[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5469 Engrossed in House (EH)]


  2d Session

                               H. R. 5469

_______________________________________________________________________

                                 AN ACT

 To amend title 17, United States Code, with respect to the statutory 
            license for webcasting, and for other purposes.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
107th CONGRESS
  2d Session
                                H. R. 5469

_______________________________________________________________________

                                 AN ACT


 
 To amend title 17, United States Code, with respect to the statutory 
            license for webcasting, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION. 1. SHORT TITLE.

    This Act may be cited as the ``Small Webcaster Amendments Act of 
2002''.

SEC. 2. EPHEMERAL ROYALTY RATES FOR ELIGIBLE SMALL WEBCASTERS.

    Section 112(e) of title 17, United States Code, is amended--
            (1) in paragraph (4), by inserting immediately before the 
        period at the end of the first sentence the following: ``, 
        except that the royalty payable under this section for any 
        reproduction of a phonorecord made during the period beginning 
        on October 28, 1998, and ending on December 31, 2004, and used 
        solely by an eligible small webcaster to facilitate 
        transmissions for which it pays royalties as and when provided 
        in section 114(f)(2)(D) shall be deemed to be included within 
        such royalty payments''; and
            (2) in paragraph (6), by adding at the end the following: 
        ``Notwithstanding the preceding provisions of this paragraph, 
        the royalty payable under this section for any reproduction of 
        a phonorecord made during the period beginning on October 28, 
        1998, and ending on December 31, 2004, and used solely by an 
        eligible small webcaster to facilitate transmissions for which 
        it pays royalties as and when provided in section 114(f)(2)(D) 
        shall be deemed to be included within such royalty payments.''

SEC. 3. ROYALTY RATES AND NOTICE AND RECORDKEEPING FOR ELIGIBLE SMALL 
              WEBCASTERS.

    (a) Provision for Certain Rates.--Section 114(f)(2) of title 17, 
United States Code, is amended--
            (1) in subparagraph (B), by inserting immediately before 
        the period at the end of the first sentence the following: ``, 
        except that the royalty rates for certain public performances 
        of sound recordings shall be as provided in subparagraph (D)''; 
        and
            (2) in subparagraph (C), by adding after clause (iii) the 
        following:
            ``(iv) Notwithstanding the preceding provisions of this 
        subparagraph, the royalty rates and terms for certain public 
        performances of sound recordings by certain entities shall be 
        as provided in subparagraph (D).''.
    (b) Rates for Eligible Small Webcasters.--Section 114(f)(2) of 
title 17, United States Code, is amended by adding after subparagraph 
(C) the following:
            ``(D)(i) Subject to clause (iii) and paragraph (3), but 
        notwithstanding any other provision of this paragraph, an 
        eligible small webcaster may, as provided in clause (ii)(VII), 
        for the period beginning on October 28, 1998, and ending on 
        December 31, 2002, or one or both of calendar years 2003 and 
        2004, elect the royalty rates specified in this clause in lieu 
        of any other applicable royalty rates:
                    ``(I) For eligible nonsubscription transmissions 
                made by an eligible small webcaster during the period 
                beginning on October 28, 1998, and ending on December 
                31, 2002, the royalty rate shall be 8 percent of the 
                webcaster's gross revenues during such period, or 5 
                percent of the webcaster's expenses during such period, 
                whichever is greater, except that an eligible small 
                webcaster that is a natural person shall exclude from 
                expenses those expenses not incurred in connection with 
                the operation of a service that makes eligible 
                nonsubscription transmissions, and an eligible small 
                webcaster that is a natural person shall exclude from 
                gross revenues his or her income during such period, 
                other than income derived from--
                            ``(aa) a media or entertainment related 
                        business that provides audio or other 
                        entertainment programming, or
                            ``(bb) a business that primarily operates 
                        an Internet or wireless service,
                that is in either case directly or indirectly 
                controlled by such natural person, or of which such 
                natural person beneficially owns 5 percent or more of 
                the outstanding voting or non-voting stock.
                    ``(II) For eligible nonsubscription transmissions 
                made by an eligible small webcaster during 2003 or 
                2004, the royalty rate shall be 10 percent of the 
                eligible small webcaster's first $250,000 in gross 
                revenues and 12 percent of any gross revenues in excess 
                of $250,000 during the applicable year, or 7 percent of 
                the webcaster's expenses during the applicable year, 
                whichever is greater.
            ``(ii) Notwithstanding paragraph (4)(C), payment of the 
        amounts specified in clause (i) shall be made as follows:
                    ``(I) Except as provided in clause (iii)(I) and 
                (IV), the amounts specified in clause (i)(I) for 
                eligible nonsubscription transmissions made by an 
                eligible small webcaster during the period beginning on 
                October 28, 1998, and ending on September 30, 2002, 
                shall 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.
                    ``(II) The amounts specified in clause (i) for 
                eligible nonsubscription transmissions made by an 
                eligible small webcaster during October 2002 or any 
                month thereafter shall be paid on or before the 
                twentieth day of the month next succeeding such month.
                    ``(III) If the gross revenues, plus the third party 
                participation revenues and revenues from the operation 
                of new subscription services, of a transmitting entity 
                and its affiliates have not exceeded $1,250,000 in any 
                year, and the transmitting entity expects to be an 
                eligible small webcaster in 2003 or 2004, the 
                transmitting entity may make payments for 2003 or 2004, 
                as the case may be, on the assumption that it will be 
                an eligible small webcaster for that year for so long 
                as that assumption is reasonable.
                    ``(IV) In making payments under clause (i)(II), the 
                webcaster shall, at the time a payment is due, 
                calculate its gross revenues and expenses for the year 
                through the end of the applicable month, and for the 
                applicable month pay the applicable percentage of gross 
                revenues or expenses, as the case may be, for the year 
                through the end of the applicable month, less any 
                amounts previously paid for such year.
                    ``(V) If a transmitting entity has made payments 
                under clause (i)(II) for 2003 or 2004 based on the 
                assumption that it will qualify as an eligible small 
                webcaster, as provided in subclause (IV), but the 
                actual gross revenues in 2003, or the actual gross 
                revenues, third party participation revenues, and 
                revenues from the operation of new subscription 
                services in 2004, of the eligible small webcaster and 
                its affiliates, exceed the maximum amounts provided in 
                clause (vi)(II), then the transmitting entity shall 
                immediately commence to pay monthly royalties based on 
                the royalty rates otherwise applicable under this 
                subsection, and on the third payment date after the 
                month in which such maximum amounts are exceeded, it 
                shall pay an amount of royalties based on such 
                otherwise applicable rates for the whole year through 
                the end of the immediately preceding month, less any 
                amounts previously paid under clause (i) for such year.
                    ``(VI) Payments of all amounts specified in clause 
                (i) shall be made to the entity designated by the 
                Copyright Office to receive royalty payments under this 
                section and shall under no circumstances be refundable, 
                but if an eligible small webcaster makes overpayments 
                during a year, it shall be entitled to a credit in the 
                amount of its overpayment, and such credit shall be 
                applicable to its payments in subsequent years.
                    ``(VII) An eligible small webcaster that wishes to 
                elect the royalty rates specified in clause (i) in lieu 
                of any other royalty rates that otherwise might apply 
                under this subsection for the period beginning on 
                October 28, 1998, and ending on December 31, 2002, or 
                one or both of calendar years 2003 and 2004, shall file 
                an election with the Copyright Office and serve it on 
                each entity designated by the Copyright Office to 
                distribute royalty payments under this section to 
                copyright owners and performers entitled to receive 
                royalties under subsection (d)(2) by no later than the 
                first date on which the webcaster is obligated under 
                this clause to make a royalty payment for such period. 
                An eligible small webcaster that fails to make a timely 
                election shall pay royalties as otherwise provided 
                under this section. As a condition of such election, an 
                eligible small webcaster shall--
                            ``(aa) make available to the entity 
                        designated to receive royalties under this 
                        section, on request at any time during the 3 
                        years following the applicable period, 
                        sufficient evidence to support its eligibility 
                        as an eligible small webcaster; and
                            ``(bb) provide to such entity, by not later 
                        than January 31 of the year following the 
                        applicable period, an accounting of its third 
                        party participation revenues.
                The entity designated to receive royalties under this 
                section may share with individual copyright owners the 
                accounting provided by an eligible small webcaster 
                under division (bb) if such entity does so in such a 
                way that the eligible small webcaster cannot readily be 
                identified.
            ``(iii) Notwithstanding clause (i), eligible small 
        webcasters that elect the royalty rates specified in clause (i) 
        shall pay a minimum fee for the periods specified in this 
        clause, as follows:
                    ``(I) For eligible nonsubscription transmissions 
                made by an eligible small webcaster during the period 
                beginning on October 28, 1998, and ending on December 
                31, 1998, the minimum fee for the year shall be $500.
                    ``(II) For eligible nonsubscription transmissions 
                made by an eligible small webcaster in any part of 
                calendar years 1999 through 2002, the minimum fee for 
                each year in which such transmissions are made shall be 
                $2,000.
                    ``(III) For eligible nonsubscription transmissions 
                made by an eligible small webcaster in any part of 
                calendar years 2003 and 2004, the minimum fee for each 
                year in which such transmissions are made shall be 
                $2,000 if the eligible small webcaster had gross 
                revenues during the immediately preceding year of not 
                more than $50,000 and expects to have gross revenues 
                during the applicable year of not more than $50,000.
                    ``(IV) For eligible nonsubscription transmissions 
                made by an eligible small webcaster in any part of 
                calendar years 2003 and 2004, the minimum fee for each 
                year in which such transmissions are made shall be 
                $5,000 if the eligible small webcaster had gross 
                revenues during the immediately preceding year of more 
                than $50,000 or expects to have gross revenues during 
                the applicable year of more than $50,000.
                    ``(V) The minimum fees specified in subclauses (I) 
                and (II) shall be paid within 30 days after the date of 
                the enactment of the Small Webcaster Amendments Act of 
                2002, except in the case of an eligible small webcaster 
                with gross revenues during the period beginning on 
                October 28, 1998, and ending on December 31, 2002, of 
                not more than $100,000, which may pay such minimum fees 
                in three equal installments at the times specified in 
                clause (ii)(I). The minimum fees specified in 
                subclauses (III) and (IV) shall be paid in two equal 
                installments, with the first due by January 31 of the 
                applicable year and the second due by June 30 of the 
                applicable year.
                    ``(VI) Payments of all amounts specified in this 
                clause shall be made to the entity designated by the 
                Copyright Office to receive royalty payments under this 
                section and shall under no circumstances be refundable.
                    ``(VII) All amounts paid under this clause shall be 
                fully creditable toward amounts due under clauses (i) 
                and (ii) for the same year.
            ``(iv) Subject to paragraph (3), but notwithstanding any 
        other provision of this paragraph, a noncommercial, non-FCC 
        webcaster may, for the period beginning on October 28, 1998, 
        and ending on December 31, 2002, or one or both of calendar 
        years 2003 and 2004, elect the royalty rates specified in this 
        clause in lieu of any other royalty rates that otherwise might 
        apply under this section. The royalty rate shall be .02 cents 
        per performance. For the purpose of this clause, the term 
        `performance' has the meaning given that term in section 261.2 
        of title 37, Code of Federal Regulations, as published in the 
        Federal Register on July 8, 2002. Such royalties shall be 
        payable at the times specified in clause (ii)(I) and (II). 
        Noncommercial, non-FCC webcasters shall pay a minimum fee, for 
        any part of calendar years 1998 through 2004, of $500 for each 
        year in which such performances are made. Such minimum fee 
        shall be fully creditable toward royalties due for the same 
        year. For performances made during the period beginning on 
        October 28, 1998, and ending on December 31, 2002, such minimum 
        fee shall be paid within 30 days after the date of the 
        enactment of the Small Webcaster Amendments Act of 2002. The 
        minimum fee for a subsequent year shall be paid by January 31 
        of that year. All payments specified in this clause shall be 
        made to the entity designated by the Copyright Office to 
        receive royalty payments under this section and shall under no 
        circumstances be refundable.
            ``(v) Any otherwise applicable terms determined in 
        accordance with this paragraph and applicable to payments under 
        this paragraph shall apply to payments under this subparagraph 
        except to the extent inconsistent with this subparagraph.
            ``(vi) 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 or that meet the objectives set forth in 
        section 801(b)(1).
            ``(E) As used in subparagraph (D), the following terms have 
        the following meanings:
                    ``(i) An `affiliate' of a transmitting entity is a 
                person or entity that directly, or indirectly through 
                one or more intermediaries --
                            ``(I) has securities or other ownership 
                        interests representing more than 50 percent of 
                        such person's or entity's voting interests 
                        beneficially owned by--
                                    ``(aa) such transmitting entity; or
                                    ``(bb) a person or entity 
                                beneficially owning securities or other 
                                ownership interests representing more 
                                than 50 percent of the voting interests 
                                of the transmitting entity;
                            ``(II) beneficially owns securities or 
                        other ownership interests representing more 
                        than 50 percent of the voting interests of the 
                        transmitting entity; or
                            ``(III) otherwise controls, is controlled 
                        by, or is under common control with the 
                        transmitting entity.
                    ``(ii) A `beneficial owner' of a security or other 
                ownership interest is any person or entity who, 
                directly or indirectly, through any contract, 
                arrangement, understanding, relationship, or otherwise, 
                has or shares voting power with respect to such 
                security or other ownership interest.
                    ``(iii) The term `control' means the possession, 
                direct or indirect, of the power to direct or cause the 
                direction of the management and policies of a person or 
                entity, whether through the ownership of voting 
                securities, by contract or otherwise.
                    ``(iv)(I) Subject to subclause (II), an `eligible 
                small webcaster' is a webcaster (as defined in section 
                261.2 of title 37, Code of Federal Regulations, as 
                published in the Federal Register on July 8, 2002) 
                that--
                            ``(aa) for the period beginning on October 
                        28, 1998, and ending on December 31, 2002, has 
                        gross revenues during the period beginning on 
                        November 1, 1998, and ending on June 30, 2002, 
                        of not more than $1,000,000;
                            ``(bb) for 2003, together with its 
                        affiliates, has gross revenues during 2003 of 
                        not more than $500,000; and
                            ``(cc) for 2004, together with its 
                        affiliates, has gross revenues, third party 
                        participation revenues, and revenues from the 
                        operation of new subscription services during 
                        2004 of not more than $1,250,000.
                    ``(II) In determining qualification under 
                subclauses (I)(bb) and (cc), a transmitting entity 
                shall exclude--
                            ``(aa) income of an affiliate that is a 
                        natural person, other than income such natural 
                        person derives from another affiliate of such 
                        natural person that is either a media or 
                        entertainment related business that provides 
                        audio or other entertainment programming, or a 
                        business that primarily operates an Internet or 
                        wireless service; and
                            ``(bb) gross revenues of any affiliate that 
                        is not engaged in a media or entertainment 
                        related business that provides audio or other 
                        entertainment programming, and is not engaged 
                        in a business that primarily operates an 
                        Internet or wireless service, if the only 
                        reason such affiliate is affiliated with the 
                        transmitting entity is that it is under common 
                        control of the same natural person or both are 
                        beneficially owned by the same natural person.
                    ``(v) The term `expenses'--
                            ``(I) means all costs incurred (whether 
                        actually paid or not) by an eligible small 
                        webcaster, except that capital costs shall be 
                        treated as expenses allocable to a period only 
                        to the extent of charges for amortization or 
                        depreciation of such costs during such period 
                        as are properly allocated to such period in 
                        accordance with United States generally 
                        accepted accounting principles (GAAP);
                            ``(II) includes the fair market value of 
                        all goods, services, or other non-cash 
                        consideration (including real, personal, 
                        tangible, and intangible property) provided by 
                        an eligible small webcaster to any third party 
                        in lieu of a cash payment and the fair market 
                        value of any goods or services purchased for or 
                        provided to an eligible small webcaster by an 
                        affiliate of such webcaster; and
                            ``(III) shall not include--
                                    ``(aa) the imputed value of 
                                personal services rendered by up to 5 
                                natural persons who are, directly or 
                                indirectly, owners of the eligible 
                                small webcaster, and for which no 
                                compensation has been paid;
                                    ``(bb) the imputed value of 
                                occupancy of residential property for 
                                which no Federal income tax deduction 
                                is claimed as a business expense; or
                                    ``(cc) costs of purchasing 
                                phonorecords of sound recordings used 
                                in the eligible small webcaster's 
                                service.
                    ``(vi) The term `gross revenues'--
                            ``(I) means all revenue of any kind earned 
                        by a person or entity, less --
                                    ``(aa) revenue from sales of 
                                phonorecords and digital phonorecord 
                                deliveries of sound recordings;
                                    ``(bb) the person or entity's 
                                actual cost of other products and 
                                services actually sold through a 
                                service that makes eligible 
                                nonsubscription transmissions, and 
                                related sales and use taxes imposed on 
                                such transactions, costs of shipping 
                                such products, allowance for bad debts, 
                                and credit card and similar fees paid 
                                to unrelated third parties;
                                    ``(cc) revenue from the operation 
                                of a new subscription service for which 
                                royalties are paid in accordance with 
                                provisions of this section other than 
                                this subparagraph; and
                                    ``(dd) revenue from the sale of 
                                assets in connection with the sale of 
                                all or substantially all of the assets 
                                of such person's or entity's business, 
                                or from the sale of capital assets; and
                            ``(II) includes--
                                    ``(aa) all cash or cash 
                                equivalents;
                                    ``(bb) the fair market value of 
                                goods, services, or other non-cash 
                                consideration (including real, 
                                personal, tangible, and intangible 
                                property); and
                                    ``(cc) amounts earned by such 
                                person or entity but paid to an 
                                affiliate of such person or entity in 
                                lieu of payment to such person or 
                                entity.
                        Gross revenues shall be calculated in 
                        accordance with United States generally 
                        accepted accounting principles (GAAP), except 
                        that a transmitting entity that computes 
                        Federal taxable income on the basis of the cash 
                        receipts and disbursements method of accounting 
                        for any taxable year may compute its gross 
                        receipts for any period included in such 
                        taxable year on the same basis.
                    ``(vii) A `noncommercial, non-FCC webcaster' is a 
                webcaster as defined in section 261.2 of title 37, Code 
                of Federal Regulations, as published in the Federal 
                Register on July 8, 2002, that is exempt from taxation 
                under section 501 of the Internal Revenue Code of 1986 
                (26 U.S.C. 501).
                    ``(viii) The `third party participation revenues' 
                of a transmitting entity are revenues of any kind 
                earned by a person or entity, other than the 
                transmitting entity, including those identified in 
                divisions (aa), (bb), and (cc) of clause (vi)(II)--
                            ``(I) that relate to the public performance 
                        of sound recordings and are subject to an 
                        economic arrangement in which the transmitting 
                        entity receives anything of value; or
                            ``(II) that are earned by such person or 
                        entity from the sale of advertising of any kind 
                        in connection with the transmitting entity's 
                        eligible nonsubscription transmissions.''.
    (c) Notice and Recordkeeping.--Section 114(f)(4)(A) of title 17, 
United States Code, is amended--
            (1) by striking ``(A) The'' and inserting ``(A)(i) Subject 
        to clauses (ii) and (iii), the''; and
            (2) by adding at the end the following:
            ``(ii) For either or both of calendar years 2003 and 2004, 
        an eligible small webcaster that makes an election pursuant to 
        paragraph (2)(D)(ii)(VII) for any year 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:
                    ``(I) The featured recording artist, group or 
                orchestra.
                    ``(II) The sound recording title.
                    ``(III) The title of the retail album or other 
                product (or, in the case of compilation albums created 
                for commercial purposes, the name of the retail album 
                identified by the eligible small webcaster for purchase 
                of the sound recording).
                    ``(IV) The marketing label of the commercially 
                available album or other product on which the sound 
                recording is found--
                            ``(aa) for all albums or other products 
                        commercially released after 2002; and
                            ``(bb) in the case of albums or other 
                        products commercially released before 2003, for 
                        67 percent of the eligible small webcaster's 
                        digital audio transmissions of such pre-2003 
                        releases during 2003 and all of the eligible 
                        small webcaster's digital audio transmissions 
                        during 2004.
                    ``(V) The International Standard Recording Code 
                (ISRC) embedded in the sound recording, if available--
                            ``(aa) for all albums or other products 
                        commercially released after 2002; and
                            ``(bb) in the case of albums or other 
                        products commercially released before 2003, for 
                        50 percent of the eligible small webcaster's 
                        digital audio transmissions of such pre-2003 
                        releases during 2003, and for 75 percent of the 
                        eligible small webcaster's digital audio 
                        transmissions of such pre-2003 releases during 
                        2004, to the extent that such information 
                        concerning such pre-2003 releases can be 
                        provided using commercially reasonable efforts.
                    ``(VI) The copyright owner information provided in 
                the copyright notice on the retail album or other 
                product (e.g., following the symbol (P) (the letter P 
                in a circle) or, in the case of compilation albums 
                created for commercial purposes, in the copyright 
                notice for the individual track)--
                            ``(aa) for all albums or other products 
                        commercially released after 2002; and
                            ``(bb) in the case of albums or other 
                        products commercially released before 2003, for 
                        50 percent of an eligible small webcaster's 
                        digital audio transmissions of such pre-2003 
                        releases during 2003, and for 75 percent of an 
                        eligible small webcaster's digital audio 
                        transmissions of such pre-2003 releases during 
                        2004, to the extent that such information 
                        concerning such pre-2003 releases can be 
                        provided using commercially reasonable efforts.
                    ``(VII) The aggregate tuning hours, on a monthly 
                basis, for each channel provided by the eligible small 
                webcaster as computed by a recognized industry ratings 
                service or as computed by the eligible small webcaster 
                from its server logs. For the purpose of this 
                subclause, the term `aggregate tuning hours' has the 
                meaning given that term in section 261.2 of title 37, 
                Code of Federal Regulations, as published in the 
                Federal Register on July 8, 2002.
                    ``(VIII) The channel for each transmission of each 
                sound recording.
                    ``(IX) The start date and time of each transmission 
                of each sound recording.
            ``(iii) Reports of use described in clause (ii) shall be 
        provided, at the same time royalty payments are due under 
        paragraph (2)(D)(ii)(II), to the entity designated by the 
        Copyright Office to distribute royalty payments under this 
        section.
            ``(iv) For calendar years 2003 and 2004, details of the 
        means by which copyright owners may receive notice of the use 
        of their sound recordings, and details of the requirements 
        under which reports of use concerning the matters identified in 
        clause (ii) shall be made available, shall be as provided in 
        regulations issued by the Librarian of Congress under clause 
        (i).''.

SEC. 4. DEDUCTIBILITY OF COSTS AND EXPENSES OF AGENTS AND DIRECT 
              PAYMENT TO ARTISTS OF ROYALTIES FOR DIGITAL PERFORMANCES 
              OF SOUND RECORDINGS.

    (a) Findings.--The Congress finds that--
            (1) in the case of royalty payments from the licensing of 
        digital transmissions of sound recordings under subsection (f) 
        of section 114 of title 17, United States Code, the parties 
        have voluntarily negotiated arrangements under which payments 
        shall be made directly to featured recording artists and the 
        administrators of the accounts provided in subsection (g)(2) of 
        that section;
            (2) such voluntarily-negotiated payment arrangements have 
        been codified in regulations issued by the Librarian of 
        Congress, currently found in section 261.4 of title 37, Code of 
        Federal Regulations, as published in the Federal Register on 
        July 8, 2002;
            (3) other 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, and the Congress is 
        therefore restoring those terms as originally negotiated among 
        the parties; and
            (4) in light of the special circumstances described in this 
        subsection, the uncertainty created by the regulations issued 
        by the Librarian of Congress, and the fact that all of the 
        interested parties have reached agreement, the voluntarily-
        negotiated arrangements agreed to among the parties are being 
        codified.
    (b) Deductibility.--Section 114(g) of title 17, United States Code, 
is amended by adding after paragraph (2) the following:
            ``(3) A nonprofit agent designated to distribute receipts 
        from the licensing of transmissions in accordance with 
        subsection (f) may deduct from any of its receipts, prior to 
        the distribution of such receipts to any person or entity 
        entitled thereto, the reasonable costs of such agent incurred 
        after November 1, 1995, in--
                    ``(A) the administration of the collection, 
                distribution, and calculation of the royalties;
                    ``(B) the settlement of disputes relating to the 
                collection and calculation of the royalties; and
                    ``(C) the licensing and enforcement of rights with 
                respect to the making of ephemeral recordings and 
                performances subject to licensing under section 112 and 
                this section, including those incurred in participating 
                in negotiations or arbitration proceedings under 
                section 112 and this section.''.
    (c) Direct Payment to Artists.--Section 114(g)(2) of title 17, 
United States Code, is amended to read:
            ``(2) An agent designated to distribute receipts from the 
        licensing of transmissions in accordance with subsection (f) 
        shall distribute such receipts as follows:
                    ``(A) 50 percent of the receipts shall be paid to 
                the copyright owner of the exclusive right under 
                section 106(6) of this title to publicly perform a 
                sound recording by means of a digital audio 
                transmission.
                    ``(B) 2-1/2 percent of the receipts shall be 
                deposited in an escrow account managed by an 
                independent administrator jointly appointed by 
                copyright owners of sound recordings and the American 
                Federation of Musicians (or any successor entity) to be 
                distributed to nonfeatured musicians (whether or not 
                members of the American Federation of Musicians) who 
                have performed on sound recordings.
                    ``(C) 2-1/2 percent of the receipts shall be 
                deposited in an escrow account managed by an 
                independent administrator jointly appointed by 
                copyright owners of sound recordings and the American 
                Federation of Television and Radio Artists (or any 
                successor entity) to be distributed to nonfeatured 
                vocalists (whether or not members of the American 
                Federation of Television and Radio Artists) who have 
                performed on sound recordings.
                    ``(D) 45 percent of the receipts shall be paid, on 
                a per sound recording basis, to the recording artist or 
                artists featured on such sound recording (or the 
                persons conveying rights in the artists' performance in 
                the sound recordings).''.

SEC. 5. REPORT TO CONGRESS.

    (a) Findings.--The Congress finds that--
            (1) eligible small webcasters have economic arrangements 
        with third parties, as a result of which third parties, many of 
        them large businesses, realize a significant portion of the 
        revenues generated from the use of sound recordings in the 
        services operated by eligible small webcasters; and
            (2) as a result of these arrangements, any royalty based on 
        revenues realized by an eligible small webcaster may result in 
        recording artists and sound recording copyright owners 
        receiving a royalty based on revenues that are a fraction of 
        the total revenues generated from the use of the sound 
        recordings under statutory license.
    (b) Report to Congress.--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--
            (1) the economic arrangements among eligible small 
        webcasters and third parties and their consequences for the 
        ability of recording artists and sound recording copyright 
        owners to be compensated appropriately on a percentage of 
        revenue basis; and
            (2) the economic incentives that percentage of revenue 
        statutory rates create for structuring economic arrangements 
        among eligible small webcasters and third parties that may be 
        to the detriment of recording artists and sound recording 
        copyright owners.
    (c) Definition.--In this section, the term ``eligible small 
webcaster'' has the meaning given that term in section 114(f)(2)(E) of 
title 17, United States Code, as added by section 3 of this Act.

SEC. 6. EFFECTIVE DATE.

    The amendments made by this Act shall take effect on the date of 
the enactment of this Act.

            Passed the House of Representatives October 7, 2002.

            Attest:

                                                                 Clerk.