."

Last year Utah Rep. Jason Chaffetz (R), a member of the Judiciary Committee, introduced the Internet Radio Fairness Act (read more in RAIN here). A companion bill was introduced to the Senate by Oregon Senator Ron Wyden (D). The bill calls to change the legal standard by which judges determine the statutory royalty rate for streaming radio. The royalty rates for most other, related uses of copyright sound recordings use the standards set in section 801(b) of the Copyright Act. The 1998 Digital Millennium Copyright Act made an exception for Internet radio, requiring rates to be set to what the judges felt a hypothetical "willing buyer and willing seller" would agree. The law would bring Internet radio in line with media like cable- and satellite radio, requiring rates to be set along 801(b) guidelines.

The bill has yet to be re-introduced to this year's Congress.

Read more in The Verge here.

A New York appeals court has ruled that the "safe harbor" provisions of the 1998 Digital Millennium Copyright Act do not extend to recordings made before 1972.

The ruling came in an appeal from Universal Music Group of a lower court decision which favored online music service Grooveshark. The service claimed (and was validated, at least at first) that it wasn't liable for user-uploaded pre-1972 sound recordings, as it was protected by the DMCA's "safe harbor" rules (read more here).

However, it's the DMCA which establishes and governs the way digital services (e.g. online radio) pay for the public performance of copyright sound recordings. Might this ruling call into question whether the law truly covers webcasters' use of pre-1972 recordings?

Digital Music News quotes the decision: "The statutory language at issue involves two equally clear and compelling Congressional priorities: to promote the existence of intellectual property on the Internet, and to insulate pre-1972 sound recordings from federal regulation... it is not unreasonable, based on the statutory language and the context in which the DMCA was enacted, to reconcile the two by concluding that Congress intended for the DMCA only to apply to post-1972 works."

We're looking forward to learning whether this decision has any impact on Internet radio. Read Digital Music News coverage here.

TV5 New Media in the Philippines has lauched Balut Radio, a customizable Internet radio service featuring Original Pinoy Music (OPM) and internation hits, for listening in that country.

The new service was built on Portland, Oregon-based radio software development firm Social Radio's platform.

Balut Radio features dozens of curated channels listeners can customize, plus a "build your own" channel feature. The service adds radio voice talent integrated into the personalized channels, plus news and information, artist interviews, and live performance video.

Social Radio is using the Balut Radio launch to introduce new audience metrics to its offerings. The company says it will measure "number of unique devices," "distinct user accounts," and "average percentage of song played," and offer these sorts of metrics to other Social Radio clients.

In working in the Philippines, Social Radio sees a distinct advantage when it comes to intellectual property use.

Steve Allaway, Social Radio’s CEO, explained the service's position: "Because there is sensible royalty legislation in the Philippines, we’re able to really exercise the capabilities we architected into Social Radio... dedications, individual song sharing to Facebook with a link back to that song in the player, showing listeners what songs are coming up next... those are a few of the features... that would make the service completely illegal in the United States."

Balut Radio is "geo-blocked" from countries with performance license legislation less-favorable to services (like the U.S.). Listeners in American can access a limited set of Balut Radio features that Social Radio says are within Digital Millennium Copyright Act parameters.

TV5 is a major Filipino commercial television network.

There's now yet another "marketplace" deal between Clear Channel and a record label -- this time, Wind-Up Records -- that will have the broadcaster pay a share of ad revenue for its broadcast of the label's music. In exchange, Clear Channel gets a discount on its royalty obligation when it streams the same music.

One reason deals like this are significant is broadcasters in the U.S. are not compelled to pay copyright owners or performers for the broadcast use of copyright sound recordings. The Digital Millennium Copyright Act of 1998, however, requires payment for the digital use (e.g. webcasting, satellite radio, cable radio) of this material. While the music industry has long bemoaned broadcasters' free over-the-air use of its intellectual property, Internet radio and other digital services have chafed under royalty obligations that can amount to half (or more) of revenues.

Such agreements could be a sign that broadcasters like Clear Channel understand the broadcast royalty exemption may not last forever, and what's more, online delivery of content is becoming more and more vital to radio. On the other side, labels like Wind-Up perhaps see that webcasting in their future too.

Industry legal expert and authority on royalties David Oxenford has written that these deals could be pivotal in upcoming government deliberations on setting a statutory U.S. webcasting royalty rate. Without actual marketplace royalty agreements, Copyright Royalty Board judges have so far been compelled to use the "willing buyer willing seller" standard and set royalties where they think a hypothetical market players would settle. And so far, all of those determinations have been wildly in the record companies' favor.

When Clear Channel's "royalty swap" agreement with the Big Machine Label Group was announced, Oxenford wrote, "the pro-record company outcome of the CRB proceedings may well be changed if these deals can be shown to be representative of the real value of the public performance of the sound recording." (Read more in RAIN here.)

Oxenford moderated "The Song Plays On," a panel discussion concerning webcast royalties, Sunday at RAIN Summit West.

Clear Channel has struck similar deals with Glassnote Entertainment Group, Dualtone, DashGo, rpm Entertainment, Robbins Entertainment, and Naxos.

Wind-up Records launched a number of multi-platinum rock artists, including Evanescence, Creed, Finger Eleven, and Seether, and has brought on Five for Fighting, O.A.R. and The Darkness, among others.