[Federal Register Volume 72, Number 244 (Thursday, December 20, 2007)]
[Rules and Regulations]
[Pages 72253-72256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-24734]


=======================================================================
-----------------------------------------------------------------------

LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 383

[Docket No. 2005-5 CRB DTNSRA]


Digital Performance Right in Sound Recordings and Ephemeral 
Recordings for a New Subscription Service

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Copyright Royalty Judges are publishing final regulations 
that set the rates and terms for the use of sound recordings in 
transmissions made by new subscription services and for the making of 
ephemeral recordings necessary for the facilitation of such 
transmissions for the period commencing from the inception of the new 
subscription service through December 31, 2010.

DATES: These regulations become effective on January 22, 2008.

FOR FURTHER INFORMATION CONTACT: Richard Strasser, Senior Attorney, or 
Gina Giuffreda, Attorney Advisor, by telephone at (202) 707-7658 or e-
mail [email protected].

SUPPLEMENTARY INFORMATION: 

Background

    In 1995, Congress enacted the Digital Performance Right in Sound 
Recordings Act of 1995 (``DPRA''), Public Law No. 104-39, which created 
an exclusive right for copyright owners of sound recordings subject to 
certain limitations, to perform publicly the sound recordings by means 
of certain digital audio transmissions. Among the limitations on the 
performance right was the creation of a new compulsory license for 
nonexempt noninteractive digital subscription transmissions. 17 U.S.C. 
114(f).

[[Page 72254]]

    Section 114 was later amended with the passage of the Digital 
Millennium Copyright Act of 1998 (``DMCA'' or ``the Act''), Public Law 
No. 105-304, to cover additional digital audio transmissions. These 
include transmissions made by ``new subscription services.'' For 
purposes of the section 114 license, a ``new subscription service'' is 
``a service that performs sound recordings by means of noninteractive 
subscription digital audio transmissions and that is not a preexisting 
subscription service or a preexisting satellite digital audio radio 
service.'' 17 U.S.C. 114(j)(8).
    In addition to expanding the section 114 license, the DMCA also 
created a statutory license to allow for the making of ephemeral 
reproductions for the purpose of facilitating certain digital audio 
transmissions, including those made by new subscription services. 17 
U.S.C. 112(e).
    On October 31, 2005, pursuant to section 114(f)(2)(C), XM Satellite 
Radio, Inc. (``XM'') filed with the Copyright Royalty Judges 
(``Judges'') a Petition to Initiate and Schedule Proceeding for a New 
Type of Subscription Service for a ``new type of subscription service 
[which] performs sound recordings on digital audio channels programmed 
by the licensee for transmission by a satellite television distribution 
service to its residential customers, where the audio channels are 
bundled with television channels as part of a `basic' package of 
service and not for a separate fee.'' XM Petition at 1. The petition 
noted that this new subscription service was to commence on or about 
November 15, 2005. Id.
    On December 5, 2005, pursuant to 17 U.S.C. 804(b)(3)(C)(ii), the 
Judges published a notice in the Federal Register announcing 
commencement of the proceeding to set rates and terms for royalty 
payments under sections 114 and 112 for the activities of the new 
subscription service described in the XM Petition and requesting 
interested parties to submit their Petitions to Participate. 70 FR 
72471. Petitions to participate were received from Sirius Satellite 
Radio, Inc. (``Sirius''), XM, MTV Networks (``MTV''), and 
SoundExchange, Inc.
    The Judges set the schedule for the proceeding for both the direct 
and rebuttal phases of the proceeding, including the dates for the 
filing of the written statements and the dates for oral testimony for 
each phase. Subsequent to the presentation of the direct phase of their 
case and the filing of their written rebuttal statements, but prior to 
the oral presentation of their rebuttal witnesses, the parties informed 
the Judges that they had ``reached full agreement on all issues in this 
litigation'' and that ``there are no more issues to try.'' Transcript 
of September 10, 2007, at p. 5. They also stated that the settlement 
agreement would be submitted to the Judges for approval and adoption 
pursuant to 17 U.S.C. 801(b)(7)(A). Id. at 6. The proposed rates and 
terms codifying the settlement agreement were filed on October 30, 
2007.
    Section 801(b)(7)(A) allows for the adoption of rates and terms 
negotiated by ``some or all of the participants in a proceeding at any 
time during the proceeding'' provided they are submitted to the 
Copyright Royalty Judges for approval. This section provides that in 
such event:

    (i) The Copyright Royalty Judges shall provide to those that 
would be bound by the terms, rates, or other determination set by 
any agreement in a proceeding to determine royalty rates an 
opportunity to comment on the agreement and shall provide to 
participants in the proceeding under section 803(b)(2) that would be 
bound by the terms, rates, or other determination set by the 
agreement an opportunity to comment on the agreement and object to 
its adoption as a basis for statutory terms and rates; and
    (ii) The Copyright Royalty Judges may decline to adopt the 
agreement as a basis for statutory terms and rates for participants 
that are not parties to the agreement, if any participant described 
in clause (i) objects to the agreement and the Copyright Royalty 
Judges conclude, based on the record before them if one exists, that 
the agreement does not provide a reasonable basis for setting 
statutory terms or rates.

17 U.S.C. 801(b)(7)(A). Accordingly, on November 9, 2007, the Judges 
published a Notice of Proposed Rulemaking (``NPRM'') requesting comment 
on the proposed rates and terms submitted to the Judges. 72 FR 63532. 
Comments were due by December 10, 2007. In response to the NPRM, the 
Judges received only one comment, which was submitted by SoundExchange, 
supporting the adoption of the proposed regulations.
    Having received no objections from a party that would be bound by 
the proposed rates and terms and that would be willing to participate 
in further proceedings, the Copyright Royalty Judges, by this notice, 
are adopting final regulations which set the rates and terms for the 
use of sound recordings in transmissions made by new subscription 
services and for the making of ephemeral recordings necessary for the 
facilitation of such transmissions for the period commencing from the 
inception of the new subscription service through December 31, 2010.\1\
---------------------------------------------------------------------------

    \1\ Section 383.4(a) states that the terms governing the 
activities of a new subscription service under sections 114 and 112 
are the same as those, unless otherwise specified, adopted to govern 
the activities of the preexisting satellite digital audio radio 
services in Docket No. 2006-1 CRB DSTRA. Those terms will appear in 
Subpart B of 37 CFR part 382, which will be published in a separate 
document.
---------------------------------------------------------------------------

List of Subjects in 37 CFR Part 383

    Copyright, Digital audio transmissions, Performance right, Sound 
recordings.

Final Regulations

0
For the reasons set forth in the preamble, the Copyright Royalty Judges 
are adding part 383 to Chapter III of title 37 of the Code of Federal 
Regulations to read as follows:

PART 383--RATES AND TERMS FOR SUBSCRIPTION TRANSMISSIONS AND THE 
REPRODUCTION OF EPHEMERAL RECORDINGS BY NEW SUBSCRIPTION SERVICES

Sec.
383.1 General.
383.2 Definitions.
383.3 Royalty fees for public performance of sound recordings and 
the making of ephemeral recordings.
383.4 Terms for making payment of royalty fees.

    Authority: 17 U.S.C. 112(e), 114, and 801(b)(1).


Sec.  383.1  General.

    (a) Scope. This part 383 establishes rates and terms of royalty 
payments for the public performance of sound recordings in certain 
digital transmissions by Licensees in accordance with the provisions of 
17 U.S.C. 114, and the making of certain ephemeral recordings by 
Licensees in accordance with the provisions of 17 U.S.C. 112(e), during 
the period commencing from the inception of the Licensees' Services and 
continuing through December 31, 2010.
    (b) Legal compliance. Licensees relying upon the statutory licenses 
set forth in 17 U.S.C. 112 and 114 shall comply with the requirements 
of those sections and the rates and terms of this part.
    (c) Relationship to voluntary agreements. Notwithstanding the 
royalty rates and terms established in this part, the rates and terms 
of any license agreements entered into by Copyright Owners and 
Licensees shall apply in lieu of the rates and terms of this part to 
transmissions with the scope of such agreements.


Sec.  383.2  Definitions.

    For purposes of this part, the following definitions shall apply:
    (a) Applicable Period is the period for which a particular payment 
to the

[[Page 72255]]

designated collection and distribution organization is due.
    (b) Bundled Contracts means contracts between the Licensee and a 
Provider in which the Service is not the only content licensed by the 
Licensee to the Provider.
    (c) Copyright Owner is a sound recording copyright owner who is 
entitled to receive royalty payments under 17 U.S.C. 112(e) or 114(g).
    (d) License Period means the period commencing from the inception 
of the Licensees' Services and continuing through December 31, 2010.
    (e) Licensee is a person that has obtained statutory licenses under 
17 U.S.C. 112 and 114, and the implementing regulations, to make 
digital audio transmissions as part of a Service (as defined in 
paragraph (h) of this section), and ephemeral recordings for use in 
facilitating such transmissions.
    (f) Provider means a ``multichannel video programming distributor'' 
as that term is defined in 47 CFR 76.1000(e); notwithstanding such 
definition, for purposes of this part, a Provider shall include only a 
distributor of programming to televisions, such as a cable or satellite 
television provider.
    (g) Revenue. (1) ``Revenue'' means all monies and other 
considerations, paid or payable, recognizable during the Applicable 
Period as revenue by the Licensee consistent with Generally Accepted 
Accounting Principles (``GAAP'') and the Licensee's past practices, 
which is derived by the Licensee from the operation of the Service and 
shall be comprised of the following:
    (i) Revenues recognizable by Licensee from Licensee's Providers and 
directly from residential U.S. subscribers for Licensee's Service;
    (ii) Licensee's advertising revenues recognizable from the Service 
(as billed), or other monies received from sponsors of the Service if 
any, less advertising agency commissions not to exceed 15% of those 
fees incurred to a recognized advertising agency not owned or 
controlled by Licensee;
    (iii) Revenues recognizable for the provision of time on the 
Service to any third party;
    (iv) Revenues recognizable from the sale of time to Providers of 
paid programming, such as infomercials, on the Service;
    (v) Where merchandise, service, or anything of value is receivable 
by Licensee in lieu of cash consideration for the use of Licensee's 
Service, the fair market value thereof or Licensee's prevailing 
published rate, whichever is less;
    (vi) Monies or other consideration recognizable as revenue by 
Licensee from Licensee's Providers, but not including revenues 
recognizable by Licensee's Providers from others and not accounted for 
by Licensee's Providers to Licensee, for the provision of hardware for 
the Service by anyone and used in connection with the Service;
    (vii) Monies or other consideration recognizable as revenue for any 
references to or inclusion of any product or service on the Service; 
and
    (viii) Bad debts recovered regarding paragraphs (g)(1)(i) through 
(vii) of this section.
    (2) ``Revenue'' shall include such payments as set forth in 
paragraphs (g)(1)(i) through (viii) of this section to which Licensee 
is entitled but which are paid or payable to a parent, subsidiary, 
division, or affiliate of Licensee, in lieu of payment to Licensee but 
not including payments to Licensee's Providers for the Service. 
Licensee shall be allowed a deduction from ``Revenue'' as defined in 
paragraph (g)(1) of this section for bad debts actually written off 
during the reporting period.
    (h) A Service is a non-interactive (consistent with the definition 
of ``interactive service'' in 17 U.S.C. 114(j)(7)) audio-only 
subscription service (including accompanying information and graphics 
related to the audio) that is transmitted to residential subscribers of 
a television service through a Provider which is marketed as and is in 
fact primarily a video service where
    (1) Subscribers do not pay a separate fee for audio channels.
    (2) The audio channels are delivered by digital audio transmissions 
through a technology that is incapable of tracking the individual sound 
recordings received by any particular consumer.
    (3) However, paragraph (h)(2) of this section shall not apply to 
the Licensee's current contracts with Providers that are in effect as 
of the effective date of this part if such Providers become capable in 
the future of tracking the individual sound recordings received by any 
particular consumer, provided that the audio channels continued to be 
delivered to Subscribers by digital audio transmissions and the 
Licensee remains incapable of tracking the individual sound recordings 
received by any particular consumer.
    (i) Subscriber means every residential subscriber to the underlying 
service of the Provider who receives Licensee's Service in the United 
States for all or any part of a month; provided, however, that for any 
Licensee that is not able to track the number of subscribers on a per-
day basis, ``Subscribers'' shall be calculated based on the average of 
the number of subscribers on the last day of the preceding month and 
the last day of the applicable month, unless the Service is paid by the 
Provider based on end-of-month numbers, in which event ``Subscribers'' 
shall be counted based on end-of-month data.
    (j) Stand-Alone Contracts means contracts between the Licensee and 
a Provider in which the only content licensed to the Provider is the 
Service.


Sec.  383.3  Royalty fees for public performances of sound recordings 
and the making of ephemeral recordings.

    (a) Royalty rates. Royalty rates for the public performance of 
sound recordings by eligible digital transmissions made over a Service 
pursuant to 17 U.S.C. 114, and for ephemeral recordings of sound 
recordings made pursuant to 17 U.S.C. 112 to facilitate such 
transmissions, are as follows. Each Licensee will pay, with respect to 
content covered by the License that is provided via the Service of each 
such Licensee:
    (1) For Stand-Alone Contracts, the greater of:
    (i) 15% of Revenue, or
    (ii) The following monthly minimum payment per Subscriber to the 
Service of such Licensee--

(A) From inception through 2006: $0.0075
(B) 2007: $0.0075
(C) 2008: $0.0075
(D) 2009: $0.0125
(E) 2010: $0.0150 and

    (2) For Bundled Contracts, the greater of:
    (i) 15% of Revenue allocated to reflect the objective value of the 
Licensee's Service, or
    (ii) The following monthly minimum payment per Subscriber to the 
Service of such Licensee:

(A) From inception through 2006: $0.0220
(B) 2007: $0.0220
(C) 2008: $0.0220
(D) 2009: $0.0220
(E) 2010: $0.0250

    (b) Minimum fee. Each Licensee will pay an annual, non-refundable 
minimum fee of one hundred thousand dollars ($100,000), payable on 
January 31 of each calendar year in which the Service is provided 
pursuant to the section 112 and 114 statutory licenses, but payable 
pursuant to the applicable regulations for all years 2007 and earlier. 
Such fee shall be recoupable and credited against royalties due in the 
calendar year in which it is paid.

[[Page 72256]]

Sec.  383.4  Terms for making payment of royalty fees.

    (a) Subject to the provisions of this section, terms governing 
timing and due dates of royalty payments, late fees, statements of 
account, audit and verification of royalty payments and distributions, 
cost of audit and verification, record retention requirements, 
treatment of Licensees' confidential information, distribution of 
royalties, unclaimed funds, designation and definition of the 
collection and distribution organization, and any definitions for 
applicable terms not defined herein and not otherwise inapplicable 
shall be those adopted by the Copyright Royalty Judges for subscription 
transmissions and the reproduction of ephemeral recordings by 
preexisting satellite digital audio radio services in Docket No. 2006-1 
CRB DSTRA (``the SDARS Proceeding'').
    (b) Without prejudice to any applicable notice and recordkeeping 
provisions, statements of account shall not require reports of 
performances.
    (c) If the Copyright Royalty Judges adopt reports of use 
regulations in the SDARS Proceeding, those regulations, if any, shall 
govern Licensees' obligations to report sound recordings used pursuant 
to this part, except that Licensees also shall report to SoundExchange 
which channels are transmitted by their respective Providers for all 
past, current and future periods. In the event that the Copyright 
Royalty Judges do not adopt reports of use regulations in the SDARS 
Proceeding, then reports of use provided by XM Satellite Radio, Inc. 
(``XM'') and Sirius Satellite Radio, Inc. (``Sirius'') for their use of 
sound recordings on their preexisting satellite digital audio radio 
services (as defined in 17 U.S.C. 114(j)(10)) shall be deemed to 
satisfy XM's and Sirius' obligations to report sound recordings used 
pursuant to this part, and MTV Networks shall provide census reporting, 
retroactive to the inception of its Service.

    Dated: December 14, 2007.
James Scott Sledge,
Chief Copyright Royalty Judge.
[FR Doc. E7-24734 Filed 12-19-07; 8:45 am]
BILLING CODE 1410-72-P