[House Report 111-139]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    111-139

======================================================================



 
                    WEBCASTER SETTLEMENT ACT OF 2009

                                _______
                                

  June 8, 2009.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Conyers, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2344]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 2344) to amend section 114 of title 17, United States 
Code, to provide for agreements for the reproduction and 
performance of sound recordings by webcasters, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for the Legislation..........................     2
Hearings.........................................................     3
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     4
New Budget Authority and Tax Expenditures........................     4
Congressional Budget Office Cost Estimate........................     4
Performance Goals and Objectives.................................     5
Constitutional Authority Statement...............................     5
Advisory on Earmarks.............................................     5
Section-by-Section Analysis......................................     5
Changes in Existing Law Made by the Bill, as Reported............     5

                          Purpose and Summary

    H.R. 2344 would amend section 114 of title 17, United 
States Code, to allow the recording industry to negotiate and 
enter into alternative royalty fee agreements with webcasters 
within thirty days of its enactment. Any agreement reached 
would replace the rates established under the Copyright Royalty 
Board's 2007 decision.

                Background and Need for the Legislation

                               BACKGROUND

    In 1998, in the Digital Millenium Copyright Act 
(``DMCA''),\1\ Congress amended several statutory licensing 
statutes to provide for and clarify the treatment of different 
types of Internet broadcasting, or webcasting. As a result, two 
categories of webcasting qualify for a compulsory license--
``preexisting'' subscription services existing at the time of 
the DMCA's enactment and ``an eligible nonsubscription 
transmission.''\2\ 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. 
Sec. 114(d) are those who transmit music over the Internet on a 
nonsubscription, noninteractive basis.
---------------------------------------------------------------------------
    \1\Pub. L. No. 105-304 (October 28, 1995).
    \2\Under the DMCA, while satellite radio and Internet radio 
providers pay performance royalties in addition to publishing 
royalties, traditional radio broadcasters pay only publishing 
royalties.
---------------------------------------------------------------------------
    The initial ratemaking proceeding for statutory royalty 
rates for webcasters for the period 1998 through 2005 proved to 
be controversial. The Librarian of Congress, under the guidance 
of the U.S. Copyright Office, rejected the recommendation 
issued by the Copyright Arbitration Royalty Panel (``CARP'') 
and revised rates downward. Congress intervened as well with 
enactment of the Small Webcasters Settlement Act of 2002 
(``SWSA''), Pub. L. No. 107-321, which permitted more options 
than the royalty rates established by the Librarian's order.
    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, Pub. L. No. 108-
419, abolished the CARP system and substituted a Copyright 
Royalty Board (``CRB'') composed of three judges. As required 
by law, in March 2007, the CRB announced royalty rates for the 
period from January 1, 2006, through December 31, 2010.

                     COPYRIGHT ROYALTY BOARD RATES

    The final determination of the CRB establishes new rates 
for commercial and noncommercial webcasters who qualify for the 
Sec. 114 compulsory license under the ``willing buyer/willing 
seller'' standard.\3\ The CRB considered the proposals by 
representatives of smaller webcasters that rates be structured 
as a percentage of revenue, but ultimately rejected them in 
lieu of a minimum-payment-per-song-per-listener formula.
---------------------------------------------------------------------------
    \3\17 U.S.C. Sec. 114(f)(2)(B).
---------------------------------------------------------------------------
    The new rates were not well received in the small 
webcasting business community. Some Members of Congress voiced 
concern as well. Several parties filed suit to appeal the CRB 
decision. Upon consolidation of the appeals, oral argument was 
heard on March 19, 2009. A decision is likely to be issued by 
summer 2009.
    Parallel to the judicial proceedings, private negotiations 
are ongoing between SoundExchange, the organization charged 
with collecting and distributing performance royalties, and 
both large and small webcasters, 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.

                  THE WEBCASTER SETTLEMENT ACT OF 2008

    H.R. 7084, the Webcaster Settlement Act of 2008 (``2008 
WSA''), which became law in October 2008, provided 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.
    Three negotiated royalty agreements have been made under 
the authority of the 2008 WSA. The Corporation for Public 
Broadcasting and SoundExchange announced on January 15, 2009, 
that they had reached consensus on the royalty rates to be paid 
for by approximately 450 public radio webcastings, including 
NPR and Public Radio International.\4\ 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 for 
terrestrial AM or FM radio broadcasters who simulcast their 
signal or stream other programming over the Internet.\5\ 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.
---------------------------------------------------------------------------
    \4\Corporation for Public Broadcasting, Agreement Reached for 
Public Radio's Webcasting Royalty Rates, available at http://
www.cpb.org/pressroom/release.php?prn=699.
    \5\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).
---------------------------------------------------------------------------
    Other small and large webcasters were not able to 
successfully negotiate a new rate agreement with the recording 
industry within the time allotted by the 2008 WSA.
    On January 5, 2009, the CRB announced that it would soon 
begin the third proceeding to determine 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.\6\
---------------------------------------------------------------------------
    \6\Copyright Royalty Board, Library of Congress, Digital 
Performance in Sound Recordings and Ephemeral Recordings, 74 Fed. Reg. 
318 (Jan. 5, 2009).
---------------------------------------------------------------------------

                  THE WEBCASTER SETTLEMENT ACT OF 2009

    H.R. 2344, the Webcaster Settlement Act of 2009, would 
allow those small and large webcasters who have yet to reach an 
agreement with SoundExchange another opportunity to do so. It 
permits them to negotiate alternative rates within thirty days 
of its enactment.

                                Hearings

    The Committee held no hearings on H.R. 2344.

                        Committee Consideration

    On May 13, 2009, the Committee met in open session and 
ordered the bill H.R. 2344 favorably reported without 
amendment, by voice vote, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that there 
were no recorded votes during the Committee's consideration of 
H.R. 2344.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 2344, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 18, 2009.
Hon. John Conyers, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2344, the 
Webcaster Settlement Act of 2009.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie, 
who can be reached at 226-2860.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.

Enclosure

cc:
        Honorable Lamar S. Smith.
        Ranking Member
H.R. 2344--Webcaster Settlement Act of 2009.
    H.R. 2344 would allow entities that broadcast audio content 
over the Internet (Webcasters) to continue to negotiate royalty 
rates with SoundExchange, the entity designated to collect 
royalties for the music industry. Under provisions of the 
Webcaster Settlement Act of 2008 (Public Law 110-435), 
SoundExchange was given limited authority to enter into royalty 
fee agreements with Webcasters that would differ from the rates 
established by the Copyright Royalty Board. This limited 
authority expired on February 15, 2009; H.R. 2344 would extend 
the authority for 30 days after the date of enactment of the 
bill.
    Because royalties collected and paid out by SoundExchange 
do not flow through the federal budget, CBO estimates that 
implementing H.R. 2344 would have no effect on federal receipts 
or spending.
    H.R. 2344 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Susan Willie. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
2344 would permit the recording industry and webcasters to 
negotiate alternative royalty rates within thirty days of its 
enactment.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8, clause 3 of the 
Constitution.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 2344 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
    Sec. 1. Short title. Section 1 sets forth the short title 
of the bill as the ``Webcaster Settlement Act of 2009.''
    Sec. 2. Authorization of Agreements. Section 2 allows for 
the implementation of any agreement(s) reached between 
SoundExchange and webcasters by 11:59 p.m. on the thirtieth day 
after the bill's enactment.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

              SECTION 114 OF TITLE 17, UNITED STATES CODE

Sec. 114. Scope of exclusive rights in sound recordings

    (a) * * *

           *       *       *       *       *       *       *

    (f) Licenses for Certain Nonexempt Transmissions.--
            (1) * * *

           *       *       *       *       *       *       *

            (5)(A) * * *

           *       *       *       *       *       *       *

            (D) Nothing in the Webcaster Settlement Act of 
        [2008] 2008, the Webcaster Settlement Act of 2009, or 
        any agreement entered into pursuant to subparagraph (A) 
        shall be taken into account by the United States Court 
        of Appeals for the District of Columbia Circuit in its 
        review of the determination by the Copyright Royalty 
        Judges of May 1, 2007, of rates and terms for the 
        digital performance of sound recordings and ephemeral 
        recordings, pursuant to sections 112 and 114.
            (E) As used in this paragraph--
                    (i) * * *

           *       *       *       *       *       *       *

                    (iii) the term ``webcaster'' means a person 
                or entity that has obtained a compulsory 
                license under section 112 or 114 and the 
                implementing regulations therefor [to make 
                eligible nonsubscription transmissions and 
                ephemeral recordings].
            (F) The authority to make settlements pursuant to 
        subparagraph (A) shall expire [February 15, 2009] at 
        11:59 p.m. Eastern time on the 30th day after the date 
        of the enactment of the Webcaster Settlement Act of 
        2009.

           *       *       *       *       *       *       *


                                  
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