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Statutory Royalty Rates for Digital
Performance of Sound Recordings: Decision
of the Copyright Royalty Board
Brian T. Yeh
Legislative Attorney
March 23, 2009
Congressional Research Service
7-5700
www.crs.gov
RL34020
CRS Report for Congress
P
repared for Members and Committees of Congress

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Statutory Royalty Rates for Digital Performance of Sound Recordings

Summary
On March 9, 2007, the Copyright Royalty Board (CRB) announced new statutory royalty rates for
certain digital transmissions of sound recordings for the period January 1, 2006, through
December 31, 2010. Implementation of these new rates marks the expiration of a previous royalty
rate agreement specifically designed to benefit “small” Internet radio broadcasters, or
“webcasters.” The new rates went into effect on July 15, 2007. Several parties, including the
Digital Media Association, National Public Radio, and a coalition of small commercial
webcasters, appealed the CRB’s decision to the U.S. Court of Appeals for the District of
Columbia Circuit; a decision in the case is not expected until summer 2009. In the meantime,
webcasters that stream copyrighted music to their listeners are obliged to pay royalties to the
copyright owners at the new statutory rates, in the absence of privately negotiated settlements
with SoundExchange, the entity that collects performance royalties on behalf of sound recording
copyright owners and artists.
Two similar bills, H.R. 2060 and S. 1353, both titled the Internet Radio Equality Act, were
introduced in the 110th Congress. The bills would have nullified the CRB’s decision, changed the
ratemaking standard, and instituted transitional rates for the current rate cycle (which is
retroactive to 2006). Although Congress has addressed the interests of small commercial
webcasters in the past, the legislation appeared to emphasize rate parity among statutory licensees
who use different transmission technology (i.e., satellite, cable, and the Internet). The bills,
however, would have permitted webcasters to choose between different payment formats for the
current cycle, including one based on percentage of revenue, a method sought by small
webcasters. The Internet Radio Equality Act was not passed before the end of the 110th Congress,
and no similar legislation has been introduced in the 111th Congress.
The Webcaster Settlement Act (WSA) of 2008 (P.L. 110-435) was signed into law on October 16,
2008, by President Bush. The purpose of the act was to simplify the approval and adoption
process regarding any alternative royalty rates negotiated between SoundExchange and
webcasters that substitutes for the statutory rates established under the CRB’s decision. The act
provided that the terms of such agreements may be effective until the end of 2016. However, the
act in no way obliged SoundExchange to negotiate an agreement. In accordance with the WSA,
SoundExchange’s authority to make such settlements expired on February 15, 2009.
Three agreements were made under the authority of the WSA. The Corporation for Public
Broadcasting (CPB) and SoundExchange reached a “comprehensive agreement” on the royalty
rates to be paid for Internet streaming of sound recordings by approximately 450 public radio
webcasters. The agreement covers a royalty period from January 1, 2005, through December 31,
2010. The National Association of Broadcasters (NAB) and SoundExchange negotiated a
settlement agreement covering an extended royalty period (from January 1, 2006, through
December 31, 2015), for terrestrial AM or FM radio broadcasters who stream their signal or other
programming on the Internet. Finally, a group of “small” webcasters reached an agreement with
SoundExchange for the same royalty period as the NAB’s license. However, the largest
commercial webcasters, including Pandora, Live365, and RealNetworks, did not reach an
agreement with SoundExchange prior to the February 15, 2009, termination of SoundExchange’s
authority to make such agreements pursuant to the WSA.
This report surveys the legislative history of this issue, the Board’s decision, and the public and
congressional response.
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Statutory Royalty Rates for Digital Performance of Sound Recordings

Contents
Statutory Licenses ....................................................................................................................... 1
Background ................................................................................................................................ 2
Copyright Royalty Board Rates................................................................................................... 3
Rationale .................................................................................................................................... 4
Public Reaction........................................................................................................................... 6
Congressional Response.............................................................................................................. 8
H.R. 2060, 110th Cong., 1st Sess. (2007), the Internet Radio Equality Act ............................... 8
S. 1353, 110th Cong., 1st Sess. (2007), the Internet Radio Equality Act ................................... 9
P.L. 110-435, the Webcaster Settlement Act of 2008 .............................................................. 9
Recent Developments................................................................................................................ 10
CRB Proceedings to Determine Royalty Rates for 2011-2015.............................................. 13

Tables
Table 1. Royalty Rates for Local Radio Broadcasters Who Stream Music Over the
Internet .................................................................................................................................. 11
Table 2. Royalty Rates for Eligible Small Webcasters, 2006-2015 ............................................. 12

Contacts
Author Contact Information ...................................................................................................... 13

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Statutory Royalty Rates for Digital Performance of Sound Recordings

Statutory Licenses
Among the creative works that U.S. copyright law protects are sound recordings,1 which the
Copyright Act defines as “works that result from the fixation of a series of musical, spoken, or
other sounds.”2 Owners of copyrighted sound recordings have exclusive rights to reproduce,
adapt, or distribute their works, or to perform them publicly by digital means.3 Normally, anyone
who wants to exercise any of the copyright owner’s exclusive rights must obtain the copyright
owner’s permission to do so, typically by direct negotiations between copyright owners and users.
However, the copyright law also provides several types of statutory, or compulsory, licenses for
sound recordings. These licenses allow third parties who pay statutorily prescribed fees to use
copyrighted sound recordings under certain conditions and according to specific requirements,
without having to negotiate private licensing agreements.4
In 1998, in the Digital Millennium Copyright Act (DMCA),5 Congress amended several statutory
licensing statutes to provide for and clarify the treatment of different types of Internet
broadcasting, or “webcasting.” Some transmissions of sound recordings are exempt from the
public performance right,6 for example, a nonsubscription broadcast transmission;7 a
retransmission of a radio station’s broadcast within 150 miles of its transmitter; and a
transmission to a business establishment for use in the ordinary course of its business.8 In
contrast, a digital transmission by an “interactive service” is not exempt from the public
performance right, nor does it qualify for a statutory license. The owner of an interactive
service—one that enables a member of the public to request or customize the music that he or she
receives—must negotiate a license, including royalty rates, directly with copyright owners.
But, two categories of webcasting that do qualify for a compulsory license are specified
“preexisting” subscription services (existing at the time of the DMCA’s enactment)9 and “an

1 17 U.S.C. § 102(a)(7).
2 17 U.S.C. § 101.
3 17 U.S.C. §§ 106(1)-(3) & (6). Note that owners of copyrighted sound recordings have no legal entitlement to demand
payment of royalties for the performance of their works by non-digital means. Thus, terrestrial radio stations (AM and
FM stations) that broadcast sound recordings through analog means, need not compensate recording artists or record
labels or obtain their permission to perform the work to the public. The Performance Rights Act (H.R. 848, S. 379)
would eliminate this royalty exemption that applies to traditional radio stations and attempt to bring parity to the sound
recording performance royalty system. For more information on this issue, see CRS Report RL34411, Expanding the
Scope of the Public Performance Right for Sound Recordings: A Legal Analysis of the Performance Rights Act (H.R.
848 and S. 379), by Brian T. Yeh.
4 For a general explanation of the mechanics of licensing copyrighted musical works (the notes and lyrics of songs) and
sound recordings, see CRS Report RL33631, Copyright Licensing in Music Distribution, Reproduction, and Public
Performance, by Brian T. Yeh.
5 P.L. 105-304 (October 28, 1995).
6 Activities that are exempt from the public performance right may be conducted without having to seek prior
authorization of the copyrighted work’s owner.
7 A “broadcast” transmission is defined as a transmission made by a terrestrial broadcast station licensed by the FCC.
17 U.S.C. § 114(j)(3). FCC-licensed radio broadcasters argued unsuccessfully that simultaneous Internet streaming of
AM/FM broadcast signals was exempt from the public performance license requirement for digital transmissions.
Bonneville International Corp. v. Peters, 347 F.3d 485 (3d Cir. 2003).
8 17 U.S.C. § 114(d)(1).
9 Pursuant to definition under § 114(j), qualifying “preexisting” services include
“(10) A ‘preexisting satellite digital audio radio service’ is a subscription satellite digital audio
(continued...)
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eligible nonsubscription transmission.” A subscription service is one that is limited to paying
customers. The broader category of webcasters who may qualify for the statutory license under
17 U.S.C. § 114(d) are those who transmit music over the Internet on a nonsubscription,
noninteractive basis.
A licensee under § 114 may also qualify for a statutory license under 17 U.S.C. § 112(e) to make
multiple “ephemeral”—or temporary—copies of sound recordings solely for the purpose of
transmitting the work by an entity legally entitled to publicly perform it.10
Background
The initial ratemaking proceeding for statutory royalty rates for webcasters for the period 1998
through 2005 proved to be controversial, perhaps reflecting in some degree the relative newness
of both the DMCA and webcasting activity. A Copyright Arbitration Royalty Panel (CARP)
issued a recommendation for the initial statutory royalty rate for eligible nonsubscription
webcasters on February 20, 2002.11 Small-scale webcasters objected to the proposed rates. In
accordance with then-existing procedures, the Librarian of Congress, on the recommendation of
the U.S. Copyright Office, rejected the CARP’s recommendation and revised rates downward.
Congress interceded as well with enactment of the Small Webcasters Settlement Act (SWSA) of
2002, P.L. 107-321. Although very complex, the law permitted more options than the royalty rates
established by the Librarian’s order. Qualifying small webcasters, for example, could elect to pay
royalties based on a percentage of revenue or expenses rather than on a per-song per-listener
basis. The rate agreement made pursuant to SWSA was published in the Federal Register12 but
not codified in the Code of Federal Regulations. However, by SWSA’s own terms, its provisions
were not to be considered in subsequent ratemaking proceedings.13

(...continued)
radio service provided pursuant to a satellite digital audio radio service license issued by the
Federal Communications Commission on or before July 31, 1998, and any renewal of such license
to the extent of the scope of the original license, and may include a limited number of sample
channels representative of the subscription service that are made available on a nonsubscription
basis in order to promote the subscription service.
“(11) A ‘preexisting subscription service’ is a service that performs sound recordings by means of
noninteractive audio-only subscription digital audio transmissions, which was in existence and was
making such transmissions to the public for a fee on or before July 31, 1998, and may include a
limited number of sample channels representative of the subscription service that are made
available on a nonsubscription basis in order to promote the subscription service.” See 37 C.F.R.
Part 260.
10 Ephemeral copies are reproductions of sound recordings made by webcasters or radio stations to facilitate the
“streaming” of their content on the Internet. The statutory license for ephemeral copies is based upon the copyright
owner’s right to control reproduction of a protected work.
11 In the Matter of Rate Setting for Digital Performance Right in Sound Recordings and Ephemeral Recordings, Report
of the Copyright Arbitration Royalty Panel, February 20, 2002, at http://www.copyright.gov/carp/webcasting_rates.pdf.
For more background, see CRS Report RL31626, Copyright Law: Statutory Royalty Rates for Webcasters, by Robin
Jeweler.
12 U.S. Copyright Office, Notification of Agreement Under the Small Webcaster Settlement Act of 2002, 67 Fed. Reg.
78510-78513 (December 24, 2002), at http://www.copyright.gov/fedreg/2002/67fr78510.html.
13 P.L. 107-321, § 4(c): “It is the intent of Congress that any royalty rates, rate structure, definitions, terms, conditions,
or notice and recordkeeping requirements, included in such agreements shall be considered as a compromise motivated
by the unique business, economic and political circumstances of small webcasters, copyright owners, and performers
(continued...)
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Subsequent to passage of the SWSA and the initial ratemaking proceeding, Congress substantially
revised the underlying adjudicative process. Enactment of the Copyright Royalty and Distribution
Reform Act of 2004, P.L. 108-419, abolished the CARP system and substituted a Copyright
Royalty Board composed of three standing Copyright Royalty Judges.14 Rates established
pursuant to the original ratemaking determination and SWSA were to remain in effect through
2005. As required by law, in March 2007 the Copyright Royalty Board announced royalty rates
for the period that commenced (retroactively) from January 1, 2006, through December 31,
2010.15
Copyright Royalty Board Rates
The general process for statutory license ratemaking factors in a three-month period, during
which interested parties are encouraged to negotiate a settlement agreement. In the absence of an
agreement, written statements and testimony are gathered, discovery takes place, hearings are
held, and the Copyright Royalty Board issues a ruling.16
Notice announcing commencement of the subject proceedings was published on February 16,
2005.17 On March 9, 2007, the Copyright Royalty Board issued its decision, which was published
as a Final Rule and Order on May 1, 2007.18 The final determination of the CRB establishes new
rates for commercial and noncommercial webcasters who qualify for the § 114 compulsory
license;19 the decision is effective on July 15, 2007.20 Rates are as follows:
• For commercial webcasters: $.0008 per performance21 for 2006, $.0011 per
performance for 2007, $.0014 per performance for 2008, $.0018 per performance
for 2009, and $.0019 per performance for 2010. This includes fees for making an
ephemeral recording under 17 U.S.C. § 112.22

(...continued)
rather than as matters that would have been negotiated in the marketplace between a willing buyer and a willing seller,
or otherwise meet the objectives set forth in section 801(b).” Congressional findings in § 2(5)-(6) also emphasize that
Congress makes no determination that the agreements reached between small webcasters and copyright owners are fair
and reasonable or represents terms that would be negotiated by a willing buyer and a willing seller.
14 For more background, see CRS Report RS21512, The Copyright Royalty and Distribution Reform Act of 2004, by
Robin Jeweler.
15 17 U.S.C. § 804(b)(3).
16 Id.
17 70 FED. REG. 7970 (2005).
18 Library of Congress, Copyright Royalty Board, Digital Performance Right in Sound Recordings and Ephemeral
Recordings, 72 FED. REG. 24084 (May 1, 2007). See 37 C.F.R. Part 380.
19 A noncommercial webcaster is a licensee that is tax exempt under § 501 of the Internal Revenue Code, 26 U.S.C. §
501 or which is operated by a state entity for public purposes. 37 C.F.R. § 380.2.
20 72 FED. REG. at 24112 (establishing a deadline of 45 days after the end of the month in which the CRB’s final
determination of rates is published in the Federal Register, for the payment of retroactive royalties for 2006 under the
new rate scheme).
21 A performance is a single sound recording publicly performed by digital audio transmission, heard by a single
listener. 37 C.F.R. § 380.2(i). For example, if a webcaster streams 30 songs to 100 listeners in the course of a day, the
total would be 3,000 performances for that day.
22 In the Copyright Royalty Board’s order denying rehearing, see infra, it authorized an optional transitional Aggregate
Tuning Hours (ATH) fee for the years 2006 and 2007. 37 C.F.R. § 380.3(a)(ii).
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• For noncommercial webcasters: (i) For Internet transmissions totaling less than
159,140 Aggregate Tuning Hours (ATH) a month, an annual per channel23 or per
station performance royalty of $500 in 2006, 2007, 2008, 2009, and 2010. (ii) For
Internet transmissions totaling more than 159,140 Aggregate Tuning Hours
(ATH) a month,24 a performance royalty of $.0008 per performance for 2006,
$.0011 per performance for 2007, $.0014 per performance for 2008, $.0018 per
performance for 2009, and $.0019 per performance for 2010. These rates include
fees for making an ephemeral recording under 17 U.S.C. § 112.
• Minimum fee. Commercial and noncommercial webcasters will pay an annual,
nonrefundable minimum fee of $500 for each calendar year or part thereof.25
• This rate structure does not make special provision for “small” webcasters, who
were addressed in the SWSA by reference to revenues.
Rationale
The standard for establishing rates, set forth by statute, is known as the “willing buyer/willing
seller” standard.26 The Board’s determination is informed by the initial royalty proceedings of the
CARP, which it refers to as “Webcaster I.” In essence, both the previous CARP and the current
Copyright Royalty Board attempt to implement the statutorily mandated standard to reach a
royalty rate. Explaining its interpretation of the governing language, the CRB wrote:
Webcaster I clarified the relationship of the statutory factors to the willing buyer/willing
seller standard. The standard requires a determination of the rates that a willing buyer and
willing seller would agree upon in the marketplace. In making this determination, the two
factors in section 114(f)(2)(B)(i) and (ii) must be considered, but neither factor defines the
standard. They do not constitute additional standards, nor should they be used to adjust the
rates determined by the willing buyer/willing seller standard. The statutory factors are merely

23 The CRB did not provide a definition for a “channel.” However, under the CRB decision, a webcaster that transmits
multiple channels is responsible for paying $500 per channel. Webcasters often have multiple channels; for example,
among the largest commercial webcasters, Yahoo, RealNeworks, and Pandora broadcast thousands of channels.
24 Aggregate Tuning Hours is defined, in part, as “the total hours of programming ... transmitted during the relevant
period to all Listeners within the United States from all channels and stations that provide audio programming[.]” 37
C.F.R. § 380.2(a). For example, if a webcaster streamed one hour of music to 1 listener, the Aggregate Tuning Hours
for that webcaster would be 1. If 2 listeners each listened for half an hour, the ATH would also be 1. If 10 listeners
listened to 1 hour, the ATH would be 10, and so forth.
25 37 C.F.R. § 380.3.
26 17 U.S.C. § 114(f)(2)(B), provides in pertinent part:
In establishing rates and terms for transmissions by eligible nonsubscription services and new
subscription services, the Copyright Royalty Judges shall establish rates and terms that most clearly
represent the rates and terms that would have been negotiated in the marketplace between a willing
buyer and a willing seller. In determining such rates and terms, the Copyright Royalty Judges shall
base [their] decision on economic, competitive and programming information presented by the
parties, including—
(i) whether use of the service may substitute for or may promote the sales of phonorecords or
otherwise may interfere with or may enhance the sound recording copyright owner’s other streams
of revenue from its sound recordings; and
(ii) the relative roles of the copyright owner and the transmitting entity in the copyrighted work and
the service made available to the public with respect to relative creative contribution, technological
contribution, capital investment, cost, and risk.
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to be considered, along with other relevant factors, to determine the rates under the willing
buyer/willing seller standard.27
The Board considered the proposals of representatives for “small” webcasters that rates be
structured as a percentage of revenue, but ultimately rejected them:
In short, among the parties on both sides who have proposed rates covering Commercial
Webcasters, only Small Commercial Webcasters propose a fee structure based solely on
revenue. However, in making their proposal, this group of five webcasters clearly is
unconcerned with the actual structure of the fee, except to the extent that a revenue-based fee
structure—especially one in which the percent of revenue fee is a single digit number (i.e.,
5%)—can protect them against the possibility that their costs would ever exceed their
revenues.... Small Commercial Webcasters’ focus on the amount of the fee, rather than how
it should be structured, is further underlined by the absence of evidence submitted by this
group to identify a basis for applying a pure revenue-based structure to them. While, at
times, they suggest that their situation as small commercial webcasters requires this type of
structure, there is no evidence in the record about how the Copyright Royalty Judges would
delineate between small webcasters and large webcasters.28
And, in a substantive footnote, the Board expressed its view that it lacks statutory authority to
carve out royalty rate niches for the emergent business models promoted by small commercial
webcasters:
It must be emphasized that, in reaching a determination, the Copyright Royalty Judges
cannot guarantee a profitable business to every market entrant. Indeed, the normal free
market processes typically weed out those entities that have poor business models or are
inefficient. To allow inefficient market participants to continue to use as much music as they
want and for as long a time period as they want without compensating copyright owners on
the same basis as more efficient market participants trivializes the property rights of
copyright owners. Furthermore, it would involve the Copyright Royalty Judges in making a
policy decision rather than applying the willing buyer/willing seller standard of the
Copyright Act.29
In setting the rates, the Board looked to proposed “benchmark” agreements to determine what a
hypothetical buyer and seller would agree to in the marketplace. It rejected the proposals
advanced by the radio broadcasters and small commercial webcasters that the appropriate
benchmark was the fee paid to performing rights organizations (PROs), such as ASCAP, BMI and
SESAC, for the digital public performance of the underlying musical composition. It also rejected
a proposal that analog over-the-air broadcast music radio be used as a benchmark, with reference
to musical composition royalties paid by such broadcasters to the PROs. Based on the evidence
before it, the Copyright Royalty Board found that the most appropriate benchmark agreements are
those in the market for interactive webcasting covering the digital performance of sound
recordings, with appropriate adjustments.30

27 72 FED. REG. at 24087.
28 Id. at 24088-89 (footnotes and citations omitted).
29 Id. note 8 at 24088.
30 Id. at 24092.
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In summary, the Copyright Royalty Board’s decision, like that of its predecessor, the CARP,
declines to delineate a separate class or to integrate a separate market analysis on behalf of
“small” webcasters.
Public Reaction
The expiration of the option to pay a percentage of revenues, to be replaced by a minium
payment, per-song per-listener formula, was, predictably, not well received in the small
webcasting business community, among others.31 Some Members of Congress voiced concern as
well.32
Parties to the proceeding before the CRB are appealing the Board’s decision. On April 16, 2007,
the Copyright Royalty Board issued an order denying rehearing.33 On May 30, 2007, several
parties, including the Digital Media Association, National Public Radio, and a coalition of small
commercial webcasters filed suit in the U.S. Court of Appeals for the D.C. Circuit requesting a
stay pending their appeal of the Board’s decision.34 The motion alleged that the Board’s decision
is arbitrary and capricious in several respects, but particularly with regard to the requirement of a
minimum fee “per station” or “per channel.”35 On July 11, 2007, a three-judge panel of the court
of appeals denied the emergency motion to delay the CRB decision pending the parties’ appeal.36
The separate appeals by the parties have been consolidated into one case.37 Oral argument was
heard in the case on March 19, 2009.38 A decision is likely to be issued by summer 2009.
Meanwhile, in parallel to the judicial proceedings, private negotiations between SoundExchange,
the organization charged with collecting and distributing performance royalties, and both large
and small webcasters are currently ongoing, in an attempt to reach a compromise royalty rate
agreement that would serve as an alternative to the payment scheme provided by the CRB
decision. Should the negotiations between the parties fail to reach a settlement, webcasters who

31 See, e.g., Robert Levine, “A Fee Per Song Can Ruin Us, Internet Radio Companies Say,” THE N.Y. TIMES, March 19,
2007 at C4. Doc Searles, Internet Radio on Death Row, posted March 8, 2007 at http://www.linuxjournal.com/
comment/reply/1000196; Carey Lening, “Policy Group Advocates Tech-Neutral Competitive Sound Recording
Royalty Rates,” 74 BNA PATENT, TRADEMARK & COPYRIGHT J. 93 (May 18, 2007).
32 “Royalty Board Sets Webcasting Royalties, Lawmakers Quick to Respond,” 73 BNA PATENT, TRADEMARK &
COPYRIGHT J. 1809 (March 9, 2007).
33 U.S. Copyright Royalty Judges, Order Denying Motions for Rehearing at http://www.loc.gov/crb/proceedings/2005-
1/motion-denial.pdf.
34 Digital Media Assoc. v. Copyright Royalty Board, No. 07-1172 (D.C.Cir. May 30, 2007). Motion for stay pending
appeal available online at BNA PATENT, TRADEMARK & COPYRIGHT J., at http://pub.bna.com/ptcj/DMAMay31.pdf.
35 Plaintiff/Appellants argue that a minimum fee per channel or station would lead to billions of dollars in royalty
payments, when the prior minimum fee for each licensee, regardless of channels or stations, could not exceed $2500.
Id. at 11.
36 Carey Lening, “Inslee Vows Not to Let Web ‘Music Die,’ But Court Won’t Delay New Royalty Rates,” 74 BNA
PATENT, TRADEMARK & COPYRIGHT J. 1826 (July 13, 2007).
37 Intercollegiate Broadcast System, Inc. v. Copyright Royalty Board, U.S. Court of Appeals for the District of
Columbia Circuit, Docket 07-1123.
38 Paul Maloney, Webcasters’ Oral Arguments in CRB Appeal Scheduled for March 19, RADIO AND INTERNET
NEWSLETTER (RAIN), Jan. 27, 2009; Michael Schmitt, Attorneys Argue During Webcast Royalty Appeal that Library of
Congress’ CRB Appointments Unconstitutional, RADIO AND INTERNET NEWSLETTER (RAIN), Mar. 20, 2009.
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did not remit the required royalty payments by the July 15, 2007, deadline may be responsible for
substantial late fees, as interest has been accruing on overdue payments since that date.39
In response to a request from the House Judiciary Subcommittee on Courts, the Internet and
Intellectual Property, SoundExchange offered in May 2007 to extend the terms of the SWSA,
with some modifications, to certain qualified small webcasters through 2010.40 “Small”
webcasters, those with annual revenues of less than $1.25 million, could pay royalties based on a
percentage of revenue model, that is, fees of 10 percent of all gross revenue up to $250,000, and
12 percent for gross revenue above that amount. SoundExchange’s proposal for small webcasters,
however, was met by criticism that the deal would effectively restrict small webcasters from
becoming larger, more profitable businesses and would limit the diversity of music that may be
played.41
Another proposal that was discussed and subsequently agreed to between several of the largest
webcasters and SoundExchange is a $50,000 per year cap on the $500 annual-per-channel
minimum fee through 2010.42 In exchange for this cap, the webcasters agreed to provide
SoundExchange with a comprehensive annual accounting of all songs performed (24 hours a day,
365 days a year) and to form a committee with SoundExchange to evaluate the issue of
unauthorized copying of Internet radio streams (a practice known as “streamripping,” or the
process of converting ephemeral Internet-streamed content into permanent recordings). The
agreement does not require webcasters to implement technological measures aimed at preventing
their listeners from engaging in streamripping, however.43
In a unilateral offer put forth by SoundExchange, qualified small webcasters (those earning $1.25
million or less in total revenues) would be permitted to stream sound recordings of all
SoundExchange members by paying royalties under the old percentage-of-revenue scheme.44
Over twenty small webcasters have since accepted this offer, the terms of which are retroactive to
January 1, 2006, and continue through December 31, 2010.45
Although the parties have agreed to cap the annual-per-channel minimum royalty fee at $50,000,
the actual royalty rates (per-song, per-listener) mandated by the CRB’s decision have not yet been

39 Jeff Cox, “Internet Radio Gets a Reprieve,” CNNMoney.com (July 17, 2007), at http://money.cnn.com/2007/07/17/
technology/internet_radio/.
40 Press Release, SoundExchange, “SoundExchange Extends Offer to Small Webcasters,” May 22, 2007, available at
http://sev.prnewswire.com/entertainment/20070522/DCTU07222052007-1.html.
41 See David Oxenford, “Another Offer From SoundExchange—Still Not a Solution,” at
http://www.broadcastlawblog.com/archives/internet-radio-another-offer-from-soundexchange-still-not-a-solution.html.
These critics observe that the agreement only allows the small webcasters to play sound recordings from
SoundExchange members, which does not include many independent artists and record labels. Webcasters interested in
playing music made by artists not represented by SoundExchange must pay the full royalty rates set forth in the
Copyright Royalty Board’s decision. Id.
42 Press Release, SaveNetRadio, “Agreement Reached to Remove Billion Dollar Threat to Webcasters,” August 23,
2007, at http://www.savenetradio.org/press_room/press_releases/070823-minimum_fee_cap.pdf.
43 Press Release, SoundExchange, “SoundExchange Reaches Accord on Minimum Fee Cap,” August 23, 2007,
available at http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/08-23-2007/
0004650734&EDATE=.
44 Press Release, SoundExchange, “SoundExchange Offers Small Webcasters Discounted Rate Agreement Through
2010,” August 21, 2007, available at http://sev.prnewswire.com/entertainment/20070821/DC0192021082007-1.html.
45 Press Release, SoundExchange, “Small Webcasters Embrace SoundExchange Offer on Discounted Rate,” Sept. 18,
2007, available at http://sev.prnewswire.com/computer-electronics/20070918/DCTU04318092007-1.html.
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altered through settlement negotiations. These royalty rates, which increase each year until 2010,
are still a cause for concern among webcasters that did not accept or did not qualify for
SoundExchange’s offer to small webcasters.
Congressional Response
Two bills related to the CRB’s decision were introduced in the 110th Congress (H.R. 2060 and S.
1353) that would have nullified the Board’s decision and substituted different rates and terms.
Another bill was introduced and passed by the 110th Congress (the Webcaster Settlement Act of
2008, P.L. 110-435) that authorized SoundExchange to enter into settlement agreements with
webcasters that effectively replace the CRB’s decision. No legislation has been introduced in the
111th Congress regarding this issue, as of the date of this report.
H.R. 2060, 110th Cong., 1st Sess. (2007), the Internet Radio Equality
Act
H.R. 2060 would have expressly nullified the Board’s rate determination and repeal the willing
buyer/willing seller standard under § 114(f)(2)(B). It would have replaced the standard with
objectives set forth under 17 U.S.C. § 801(b)(1), namely, that rates be calculated to realize the
objectives:
(A) To maximize the availability of creative works to the public.
(B) To afford the copyright owner a fair return for his or her creative work and the copyright
user a fair income under existing economic conditions.
(C) To reflect the relative roles of the copyright owner and the copyright user in the product
made available to the public with respect to relative creative contribution, technological
contribution, capital investment, cost, risk, and contribution to the opening of new markets
for creative expression and media for their communication.
(D) To minimize any disruptive impact on the structure of the industries involved and on
generally prevailing industry practices.46
These standards apply to terms and rates for other compulsory license royalty payments, in
general,47 and to the preexisting subscription services eligible under § 114(d)(2).48 Hence, it was
the goal of the legislation to create “royalty parity”among the different delivery systems.49 The
bill would have capped a minimum annual royalty at $500 for each service provider.50

46 17 U.S.C. § 801(b)(1).
47 Specifically, these objectives are designed to determine reasonable royalty payments under §§ 112(e), 114, 115, 116,
118, 119 and 1004. Id.
48 The preexisting subscription services include satellite digital audio radio services. For more background, see Library
of Congress, Copyright Office, Designation as a Preexisting Subscription Service: Final Order, 71 FED. REG. 64639
(November 3, 2006), available online at http://www.copyright.gov/fedreg/2006/71fr64639.pdf.
49 153 CONG. REC. E874 (daily ed. April 26, 2007) (statement of Rep. Inslee).
50 H.R. 2060, § 3.
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For the period covered by the Board’s decision, that is, from January 1, 2006, through December
31, 2010, rates established by the bill would have been as follows:
• 0.33 cents per hour of sound recordings transmitted to a single listener; or,
• 7.5 percent of the annual revenues received by the provider that are directly
related to the provider’s digital transmissions of sound recordings.
Providers could have selected their payment method. Hence, all nonsubscription, noninteractive
Internet radio webcasters eligible for the statutory license under § 114(f) would have had the
option of paying pursuant to a per-hour, per-listener or percentage-of-revenue basis. For the next
determination of royalty rates (governing the period from 2011-2015), the Board would have
been required to apply the more flexible standards under § 801, which are already used in
connection with preexisting subscription services under § 114(f)(1).
The bill would have amended 17 U.S.C. § 118, entitled “Scope of exclusive rights: Use of certain
works in connection with noncommercial broadcasting,” which includes a compulsory license for
noncommercial broadcasters, such as National Public Radio, to include digital performance of
sound recordings, i.e., webcasting. It would have broadened the scope of “nonprofit institution” to
encompass college radio.51 It included a transitional rate of 1.5 times the total fees paid for
applicable usage in the year 2004.
Finally, the bill would have required analysis and reports on the competitiveness of the Internet
radio market place and other matters by the National Telecommunications and Information
Administration in the Department of Commerce, the Federal Communications Commission, and
the Corporation for Public Broadcasting.
S. 1353, 110th Cong., 1st Sess. (2007), the Internet Radio Equality Act
Introduced in the Senate as a companion to H.R. 2060, S. 1353 took the same general approach as
the House bill. It had slightly different transition rates for noncommercial broadcasters under §
118, and omitted the reporting requirements in the House bill.
The sponsors in both the House and the Senate emphasized that the goal of the legislation was to
promote greater equality, that is rate parity, among webcasters who utilize compulsory licensing.52
Unlike the SWSA, it was not directed solely at small commercial webcasters. Furthermore, it did
not alter the historically based exemption that terrestrial broadcasters receive from paying any
copyright royalty for the performance of sound recordings.
P.L. 110-435, the Webcaster Settlement Act of 2008
The Webcaster Settlement Act (WSA) of 2008, H.R. 7084, was introduced on September 25,
2008, by Representative Inslee and then subsequently approved by voice vote in the House on
September 27 and by unanimous consent in the Senate on September 30. It was signed by

51 153 CONG. REC. S5931 (daily ed. May 10, 2007) (statement of Sen. Wyden).
52 A broader approach to technology-neutral music licensing is set forth in S. 256, 110th Cong., 1st Sess. (2007). For
background, see CRS Report RL33922, Platform Equality and Remedies for Rights Holders in Music Act of 2007 (S.
256): Section-by-Section Analysis, by Kate M. Manuel and Brian T. Yeh.
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President Bush on October 16, 2008 (P.L. 110-435). The purpose of the act was to provide limited
statutory authority for SoundExchange to negotiate and enter into alternative royalty fee
agreements with webcasters that would replace the rates established under the CRB’s decision,
while Congress was in recess for the November 2008 elections.53 However, the act provided a
limited period of time for reaching voluntary accords, as it terminated SoundExchange’s authority
to make settlements with webcasters on February 15, 2009.54 These agreements “shall be binding
on all copyright owners of sound recordings and other persons entitled to payment ... in lieu of
any determination [of royalty rates] by the Copyright Royalty Judges.”55 However, the act did not
mandate that SoundExchange negotiate agreements with webcasters.56
The WSA amended 17 U.S.C. § 114(f)(5), which had been added to the Copyright Act by the
“Small Webcaster Settlement Act of 2002.”57 The act deleted references to “small” webcasters,
thereby allowing the section to pertain to all webcasters regardless of size.58 The act also amended
the section to state that agreements “may” include provisions for payment of royalties on the
basis of a percentage of revenue or expenses, or both, and a minimum fee; the section originally
provided that agreements “shall” contain these terms.59 The WSA also provided that the terms of
a negotiated agreement may be effective for up to a period of 11 years beginning on January 1,
2005.60 The act permitted any agreement to be precedential in future CRB rate-making
proceedings, if the parties to the agreement so expressly authorized.61 Finally, the act declared
that nothing in the WSA (or any agreement entered into under the WSA) shall be taken into
account by the U.S. Court of Appeals for the District of Columbia Circuit in its review of the May
1, 2007, determination of royalty rates by the Copyright Royalty Judges.62 As noted earlier, oral
arguments in this case were heard on March 19, 2009.
Recent Developments
Three negotiated royalty agreements have been made under the authority of the Webcaster
Settlement Act of 2008. The Corporation for Public Broadcasting (CPB) and SoundExchange
announced on January 15, 2009, that they had reached a “comprehensive agreement” on the

53 A privately negotiated agreement is not effective without congressional approval after the CRB has issued a decision
on royalty rates for a statutory license—thus, the parties would continue to be bound by the CRB decision. See 154
CONG. REC. H10279 (daily ed. Sept. 27, 2008) (statement of Rep. Howard Berman) (“Because the parties will not be
able to finish their negotiations before Congress recesses, however, and because authority by Congress is required for a
settlement to take effect under the government compulsory license, we are pushing this legislation that will grant such
authority and hope the negotiations will continue in a positive direction for both sides.”).
54 H.R. 7084, § 2(5).
55 H.R. 7084, § 2(1)(C), modifying 17 U.S.C. § 114(f)(5)(A).
56 H.R. 7084 leaves unchanged language in 17 U.S.C. § 114(f)(5)(A) that notes: “The receiving agent [SoundExchange]
shall be under no obligation to negotiate any such agreement. The receiving agent shall have no obligation to any
copyright owner of sound recordings or any other person entitled to payment under this section in negotiating any such
agreement, and no liability to any copyright owner of sound recordings or any other person entitled to payment under
this section for having entered into such agreement.”
57 P.L. 107-321.
58 H.R. 7084, §§ 2(1)(A), 2(2), 3(B), 4(A).
59 H.R. 7084, § 2(1)(D).
60 H.R. 7084, § 2(1)(B).
61 H.R. 7084, § 2(3)(C).
62 H.R. 7084, § 2(4)(B).
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royalty rates to be paid for Internet streaming of sound recordings by approximately 450 public
radio webcasters, including CPB-supported station websites, NPR, NPR members, National
Federation of Community Broadcasters members, American Public Media, Public Radio
Exchange, and Public Radio International.63 The agreement, which substitutes for the statutory
rates determined by the CRB in May 2007, covers a royalty period from January 1, 2005,64
through December 31, 2010. Under the agreement, CPB is required to pay SoundExchange a
single, “up-front” flat-fee royalty payment of $1.85 million. In addition, CPB, on behalf of the
public radio system, is to provide SoundExchange with consolidated usage and playlist reporting
in order to “improve the efficiency of the payment process helping to ensure that performers and
sound recording copyright owners are accurately paid for the use of their recordings.”65 As a
condition of the agreement, NPR also agreed to drop its appeal of the CRB’s royalty rate decision.
On February 15, 2009, the National Association of Broadcasters (NAB) and SoundExchange
informed the Copyright Office that they had made an agreement that covers an extended royalty
period (from January 1, 2006, through December 31, 2015) for terrestrial AM or FM radio
broadcasters (licensed by the Federal Communications Commission) who simulcast their signal
or stream other programming over the Internet.66 The negotiated agreement calls for each
broadcaster to pay an annual minimum fee of $500 for each of its channels, although no
broadcaster is required to pay more than $50,000 on the minimum fees.67 In addition,
broadcasters must pay royalty rates on a per-performance basis, as follows:
Table 1. Royalty Rates for Local Radio Broadcasters Who Stream Music
Over the Internet
Year
Rate Per Performance (per song, per listener)
2006 $0.008
2007 $0.0011
2008 $0.0014
2009 $0.0015
2010 $0.0016
2011 $0.0017
2012 $0.0020
2013 $0.0022

63 Corporation for Public Broadcasting, Agreement Reached for Public Radio’s Webcasting Royalty Rates, available at
http://www.cpb.org/pressroom/release.php?prn=699.
64 The 2005 date is not a typographic error. The Webcaster Settlement Act of 2008 permitted parties to negotiate rates
governing a royalty period “of not more than 11 years beginning on January 1, 2005.” P.L. 110-435, § 2 (amending 17
U.S.C. § 114(f)(5)(A)). Therefore, the law allowed negotiated agreements to apply retroactively from the start of 2005,
compared with the CRB’s decision that covers a royalty period beginning on January 1, 2006. The Corporation for
Public Broadcasting’s license establishes a royalty payment for a period that began on January 1, 2005, whereas the
other two agreements discussed in this section use royalty periods that commence on January 1, 2006.
65 Corporation for Public Broadcasting, Agreement Reached for Public Radio’s Webcasting Royalty Rates, available at
http://www.cpb.org/pressroom/release.php?prn=699.
66 U.S. Copyright Office, Library of Congress, Notification of Agreements Under the Webcaster Settlement Act of 2008,
74 Fed. Reg. 9293, 9299 (Mar. 3, 2009).
67 Id. at 9300.
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Year
Rate Per Performance (per song, per listener)
2014 $0.0023
2015 $0.0025
Source: CRS presentation of royalty rates published by the U.S. Copyright Office in the Federal Register, 74
Fed. Reg. 9293, 9300 (Mar. 3, 2009).
Broadcasters must also submit, on a monthly basis, “census” reports to SoundExchange that
detail information about the songs that they play over the Internet, including song title, artist,
album, number of times a song is played, and the number of listeners for each song.68 “Small”
broadcasters that stream less than 27,777 aggregate tuning hours per year may pay $100 per year
to obtain a waiver from this detailed annual census reporting requirement.69
Finally, on February 15, 2009, a limited number of “small” webcasters reached an agreement with
SoundExchange for the same royalty period as the NAB’s license (2006-2015).70 The webcasters
that are party to this agreement must comply with census reporting requirements71 and pay annual
minimum fees that vary from $500 to $5,000, depending on specified gross revenue limits.72 The
negotiated royalty rate for these small webcasters73 is as follows:
Table 2. Royalty Rates for Eligible Small Webcasters, 2006-2015
Transmissions Not Exceeding 5,000,000
Transmissions Exceeding 5,000,000 Aggregate
Aggregate Tuning Hours per month –
Tuning Hours per month –
the greater of:
Either the rates provided by the CRB for the royalty period
2006-2010 or the “then-applicable commercial webcasting
(1) 10% of the smal webcaster’s first $250,000 in
rates” for the royalty period 2011-2015.
gross revenues, or 12% of any gross revenues in
excess of $250,000, or
(2) 7% of the small webcaster’s annual expenses
Source: CRS presentation of royalty rates published by the U.S. Copyright Office in the Federal Register, 74
Fed. Reg. 9293, 9303 (Mar. 3, 2009).
All of the three agreements described above provide that their rates and terms are
nonprecedential, and “shall not be admissible as evidence or otherwise taken into account in any

68 Id. at 9301.
69 Id. at 9300.
70 This group of “small webcasters” are Attention Span Radio; Blogmusik (Deezer.com); Born Again Radio; Christmas
Music 24/7; Club 80’s Internet Radio; Dark Horse Productions; Edgewater Radio; Forever Cool (Forevercool.us);
Indiwaves (Set YourMusicFree.com); Ludlow Media (MandarinRadio.com); Musical Justice; My Jazz Network;
PartiRadio; Playa Cofi Jukebox (Tropicalglen.com); Soulsville Online; taintradio; Voice of Country; and Window To
The World Communications (WFMT.com). Id. at 9294, note 1.
71 Id. at 9305.
72 For example, there is a $500 annual minimum fee for “microcasters” who had gross annual revenues not exceeding
$5,000 and made transmissions not exceeding 18,067 aggregate tuning hours; a $2,000 minimum fee for small
webcasters with less than $50,000 gross revenues; and a $5,000 minimum fee for small webcasters with gross revenues
of more than $50,000. Id. at 9303, 9306.
73 These royalty rates do not apply to “microcasters,” who need only pay the minimum annual fees and a $100 fee to be
exempt from the census reporting requirements. Id. at 9303.
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administrative, judicial, or other government proceeding involving the setting or adjustment of”
royalties for Internet transmission of copyrighted music.74
CRB Proceedings to Determine Royalty Rates for 2011-2015
Although the past two years have been consumed with the reactions to the CRB’s May 2007
decision in various private and public settings, time marches on, and the CRB announced on
January 5, 2009, that it would soon begin the third proceeding to determine the royalty rates for
the statutory license covering Internet transmissions of sound recordings, applicable to the next
royalty period that runs from January 1, 2011, through December 31, 2015.75

Author Contact Information

Brian T. Yeh

Legislative Attorney
byeh@crs.loc.gov, 7-5182





74 Id. at 9295, 9302.
75 Copyright Royalty Board, Library of Congress, Digital Performance in Sound Recordings and Ephemeral
Recordings, 74 Fed. Reg. 318 (Jan. 5, 2009).
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