Copyright Royalty Board Upholds Rate Increase for Internet Radio

The U.S. Court of Appeals for the District of Columbia Circuit ruled last week to uphold the Copyright Royalty Board’s Web V rate determination, published in the Federal Register on Oc. 27, 2021.

That determination, which impacts non-interactive, programmed plays on digital radio like Pandora and iHeartRadio, set inflation-adjusted rates at $.0026 per paid subscription stream, up from $0.0024 cents. For ad-supported streams, the CRB set a rate of $0.0021, up from $0.0018 per play. (On-demand streams from services like Spotify and Apple are not included in this determination.)

These payments from digital radio, webcasters and simulcasters are made to SoundExchange, which in turn distributes royalties to labels and recording artists. Some labels have direct deals that get them paid directly from the large radio networks — in which case they turn over the artist’s share to SoundExchange, for distribution to artists.

The Web V rate determination covers the five-year term of 2021 through 2025, but since it includes inflation-adjusted rates, on Dec. 1, 2021, the 2021 rates set in the determination were adjusted to higher rates of $0.0028 per paid subscription stream and $0.0022 per ad-supported stream.

Around the same time as the adjusted rates were set, various participants in the Web V proceedings appealed certain aspects of the initial rate determination. They included the National Association of Broadcasters (NAB), which sought lower rates than the determination; and SoundExchange, which sought higher rates for commercial non-subscription, ad-supported services than the determination; and the National Religious Broadcasters Music License Committee. The Appeals Court ruling rejected their arguments.

In addition to upholding the per-play rates, the Appeals Court also reaffirmed the doubling of the minimum rate to $1,000 per station, up from $500 per station annually, with a maximum aggregate minimum fee of $100,000 for large commercial radio broadcasters with more than 100 stations.

In a statement, SoundExchange said: “We appreciate the court’s thoughtful attention to our appeal regarding royalty rate-setting methodology, and we are pleased that the appeals court rejected broadcasters’ efforts to reduce royalty rates at the expense of hard-working artists and creators and preserved the status quo for webcasting rates through 2025.”

This ruling confirms that broadcasters compete with audio music services for listeners and, therefore, should continue to pay royalty rates on a level playing field. The appeals court determined that the broadcasters failed to adequately give reason why artists and rights owners should subsidize the broadcasting industry even more than they already do. After all, broadcasters still inexplicably get a free pass for the use of sound recordings on their AM/FM transmissions.

Meanwhile, NAB said in a statement to Radio Ink and confirmed to Billboard that it was pleased that “the Court rejected SoundExchange’s aggressive and deeply flawed arguments in favor of higher digital royalty fees and acknowledged that broadcasters could pay a lower rate for simulcasts in the future.”

(The reference to possible lower rates for simulcasts in the future comes from the Appeals Court ruling “that future records may warrant new rate category distinctions” between simulcasting and other types of commercial webcasting.)

The NAB statement continued, “We will continue advocating for reasonable streaming rates that allow broadcasters to expand their digital offerings and stream music, which will benefit performing artists, songwriters and our tens of millions of listeners.”