[Federal Register Volume 87, Number 214 (Monday, November 7, 2022)]
[Proposed Rules]
[Pages 66976-66985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24300]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 385

[Docket No. 21-CRB-0001-PR (2023-2027)]


Determination of Rates and Terms for Making and Distributing 
Phonorecords (Phonorecords IV)

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Proposed rule.

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SUMMARY: The Copyright Royalty Judges publish for comment and objection 
proposed regulations that set rates and terms applicable during the 
period from January 1, 2023, through December 31, 2027, for the section 
115 statutory license for making and distributing phonorecords of 
nondramatic musical works.

DATES: Comments and objections, if any, are due no later than December 
7, 2022.

ADDRESSES: You may send comments, identified by docket number 21-CRB-
0001-PR (2023-2027), online through eCRB at https://app.crb.gov.
    Instructions: To send your comment through eCRB, if you don't have 
a user account, you will first need to register for an account and wait 
for your

[[Page 66977]]

registration to be approved. Approval of user accounts is only 
available during business hours. Once you have an approved account, you 
can only sign in and file your comment after setting up multi-factor 
authentication, which can be done at any time of day. All comments must 
include the Copyright Royalty Board name and the docket number for this 
proposed rule. All properly filed comments will appear without change 
in eCRB at https://app.crb.gov, including any personal information 
provided.
    Docket: For access to the docket to read background documents or 
comments received, go to eCRB at https://app.crb.gov and perform a case 
search for docket 21-CRB-0001-PR (2023-2027).

FOR FURTHER INFORMATION CONTACT: Anita Brown, CRB Program Specialist, 
at 202-707-7658 or [email protected].

SUPPLEMENTARY INFORMATION:

Background

    Section 115 of the Copyright Act, title 17 of the United States 
Code, requires a copyright owner of a nondramatic musical work to grant 
a license (also known as the ``mechanical'' compulsory license) to any 
person who wants to make and distribute phonorecords of that work, 
under circumstances set forth in the statute and regulations. In 
addition to the production or distribution of physical phonorecords 
(compact discs, vinyl, cassette tapes, and the like), section 115 
applies to digital transmissions of phonorecords, including permanent 
digital downloads and ringtones.
    Chapter 8 of the Copyright Act authorizes the Copyright Royalty 
Judges (Judges) to conduct proceedings every five years to determine 
the rates and terms for the section 115 license. 17 U.S.C. 801(b)(1), 
804(b)(4). Accordingly, the Judges commenced the current proceeding in 
January 2021, by publishing notice of the commencement and a request 
that interested parties submit petitions to participate. See 86 FR 25 
(Jan. 5, 2021).
    The Judges received petitions to participate in the current 
proceeding from Amazon.com Services LLC, Apple Inc., Copyright Owners 
(joint petitioners Nashville Songwriters Association International 
(NSAI) and National Music Publishers Association (NMPA)), Google LLC, 
George Johnson, Joint Record Company Participants (filed by Recording 
Industry Association of America, Inc. for joint petitioners Sony Music 
Entertainment, UMG Recordings, Inc., and Warner Music Group Corp.), 
Pandora Media, LLC, David Powell, SoundCloud Operations Inc.,\1\ 
Spotify USA Inc., and Brian Zisk.
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    \1\ SoundCloud Operations Inc. withdrew from the proceeding on 
May 21, 2021.
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    The Judges gave notice to all participants of the three-month 
negotiation period required by 17 U.S.C. 803(b)(3) and directed that, 
if the participants were unable to negotiate a settlement, they should 
submit Written Direct Statements no later than September 10, 2021.\2\ 
The Judges extended the deadline to October 13, 2021. Order Granting 
Joint Motion to Modify the Case Scheduling Order (eCRB No. 25555) (Aug. 
3, 2021). The Judges received Written Direct Statements from 
participants Amazon.com Services LLC, Apple Inc., Copyright Owners 
(Nashville Songwriters Association International (NSAI) and National 
Music Publishers Association (NMPA)), Google LLC, George Johnson, 
Pandora Media, LLC, and Spotify USA Inc.
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    \2\ Several parties negotiated a proposed partial settlement in 
May 2021. The Judges accordingly published for comment the parties' 
proposed changes (to subparts A and B of 37 CFR part 385). See 87 FR 
33093 (June 1, 2022).
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    On August 31, 2022, the Judges received a motion stating that 
several participants, (Settling Parties),\3\ had reached a partial 
settlement regarding the rates and terms under Section 115 of the 
Copyright Act, namely, for Licensed Activity (as defined in 37 CFR part 
385, subpart A) \4\ presently addressed in subparts C & D of 37 CFR 
part 385 together with certain regulations of general application 
(e.g., definitions and late fee provisions) applicable to the subpart C 
& D Configurations presently addressed in 37 CFR part 385, subpart A, 
for the 2023-2027 rate period \5\ and seeking approval of that partial 
settlement. See Motion to Adopt Settlement of Statutory Royalty Rates 
and Terms for Subpart C and D Configurations, Docket No. 21-CRB-0001-PR 
(2023-2027) at 1 (Motion). The movants state that ``the settlement [ ] 
represents the consensus of both licensees and licensors representing 
the vast majority of the market for rights under Section 115 for 
Subpart C & D Configurations.'' \6\ Motion at 3.
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    \3\ The participants who filed the motion are the National Music 
Publishers' Association (``NMPA'') and Nashville Songwriters 
Association International (``NSAI,'' and collectively with NMPA, the 
``Copyright Owners''), on the one hand, and Amazon.com Services LLC, 
Apple Inc., Google LLC, Pandora Media, LLC, and Spotify USA Inc. 
Motion at 1.
    \4\ ``Licensed Activity . . . as the term is used in subparts C 
and D of this part, means delivery of musical works, under voluntary 
or statutory license, via Digital Phonorecord Deliveries in 
connection with Interactive Eligible Streams, Eligible Limited 
Downloads, Limited Offerings, mixed Bundles, and Locker Services.'' 
37 CFR 385.2.
    \5\ The motion refers to the rate period as ``the full time 
period addressed by the Proceeding''. Motion at 1.
    \6\ The movants indicate that participant George Johnson does 
not agree to the settlement and that participants David Powell and 
Brian Zisk should be dismissed because they did not file a Written 
Direct Statement. Motion at 3 and n. 1. Mr. Johnson filed an 
opposition to the motion (eCRB. No. 27239) on September 6 which the 
Judges consider relevant to this proposed rule.
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    On September 26, 2022, the Judges issued ``Order 63 to File 
Certification or Provide Settlement Agreements'' (Order 63), which 
ordered the Settling Parties to certify that the Motion and the 
Proposed Regulations annexed to the Motion represent the full agreement 
of the Settling Parties, i.e., that there are no other related 
agreements and no other clauses. Order 63 further ordered that if such 
other agreements or clauses exist, the Settling Parties shall file 
them.
    On September 26, 2022, the Settling Parties filed a ``Joint 
Response to George Johnson's Motion to Compel Production of Settlement 
and CRB Order 63'' (Joint Response). Portions of the Joint Response, 
which were submitted as Restricted, are responsive to Order 63. On 
October 6, 2022, the Settling Parties filed a ``Joint Submission of 
Settling Participants Regarding Settlement Agreement'' (Joint 
Submission) which removed the Restricted designation to the 
``Settlement Agreement'' attached as Exhibit A to the Joint Submission. 
However, the Joint Response and the Joint Submission do not completely 
and adequately respond to Order 63.
    On October 3, 2022, Google and NMPA filed ``Google and NMPA's Joint 
Notice of Lodging'' (Joint Notice of Lodging), which indicated that 
those two parties found Order 63 unclear regarding what is meant by 
``related agreements.'' Google and NMPA offered that they broadly 
construed Order 63's reference to ``related agreements'' to include 
certain letter agreements executed between Google, on the one hand, and 
certain music publishers and the NMPA, on the other hand, on or around 
the execution date of the settlement agreement. Google and NMPA 
indicated they will ``lodge'' such letter agreements concurrently with 
their Joint Notice of Lodging.\7\ Google and NMPA also indicated that 
they do not believe that the letter agreements are substantively 
related to the parties' settlement agreement, and that the letter 
agreements simply concern Google's allocation practices to avoid double

[[Page 66978]]

payments arising from certain direct agreements.
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    \7\ On October 7, 2022, Google and NMPA submitted ``Google and 
NMPA's Joint Notice of Public Lodging'' which included public 
versions of letter agreements.
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    On October 17, 2022, the Judges issued ``Order 64 to File 
Settlement Agreements and Provide Certification'' (Order 64), which 
clarified the scope of Order 63 and ordered the Settling Parties to:

    (1) file (not ``lodge'') any supplemental written agreements 
between Service Participants, on the one hand, and Copyright Owners 
and/or their affiliates, including copyright owners that they 
represented in this proceeding, on the other hand, that represent 
consideration for, or are contractually related to, the Settlement 
referenced in the Motion.
    (2) file a detailed description of any supplemental oral 
agreements between Service Participants, on the one hand, and 
Copyright Owners and/or their affiliates, including copyright owners 
that they represented in this proceeding, on the other hand, that 
represent consideration for, or are contractually related to the 
Settlement referenced in the Motion, through a certification or 
certifications from individuals with direct knowledge of any such 
supplemental oral agreements.
    (3) file a certification or certifications from a person or 
persons with first-hand knowledge stating that there are no other 
agreements, written or oral, beyond the Settlement, the Settlement 
Agreement and the filed supplemental written or oral agreements 
responsive to this order.
    (4) explain in a supplemental brief why the remaining restricted 
portions of the Joint Response, apart from Exhibit A, from which the 
Restricted designation has been removed, would, if disclosed, 
interfere with the ability of the Producer to obtain like 
information in the future.
    On October 26, 2022, the Settling Parties filed a ``Joint 
Response to Order 64''

(Joint Response 2).
    In response to item #1 above, Joint Response 2 noted that the 
October 6, 2022, Joint Submission removed the Restricted designation to 
the ``Settlement Agreement'' and attached it within Exhibit A to Joint 
Response 2. In Joint Response 2, Google and NMPA also filed the 
aforementioned letter agreements as Exhibit B to Joint Submission 2.\8\ 
Joint Response 2 also included the Settling Parties' representation 
that other than the Settlement Agreement itself, there are no other 
agreements responsive to Order 64.
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    \8\ Joint Response 2 reiterated Google and NMPA's view that the 
letter agreements are not substantively related to the parties' 
settlement agreement, and that the letter agreements simply concern 
Google's allocation practices to avoid double payments arising from 
certain direct agreements
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    In response to item #2 above, Joint Response 2 stated that there 
are no supplemental oral agreements responsive to Order 64.
    In response to item #3 above, Joint Response 2 included Exhibits C-
1 through C-7, certifications from a representative of each Party with 
first-hand knowledge of the Settlement Agreement and negotiations, 
which collectively attest that there are no other agreements, written 
or oral, responsive to Order 64 beyond the agreements provided as part 
of Joint Response 2.
    In response to item #4 above, Joint Response 2 noted that the 
Settling Parties do not believe that there is any reason why any 
restricted portions of the Joint Response need to remain restricted. 
Therefore, the Settling Parties filed, concurrently with Joint Response 
2, a revised version of the Joint Response that removes all redactions, 
entitled ``[Revised to Remove Redactions] Joint Response to George 
Johnson's Motion to Compel Production of Settlement and CRB Order 63.'' 
(Revised Joint Response).
    The Settling Parties offered that through Joint Response 2, and the 
related submissions referenced therein, the Judges have all materials 
necessary to publish the proposed rates and terms for public comment. 
The Settling Parties noted the necessary public comment and objection 
period, as well as potential consequences to the industry if rates and 
terms are not effective in time to be operationalized for the beginning 
of 2023, and therefore request that the Judges publish the proposed 
rates and terms for public comment as soon as possible.\9\ Proposed 
regulations implementing the settlement are attached to Joint Response 
2.
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    \9\ The Judges are aware of the participants' and the public's 
interest in timely implementation of rates and terms, and note that 
the submission of partial agreements and related materials as 
restricted has been a source of unfortunate delay in consideration 
of the proposed settlement of statutory royalty rates and terms for 
subpart C and D configurations.
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    Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to 
adopt 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 Judges for approval. This section states that the 
Judges shall (1) provide an opportunity to comment on the agreement to 
non-participants who would be bound by the terms, rates, or other 
determination set by the agreement; and (2) provide an opportunity to 
comment and to object to participants in the proceeding who would be 
bound by the terms, rates, or other determination set by the agreement. 
See section 801(b)(7)(A). The Judges may decline to adopt the agreement 
as a basis for statutory terms and rates for participants not party to 
the agreement if any participant objects and the Judges conclude that 
the agreement does not provide a reasonable basis for setting statutory 
terms or rates. Id.
    Having reviewed Joint Response 2, its attachments, and the related 
submissions referenced therein, the Judges find that Joint Response 2, 
Exhibit A, sub-exhibit A (referenced therein as the ``Settlement 
Agreement'' and ``Proposed Regulations'') includes ``the agreement'' 
for purposes of Section 801(b)(7)(A). The portions of Joint Response 2 
Exhibit A, sub-exhibit A referred to as ``Settlement Agreement'' and 
``Proposed Regulations'' may be found on pages 9-17 of 89 and 19-34 of 
89 of Joint Response 2, (eCRB No. 27290). The regulatory amendments 
that adoption of the proposed settlement would entail are reflected in 
the Proposed Regulations portion of this document.\10\
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    \10\ The docket for this proceeding, including documents 
referenced in this document, may be accessed via the Electronic 
filing system eCRB at https://app.crb.gov and perform a case search 
for docket 21-CRB-0001-PR (2023-2027).
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    If the Judges adopt rates and terms reached pursuant to a 
negotiated settlement, those rates and terms are binding on all 
copyright owners of musical works and those using the musical works in 
the activities described in the proposed regulations.
    The Judges solicit comments and objections from participants on 
whether they should adopt the proposed regulations as statutory rates 
and terms relating to the making and distribution of phonorecords of 
nondramatic musical works.
    Comments and objections regarding the rates and terms must be 
submitted no later than December 7, 2022.

List of Subjects in 37 CFR Part 385

    Copyright, Phonorecords, Recordings.

Proposed Regulations

    For the reasons set forth in the preamble, the Copyright Royalty 
Judges propose to amend 37 CFR part 385 as follows:

PART 385--RATES AND TERMS FOR USE OF NONDRAMATIC MUSICAL WORKS IN 
THE MAKING AND DISTRIBUTING OF PHYSICAL AND DIGITAL PHONORECORDS

0
1. The authority citation for part 385 continues to read as follows:

    Authority:  17 U.S.C. 115, 801(b)(1), 804(b)(4).

0
2. Revise subpart A to read as follows:

[[Page 66979]]

Subpart A--Regulations of General Application

Sec.
385.1 General.
385.2 Definitions.
385.3 Late payments.
385.4 Recordkeeping for promotional or free trial non-royalty-
bearing uses.

Subpart A--Regulations of General Application


Sec.  385.1   General.

    (a) Scope. This part establishes rates and terms of royalty 
payments for the use of nondramatic musical works in making and 
distributing of physical and digital phonorecords in accordance with 
the provisions of 17 U.S.C. 115. This subpart contains regulations of 
general application to the making and distributing of phonorecords 
subject to the section 115 license.
    (b) Legal compliance. Licensees relying on the compulsory license 
detailed in 17 U.S.C. 115 shall comply with the requirements of that 
section, the rates and terms of this part, and any other applicable 
regulations. This part describes rates and terms for the compulsory 
license only.
    (c) Interpretation. This part is intended only to set rates and 
terms for situations in which the exclusive rights of a Copyright Owner 
are implicated and a compulsory license pursuant to 17 U.S.C. 115 is 
obtained. Neither this part nor the act of obtaining a license under 17 
U.S.C. 115 is intended to express or imply any conclusion as to the 
circumstances in which a user must obtain a compulsory license pursuant 
to 17 U.S.C. 115.
    (d) Relationship to voluntary agreements. The rates and terms of 
any license agreements entered into by Copyright Owners and Licensees 
relating to use of musical works within the scope of those license 
agreements shall apply in lieu of the rates and terms of this part.


Sec.  385.2   Definitions.

    Unless otherwise specified, capitalized terms in this part shall 
have the same meaning given to them in 17 U.S.C. 115(e). For the 
purposes of this part, the following definitions apply:
    Accounting Period means the monthly period specified in 17 U.S.C. 
115(c)(2)(I) and in 17 U.S.C. 115(d)(4)(A)(i), and any related 
regulations, as applicable.
    Active Subscriber means an End User of a Bundled Subscription 
Offering who has made at least one Play during the Accounting Period.
    Affiliate means an entity controlling, controlled by, or under 
common control with another entity, except that an affiliate of a Sound 
Recording Company shall not include a Copyright Owner to the extent it 
is engaging in business as to musical works.
    Artificial Accounts are accounts that are disabled or terminated 
for having engaged in User Manipulation or other fraudulent activity 
and for which any subscription revenues are refunded or otherwise not 
received by the Service Provider.
    Bundle means a combination of a Subscription Offering providing 
Eligible Interactive Streams and/or Eligible Limited Downloads and one 
or more other products or services having more than token value, 
purchased by End Users in a single transaction (e.g., where End Users 
make a single payment without separate pricing for the Subscription 
Offering component).
    Bundled Subscription Offering means a Subscription Offering 
providing Eligible Interactive Streams and/or Eligible Limited 
Downloads included within a Bundle.
    Copyright Owner(s) are nondramatic musical works copyright owners 
who are entitled to royalty payments made under this part pursuant to 
the compulsory license under 17 U.S.C. 115.
    Digital Phonorecord Delivery has the same meaning as in 17 U.S.C. 
115(e)(10).
    Eligible Interactive Stream means a Stream that is an Interactive 
Stream as defined in 17 U.S.C. 115(e)(13).
    Eligible Limited Download means a Limited Download as defined in 17 
U.S.C. 115(e)(16) that is only accessible for listening for--
    (1) An amount of time not to exceed one month from the time of the 
transmission (unless the Licensee, in lieu of retransmitting the same 
sound recording as another Eligible Limited Download, separately, and 
upon specific request of the End User made through a live network 
connection, reauthorizes use for another time period not to exceed one 
month), or in the case of a subscription plan, a period of time 
following the end of the applicable subscription no longer than a 
subscription renewal period or three months, whichever is shorter; or
    (2) A number of times not to exceed 12 (unless the Licensee, in 
lieu of retransmitting the same sound recording as another Eligible 
Limited Download, separately, and upon specific request of the End User 
made through a live network connection, reauthorizes use of another 
series of 12 or fewer plays), or in the case of a subscription 
transmission, 12 times after the end of the applicable subscription.
    End User means each unique person that:
    (1) Pays a subscription fee for an Offering during the relevant 
Accounting Period; or
    (2) Makes at least one Play during the relevant Accounting Period.
    Family Plan means a discounted Subscription Offering to be shared 
by up to six members of the same family or household for a single 
subscription price.
    Free Trial Offering means a subscription to a Service Provider's 
transmissions of sound recordings embodying musical works when--
    (1) Neither the Service Provider, the Sound Recording Company, the 
Copyright Owner, nor any person or entity acting on behalf of or in 
lieu of any of them receives any monetary consideration for the 
Offering;
    (2) The usage does not exceed 45 days per subscriber per one-year 
period, which days may be nonconsecutive;
    (3) In connection with the Offering, the Service Provider complies 
with the recordkeeping requirements in Sec.  385.4 or superseding 
Copyright Office recordkeeping requirements;
    (4) The Free Trial Offering is made available to the End User free 
of any charge; and
    (5) The Service Provider offers the End User periodically during 
the trial an opportunity to subscribe to, and/or auto-renews the End 
User into, a non-Free Trial Offering of the Service Provider.
    GAAP means U.S. Generally Accepted Accounting Principles in effect 
at the relevant time, except that if the U.S. Securities and Exchange 
Commission permits or requires entities with securities that are 
publicly traded in the U.S. to employ International Financial Reporting 
Standards in lieu of Generally Accepted Accounting Principles, then 
that entity may employ International Financial Reporting Standards as 
``GAAP'' for purposes of this subpart.
    Licensee means any entity availing itself of the compulsory license 
under 17 U.S.C. 115 to use copyrighted musical works in the making or 
distributing of physical or digital phonorecords.
    Licensed Activity as the term is used in subparts C and D of this 
part, means Covered Activity, under voluntary or statutory license, in 
the form of Eligible Interactive Streams, Eligible Limited Downloads, 
and Restricted Downloads.
    Locker Service means an Offering providing digital access to sound 
recordings of musical works in the form of Eligible Interactive 
Streams, Permanent Downloads, Restricted Downloads or Ringtones where 
the Service Provider has reasonably

[[Page 66980]]

determined that the End User has purchased or is otherwise in 
possession of the subject phonorecords of the applicable sound 
recording prior to the End User's first request to use the sound 
recording via the Locker Service. The term Locker Service does not mean 
any part of a Service Provider's products otherwise meeting this 
definition, but as to which the Service Provider has not obtained a 
section 115 license.
    Mixed Service Bundle means an Offering providing Licensed Activity 
consisting of Eligible Interactive Streams or Eligible Limited 
Downloads that meets all of the following criteria:
    (1) The Offering is made available to End Users only in combination 
(i.e., the Offering is not available on a standalone basis) with one or 
more products or services (including services subject to other 
subparts) of more than token value as part of one transaction for which 
End Users make a payment without receiving pricing for the Offering 
separate from the product(s) or service(s) with which it is made 
available.
    (2) The Offering is made available by a Service Provider that also 
offers End Users a separate, standalone Subscription Offering.
    (3) The Offering offers End Users less functionality relative to 
that separate, standalone Subscription Offering. Such lesser 
functionality may include, but is not limited to, limitations on the 
ability of End Users to choose to listen to specific sound recordings 
on request or a limited catalog of sound recordings.
    (4) Where an Offering could qualify or be considered as either a 
Bundled Subscription Offering or a Mixed Service Bundle, such Offering 
shall be deemed a Mixed Service Bundle for the purpose of calculating 
and paying royalties under subpart C of this part.
    Music Bundle means two or more of physical phonorecords, Permanent 
Downloads or Ringtones delivered as part of one transaction (e.g., 
download plus ringtone, CD plus downloads). In the case of Music 
Bundles containing one or more physical phonorecords, the Service 
Provider must sell the physical phonorecord component of the Music 
Bundle under a single catalog number, and the musical works embodied in 
the Digital Phonorecord Delivery configurations in the Music Bundle 
must be the same as, or a subset of, the musical works embodied in the 
physical phonorecords; provided that when the Music Bundle contains a 
set of Digital Phonorecord Deliveries sold by the same Sound Recording 
Company under substantially the same title as the physical phonorecord 
(e.g., a corresponding digital album), the Service Provider may include 
in the same bundle up to 5 sound recordings of musical works that are 
included in the stand-alone version of the set of digital phonorecord 
deliveries but not included on the physical phonorecord. In addition, 
the Service Provider must permanently part with possession of the 
physical phonorecord or phonorecords it sells as part of the Music 
Bundle. In the case of Music Bundles composed solely of digital 
phonorecord deliveries, the number of digital phonorecord deliveries in 
either configuration cannot exceed 20, and the musical works embodied 
in each configuration in the Music Bundle must be the same as, or a 
subset of, the musical works embodied in the configuration containing 
the most musical works.
    Offering means a Service Provider's engagement in Licensed Activity 
covered by subparts C and D of this part.
    Paid Locker Service means a Locker Service for which the End User 
pays a fee to the Service Provider.
    Performance Royalty means the license fee payable for the right to 
perform publicly musical works in any of the forms covered by subparts 
C and D this part.
    Permanent Download has the same meaning as in 17 U.S.C. 115(e)(24).
    Play means an Eligible Interactive Stream, or a play of an Eligible 
Limited Download, lasting 30 seconds or more and, if a track lasts in 
its entirety under 30 seconds, an Eligible Interactive Stream or a play 
of an Eligible Limited Download of the entire duration of the track. A 
Play excludes an Eligible Interactive Stream or a play of an Eligible 
Limited Download caused by User Manipulation.
    Promotional Offering means a digital transmission of a sound 
recording, in the form of an Eligible Interactive Stream or an Eligible 
Limited Download, embodying a musical work, the primary purpose of 
which is to promote the sale or other paid use of that sound recording 
or to promote the artist performing on that sound recording and not to 
promote or suggest promotion or endorsement of any other good or 
service and
    (1) A Sound Recording Company is lawfully distributing the sound 
recording through established retail channels or, if the sound 
recording is not yet released, the Sound Recording Company has a good 
faith intention to lawfully distribute the sound recording or a 
different version of the sound recording embodying the same musical 
work;
    (2) The Service Provider is in compliance with the recordkeeping 
requirements of Sec.  385.4 or superseding Copyright Office 
recordkeeping requirements;
    (3) For Eligible Interactive Streams of segments of sound 
recordings not exceeding 90 seconds, the Sound Recording Company 
delivers or authorizes delivery of the segments for promotional 
purposes and neither the Service Provider nor the Sound Recording 
Company creates or uses a segment of a sound recording in violation of 
17 U.S.C. 106(2) or 115(a)(2);
    (4) The Promotional Offering is made available to an End User free 
of any charge; and
    (5) The Service Provider provides to the End User at the same time 
as the Promotional Offering Stream an opportunity to purchase the sound 
recording or the Service Provider periodically offers End Users the 
opportunity to subscribe to a paid Offering of the Service Provider.
    Purchased Content Locker Service means a Locker Service made 
available to End User purchasers of Permanent Downloads, Ringtones, or 
physical phonorecords at no incremental charge above the otherwise 
applicable purchase price of the Permanent Downloads, Ringtones, or 
physical phonorecords acquired from a qualifying seller. With a 
Purchased Content Locker Service, an End User may receive one or more 
additional phonorecords of the purchased sound recordings of musical 
works in the form of Permanent Downloads or Ringtones at the time of 
purchase, or subsequently have digital access to the purchased sound 
recordings of musical works in the form of Eligible Interactive 
Streams, additional Permanent Downloads, Restricted Downloads, or 
Ringtones.
    (1) A qualifying seller for purposes of this definition is the 
entity operating the Service Provider, including Affiliates, 
predecessors, or successors in interest, or--
    (i) In the case of Permanent Downloads or Ringtones, a seller 
having a legitimate connection to the locker service provider pursuant 
to one or more written agreements (including that the Purchased Content 
Locker Service and Permanent Downloads or Ringtones are offered through 
the same third party); or
    (ii) In the case of physical phonorecords,
    (A) The seller of the physical phonorecord has an agreement with 
the Purchased Content Locker Service provider establishing an 
integrated offer that creates a consumer experience commensurate with 
having the same Service Provider both sell the physical

[[Page 66981]]

phonorecord and offer the integrated locker service; or
    (B) The Service Provider has an agreement with the entity offering 
the Purchased Content Locker Service establishing an integrated offer 
that creates a consumer experience commensurate with having the same 
Service Provider both sell the physical phonorecord and offer the 
integrated locker service.
    (2) [Reserved]
    Relevant Page means an electronic display (for example, a web page 
or screen) from which a Service Provider's Offering consisting of 
Eligible Interactive Streams or Eligible Limited Downloads is directly 
available to End Users, but only when the Offering and content directly 
relating to the Offering (e.g., an image of the artist, information 
about the artist or album, reviews, credits, and music player controls) 
comprises 75% or more of the space on that display, excluding any space 
occupied by advertising. An Offering is directly available to End Users 
from a page if End Users can receive sound recordings of musical works 
(in most cases this will be the page on which the Eligible Limited 
Download or Eligible Interactive Stream takes place).
    Restricted Download means a Digital Phonorecord Delivery in a form 
that cannot be retained and replayed on a permanent basis. The term 
Restricted Download includes an Eligible Limited Download.
    Ringtone means a phonorecord of a part of a musical work 
distributed as a Digital Phonorecord Delivery in a format to be made 
resident on a telecommunications device for use to announce the 
reception of an incoming telephone call or other communication or 
message or to alert the receiver to the fact that there is a 
communication or message.
    Service Provider means that entity governed by subparts C and D of 
this part, which might or might not be the Licensee, that with respect 
to the section 115 license
    (1) Contracts with or has a direct relationship with End Users or 
otherwise controls the content made available to End Users;
    (2) Is able to report fully on Service Provider Revenue from the 
provision of musical works embodied in phonorecords to the public, and 
to the extent applicable, verify Service Provider Revenue through an 
audit; and
    (3) Is able to report fully on its usage of musical works, or 
procure such reporting and, to the extent applicable, verify usage 
through an audit.
    Service Provider Revenue. (1) Subject to paragraphs (2) through (5) 
of this definition and subject to GAAP, Service Provider Revenue shall 
mean, for each Offering subject to subpart C of this part:
    (i) All revenue from End Users recognized by a Service Provider for 
the provision of the Offering;
    (ii) All revenue recognized by a Service Provider by way of 
sponsorship and commissions as a result of the inclusion of third-party 
``in-stream'' or ``in-download'' advertising as part of the Offering, 
i.e., advertising placed immediately at the start or end of, or during 
the actual delivery of, a musical work, by way of Eligible Interactive 
Streams or Eligible Limited Downloads; and
    (iii) All revenue recognized by the Service Provider, including by 
way of sponsorship and commissions, as a result of the placement of 
third-party advertising on a Relevant Page of the Service Provider or 
on any page that directly follows a Relevant Page leading up to and 
including the Eligible Limited Download or Eligible Interactive Stream 
of a musical work; provided that, in case more than one Offering is 
available to End Users from a Relevant Page, any advertising revenue 
shall be allocated between or among the Service Providers on the basis 
of the relative amounts of the page they occupy.
    (2) Service Provider Revenue shall:
    (i) Include revenue recognized by the Service Provider, or by any 
associate, Affiliate, agent, or representative of the Service Provider 
in lieu of its being recognized by the Service Provider; and
    (ii) Include the value of any barter or other nonmonetary 
consideration; and
    (iii) Except as expressly detailed in this part, not be subject to 
any other deduction or set-off other than refunds to End Users for 
Offerings that the End Users were unable to use because of technical 
faults in the Offering or other bona fide refunds or credits issued to 
End Users in the ordinary course of business.
    (3) Service Provider Revenue shall exclude revenue derived by the 
Service Provider solely in connection with activities other than 
Offering(s), whereas advertising or sponsorship revenue derived in 
connection with any Offering(s) shall be treated as provided in 
paragraphs (1), (2), and (4) of this definition.
    (4) For purposes of paragraph (1) of this definition, advertising 
or sponsorship revenue shall be reduced by the actual cost of obtaining 
that revenue, not to exceed 15%.
    (5) In instances in which a Service Provider provides a Bundled 
Subscription Offering to End Users, the revenue from End Users deemed 
to be recognized by the Service Provider for the Offering for the 
purpose of paragraph (1) of this definition of Service Provider Revenue 
shall be as follows:
    (i) For Bundled Subscription Offerings where both each component of 
the Bundle is a product or service of the Service Provider (including 
Affiliates) and the Service Provider (including Affiliates) makes the 
Bundle available to End Users directly, then the revenue from End Users 
deemed to be recognized by the Service Provider for the purpose of 
paragraph (1) of this definition shall be the aggregate of the retail 
price paid for the Bundle (i.e., all components for one retail price) 
multiplied by a fraction where the numerator is the standalone retail 
price of the Subscription Offering component in the Bundle and the 
denominator is the sum of the standalone retail prices of each of the 
components in the Bundle (e.g. if a Service Provider sells the 
Subscription Offering component on a standalone basis for $10/month and 
a separate product and/or service on a standalone basis for $5/month, 
then the fraction shall be $10 divided by $15, i.e. \2/3\, resulting in 
Service Provider Revenue of $8,000 if the aggregate of the retail price 
paid for the Bundle is $12,000).
    (ii) For Bundled Subscription Offerings where either one or more 
components of the Bundle are not products or services of the Service 
Provider (including Affiliates) or the Service Provider (including 
Affiliates) does not make the Bundle available to End Users directly, 
then the revenue from End Users deemed to be recognized by the Service 
Provider for the purpose of paragraph (1) of this definition shall be 
the revenue recognized by the Service Provider from the Bundle 
multiplied by a fraction where the numerator is the standalone retail 
price of the Subscription Offering component in the Bundle and the 
denominator is the sum of the standalone retail prices of each of the 
components of the Bundle. Notwithstanding the preceding sentence, where 
the Service Provider does not recognize revenue for one or more 
components of the Bundle, then the standalone price(s) of the 
component(s) for which revenue is not recognized shall not be included 
in the calculation of the denominator of the fraction described in this 
sub-paragraph (e.g., where a Bundle of three services, each with a 
standalone price of $20/month, sells for $50/month, and the Service 
Provider recognizes $30,000 of revenue from the provision of only two 
of those services, one of which is a Subscription Offering, then the 
fraction

[[Page 66982]]

shall be $20 divided by $40, i.e. \1/2\, resulting in Service Provider 
Revenue of $15,000).
    (iii) For the calculations in paragraphs (5)(i) and (ii) of this 
definition, in the event that there is no standalone published price 
for a component of the Bundle, then the Service Provider shall use the 
average standalone published price for End Users for the most closely 
comparable product or service in the U.S. or, if more than one 
comparable exists, the average of standalone prices for comparables. If 
no reasonably comparable product or service exists in the U.S., then 
the Service Provider may use another good faith, reasonable measure of 
the market value of the component.
    Sound Recording Company means a person or entity that:
    (1) Is a copyright owner of a sound recording embodying a musical 
work;
    (2) In the case of a sound recording of a musical work fixed before 
February 15, 1972, has rights to the sound recording, under chapter 14 
of title 17, United States Code, that are equivalent to the rights of a 
copyright owner of a sound recording of a musical work under title 17, 
United States Code;
    (3) Is an exclusive Licensee of the rights to reproduce and 
distribute a sound recording of a musical work; or
    (4) Performs the functions of marketing and authorizing the 
distribution of a sound recording of a musical work under its own 
label, under the authority of a person identified in paragraphs (1) 
through (3) of this definition.
    Standalone Limited Offering means a Subscription Offering providing 
Eligible Interactive Streams or Eligible Limited Downloads for which--
    (1) An End User cannot choose to listen to a particular sound 
recording (i.e., the Service Provider does not provide Eligible 
Interactive Streams of individual recordings that are on-demand, and 
Eligible Limited Downloads are rendered only as part of programs rather 
than as individual recordings that are on-demand); or
    (2) The particular sound recordings available to the End User over 
a period of time are substantially limited relative to Service 
Providers in the marketplace providing access to a comprehensive 
catalog of recordings (e.g., a product limited to a particular genre or 
permitting Eligible Interactive Streams only from a monthly playlist 
consisting of a limited set of recordings).
    Standalone Non-Portable Subscription Offering--Mixed means a 
Subscription Offering through which an End User can listen to sound 
recordings either in the form of Eligible Interactive Streams or 
Eligible Limited Downloads but only from a non-portable device to which 
those Eligible Interactive Streams or Eligible Limited Downloads are 
originally transmitted.
    Standalone Non-Portable Subscription Offering--Streaming Only means 
a Subscription Offering through which an End User can listen to sound 
recordings only in the form of Eligible Interactive Streams and only 
from a non-portable device to which those Eligible Interactive Streams 
are originally transmitted while the device has a live network 
connection.
    Standalone Portable Subscription Offering means a Subscription 
Offering through which an End User can listen to sound recordings in 
the form of Eligible Interactive Streams or Eligible Limited Downloads 
from a portable device.
    Stream means the digital transmission of a sound recording of a 
musical work to an End User--
    (1) To allow the End User to listen to the sound recording, while 
maintaining a live network connection to the transmitting service, 
substantially at the time of transmission, except to the extent that 
the sound recording remains accessible for future listening from a 
Streaming Cache Reproduction;
    (2) Using technology that is designed such that the sound recording 
does not remain accessible for future listening, except to the extent 
that the sound recording remains accessible for future listening from a 
Streaming Cache Reproduction; and
    (3) That is subject to licensing as a public performance of the 
musical work.
    Streaming Cache Reproduction means a reproduction of a sound 
recording embodying a musical work made on a computer or other 
receiving device by a Service Provider solely for the purpose of 
permitting an End User who has previously received a Stream of that 
sound recording to play the sound recording again from local storage on 
the computer or other device rather than by means of a transmission; 
provided that the End User is only able to do so while maintaining a 
live network connection to the Service Provider, and the reproduction 
is encrypted or otherwise protected consistent with prevailing industry 
standards to prevent it from being played in any other manner or on any 
device other than the computer or other device on which it was 
originally made.
    Student Plan means a discounted Subscription Offering available on 
a limited basis to students.
    Subscription Offering means an Offering for which End Users are 
required to pay a fee to have access to the Offering for defined 
subscription periods of 3 years or less (in contrast to, for example, a 
service where the basic charge to users is a payment per download or 
per play), whether the End User makes payment for access to the 
Offering on a standalone basis or as part of a Bundle.
    TCC means the total amount expensed by a Service Provider or any of 
its Affiliates in accordance with GAAP for rights to make Eligible 
Interactive Streams or Eligible Limited Downloads of a musical work 
embodied in a sound recording through the Service Provider for the 
Accounting Period, which amount shall equal the Applicable 
Consideration for those rights at the time the Applicable Consideration 
is properly recognized as an expense under GAAP. As used in this 
definition, ``Applicable Consideration'' means anything of value given 
for the identified rights to undertake the Licensed Activity, 
including, without limitation, ownership equity, monetary advances, 
barter or any other monetary and/or nonmonetary consideration, whether 
that consideration is conveyed via a single agreement, multiple 
agreements and/or agreements that do not themselves authorize the 
Licensed Activity but nevertheless provide consideration for the 
identified rights to undertake the Licensed Activity, and including any 
value given to an Affiliate of a Sound Recording Company for the rights 
to undertake the Licensed Activity. Value given to a Copyright Owner of 
musical works that is controlling, controlled by, or under common 
control with a Sound Recording Company for rights to undertake the 
Licensed Activity shall not be considered value given to the Sound 
Recording Company. Notwithstanding the foregoing, Applicable 
Consideration shall not include in-kind promotional consideration given 
to a Sound Recording Company (or Affiliate thereof) that is used to 
promote the sale or paid use of sound recordings embodying musical 
works or the paid use of music services through which sound recordings 
embodying musical works are available where the in-kind promotional 
consideration is given in connection with a use that qualifies for 
licensing under 17 U.S.C. 115.
    User Manipulation means any behavior that artificially distorts the 
number of Plays, including, but not limited to, the use of manual 
(e.g., click farms) or automated (e.g., bots) means.


Sec.  385.3   Late payments.

    A Licensee shall pay a late fee of 1.5% per month, or the highest 
lawful rate,

[[Page 66983]]

whichever is lower, for any payment owed to a Copyright Owner and 
remaining unpaid after the due date established in 17 U.S.C. 
115(c)(2)(I) or 17 U.S.C. 115(d)(4)(A)(i), as applicable and detailed 
in part 210 of this title. Late fees shall accrue from the due date 
until the Copyright Owner receives payment.


Sec.  385.4   Recordkeeping for promotional or free trial non-royalty-
bearing uses.

    (a) Effect of Copyright Office recordkeeping regulations. Unless 
and until the Copyright Office promulgates superseding regulations 
concerning recordkeeping for promotional or free trial non-royalty-
bearing uses subject to this part, the recordkeeping provisions in this 
section shall apply to Service Providers.
    (b) General. A Service Provider transmitting a sound recording 
embodying a musical work subject to 17 U.S.C. 115 and subparts C and D 
of this part and claiming a Promotional Offering or Free Trial Offering 
zero royalty rate shall keep complete and accurate contemporaneous 
written records of making or authorizing Eligible Interactive Streams 
or Eligible Limited Downloads, including the sound recordings and 
musical works involved, the artists, the release dates of the sound 
recordings, a brief statement of the promotional activities authorized, 
the identity of the Offering or Offerings for which the zero-rate is 
authorized (including the internet address if applicable), and the 
beginning and end date of each zero rate Offering.
    (c) Retention of records. A Service Provider claiming zero rates 
shall maintain the records required by this section for no less time 
than the Service Provider maintains records of royalty-bearing uses 
involving the same types of Offerings in the ordinary course of 
business, but in no event for fewer than five years from the conclusion 
of the zero rate Offerings to which they pertain.
    (d) Availability of records. If the Mechanical Licensing Collective 
requests information concerning zero rate Offerings, the Service 
Provider shall respond to the request within an agreed, reasonable 
time.
0
3. Revise subpart C, consisting of Sec. Sec.  385.20 and 385.21, to 
read as follows:

Subpart C--Eligible Interactive Streaming, Eligible Limited 
Downloads, Standalone Limited Offerings, Mixed Service Bundles, 
Bundled Subscription Offerings, Locker Services, and Other Delivery 
Configurations


Sec.  385.20   Scope.

    This subpart establishes rates and terms of royalty payments for 
Eligible Interactive Streams and Eligible Limited Downloads of musical 
works, and other reproductions or distributions of musical works 
through Standalone Limited Offerings, Mixed Service Bundles, Bundled 
Subscription Offerings, Paid Locker Services, and Purchased Content 
Locker Services provided through subscription and nonsubscription 
digital music Service Providers in accordance with the provisions of 17 
U.S.C. 115, exclusive of Offerings subject to subpart D of this part.


Sec.  385.21   Royalty rates and calculations.

    (a) Applicable royalty. Licensees that engage in Licensed Activity 
covered by this subpart pursuant to 17 U.S.C. 115 shall pay royalties 
therefor that are calculated as provided in this section.
    (b) Rate calculation. Royalty payments for Licensed Activity in 
this subpart shall be calculated as provided in this paragraph (b). If 
a Service Provider makes available different Offerings, royalties must 
be calculated separately with respect to each Offering taking into 
consideration Service Provider Revenue, TCC, subscribers, Plays, 
expenses, and Performance Royalties associated with each Offering. A 
Service Provider shall not be required to subject the same portion of 
Service Provider Revenue, TCC, subscribers, Plays, expenses, or 
Performance Royalties to the calculation of royalties for more than one 
Offering in an Accounting Period.
    (1) Step 1: Calculate the all-in royalty for the Offering. For each 
Accounting Period, the all-in royalty for each Offering in this subpart 
with the exception of Mixed Service Bundles shall be the greater of 
{a{time}  the applicable percent of Service Provider Revenue, as set 
forth in Table 1 to this paragraph (b)(1), and {b{time}  the result of 
the TCC Prong Calculation for the respective type of Offering as set 
forth in Table 2 to this paragraph (b)(1). For Mixed Service Bundles, 
the all-in royalty shall be the result of the TCC Prong Calculation as 
set forth in table 2.

                                                               Table 1 to Paragraph (b)(1)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                            Royalty year                                   2023             2024             2025             2026             2027
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of Service Provider Revenue................................            15.1             15.2            15.25             15.3            15.35
--------------------------------------------------------------------------------------------------------------------------------------------------------


                       Table 2 to Paragraph (b)(1)
------------------------------------------------------------------------
            Type of offering                  TCC prong calculation
------------------------------------------------------------------------
Standalone Non-Portable Subscription     The lesser of (i) 26.2% of TCC
 Offering--Streaming Only.                for the Accounting Period or
                                          (ii) the aggregate amount of
                                          60 cents per subscriber for
                                          the Accounting Period.
Standalone Non-Portable Subscription     The lesser of (i) 26.2% of TCC
 Offering--Mixed.                         for the Accounting Period or
                                          (ii) the aggregate amount of
                                          60 cents per subscriber for
                                          the Accounting Period.
Standalone Portable Subscription         The lesser of (i) 26.2% of TCC
 Offering.                                for the Accounting Period or
                                          (ii) the aggregate amount of
                                          $1.10 per subscriber for the
                                          Accounting Period.
Free nonsubscription/ad-supported        26.2% of TCC for the Accounting
 services free of any charge to the End   Period.
 User.
Bundled Subscription Offering..........  24.5% of TCC for the Accounting
                                          Period.
Mixed Service Bundle...................  26.2% of TCC for the Accounting
                                          Period.
Purchased Content Locker Service.......  26.2% of TCC for the Accounting
                                          Period.
Standalone Limited Offering............  26.2% of TCC for the Accounting
                                          Period.
Paid Locker Service....................  26.2% of TCC for the Accounting
                                          Period.
------------------------------------------------------------------------


[[Page 66984]]

    (2) Step 2: Subtract applicable Performance Royalties. From the 
amount determined in step 1 in paragraph (b)(1) of this section, for 
each Offering of the Service Provider, subtract the total amount of 
Performance Royalties that the Service Provider has expensed or will 
expense pursuant to public performance licenses in connection with uses 
of musical works through that Offering during the Accounting Period 
that constitute Licensed Activity. Although this amount may be the 
total of the Service Provider's payments for that Offering for the 
Accounting Period, it will be less than the total of the performance 
royalties if the Service Provider is also engaging in public 
performance of musical works that does not constitute Licensed 
Activity. In the case in which the Service Provider is also engaging in 
the public performance of musical works that does not constitute 
Licensed Activity, the amount to be subtracted for Performance 
Royalties shall be the amount allocable to Licensed Activity uses 
through the relevant Offering as determined in relation to all uses of 
musical works for which the Service Provider pays performance royalties 
for the Accounting Period. The Service Provider shall make this 
allocation on the basis of Plays of musical works, provided that if the 
Service Provider is not capable of tracking Play information, including 
because of bona fide limitations of the available technology for 
Offerings of that nature or of devices useable with the Offering, the 
allocation may instead be accomplished in a manner consistent with the 
methodology used for making royalty payment allocations for the use of 
individual sound recordings, and further provided that, if the Service 
Provider is also not capable of utilizing a manner consistent with a 
methodology used for making royalty payment allocations for the use of 
individual sound recordings, the Service Provider may use an 
alternative, good faith methodology that is reasonable, identifiable, 
and implemented consistently.
    (3) Step 3: Determine the payable royalty pool. The payable royalty 
pool is the amount payable for the reproduction and distribution of all 
musical works used by the Service Provider by virtue of its Licensed 
Activity for a particular Offering during the Accounting Period. This 
amount is the greater of:
    (i) The result determined in step 2 in paragraph (b)(2) of this 
section; and
    (ii) The royalty floor (if any) resulting from the calculations 
described in paragraph (d) of this section.
    (4) Step 4: Calculate the per-work royalty allocation. This is the 
amount payable for the reproduction and distribution of each musical 
work used by the Service Provider by virtue of its Licensed Activity 
through a particular Offering during the Accounting Period. To 
determine this amount, the result determined in step 3 in paragraph 
(b)(3) of this section must be allocated to each musical work used 
through the Offering. The allocation shall be accomplished by the 
Mechanical Licensing Collective by dividing the payable royalty pool 
determined in step 3 for the Offering by the total number of Plays of 
all musical works through the Offering during the Accounting Period 
(other than Plays subject to subpart D of this part) to yield a per-
Play allocation, and multiplying that result by the number of Plays of 
each musical work (other than Plays subject to subpart D of this part) 
through the Offering during the Accounting Period. For purposes of 
determining the per-work royalty allocation in all calculations under 
step 4 in this paragraph (b)(4) only (i.e., after the payable royalty 
pool has been determined), for sound recordings of musical works with a 
playing time of over 5 minutes, each Play shall be counted as provided 
in paragraph (c) of this section. Notwithstanding the foregoing, if the 
Service Provider is not capable of tracking Play information because of 
bona fide limitations of the available technology for Offerings of that 
nature or of devices useable with the Offering, the per-work royalty 
allocation may instead be accomplished in a manner consistent with the 
methodology used for making royalty payment allocations for the use of 
individual sound recordings.
    (c) Overtime adjustment. For purposes of the calculations in step 4 
in paragraph (b)(4) of this section only, for sound recordings of 
musical works with a playing time of over 5 minutes, adjust the number 
of Plays as follows.
    (1) 5:01 to 6:00 minutes--Each Play = 1.2 Plays.
    (2) 6:01 to 7:00 minutes--Each Play = 1.4 Plays.
    (3) 7:01 to 8:00 minutes--Each Play = 1.6 Plays.
    (4) 8:01 to 9:00 minutes--Each Play = 1.8 Plays.
    (5) 9:01 to 10:00 minutes--Each Play = 2.0 Plays.
    (6) For playing times of greater than 10 minutes, continue to add 
0.2 Plays for each additional minute or fraction thereof.
    (d) Royalty floors for specific types of Offerings. The following 
royalty floors for use in step 3 in paragraph (b)(3) of this section 
shall apply to the respective types of Offerings:
    (1) Standalone non-portable Subscription Offerings--streaming only. 
Except as provided in paragraphs (d)(4) and (6) of this section with 
respect to Standalone Limited Offerings, in the case of a Subscription 
Offering through which an End User can listen to sound recordings only 
in the form of Eligible Interactive Streams and only from a non-
portable device to which those Eligible Interactive Streams are 
originally transmitted while the device has a live network connection, 
the royalty floor for use in step 3 in paragraph (b)(3) of this section 
is the aggregate amount of 18 cents per subscriber per Accounting 
Period.
    (2) Standalone non-portable Subscription Offerings--mixed. Except 
as provided in paragraphs (d)(4) and (6) of this section with respect 
to Standalone Limited Offerings, in the case of a Subscription Offering 
through which an End User can listen to sound recordings either in the 
form of Eligible Interactive Streams or Eligible Limited Downloads but 
only from a non-portable device to which those Eligible Interactive 
Streams or Eligible Limited Downloads are originally transmitted, the 
royalty floor for use in step 3 in paragraph (b)(3) of this section is 
the aggregate amount of 36 cents per subscriber per Accounting Period.
    (3) Standalone portable Subscription Offerings. Except as provided 
in paragraphs (d)(4) and (6) of this section with respect to Standalone 
Limited Offerings, in the case of a Subscription Offering through which 
an End User can listen to sound recordings in the form of Eligible 
Interactive Streams or Eligible Limited Downloads from a portable 
device, the royalty floor for use in step 3 in paragraph (b)(3) of this 
section is the aggregate amount of 60 cents per subscriber per 
Accounting Period.
    (4) Bundled Subscription Offerings. In the case of a Bundled 
Subscription Offering, the royalty floor for use in step 3 in paragraph 
(b)(3) of this section is the aggregate amount of 33 cents per 
Accounting Period for each Active Subscriber. Notwithstanding the 
foregoing, solely where the Licensed Activity provided as part of a 
Bundled Subscription Offering would qualify as a Standalone Limited 
Offering if offered on a standalone basis, the royalty floor for use in 
step 3 in paragraph (b)(3) of this section is the aggregate amount of 
25 cents per Accounting Period for each Active Subscriber.
    (5) Mixed Service Bundles. In the case of a Mixed Service Bundle, 
the royalty floor for use in step 3 in paragraph (b)(3) of this section 
is the aggregate amount

[[Page 66985]]

of 25 cents per Accounting Period for each Active Subscriber.
    (6) Other Offerings. A Standalone Limited Offering, a Paid Locker 
Service, a Purchased Content Locker Service, and a free 
nonsubscription/ad-supported service free of any charge to the End User 
shall not be subject to a royalty floor in step 3 in paragraph (b)(3) 
of this section.
    (e) Computation of per-subscriber rates and royalty floors. For 
purposes of this section, to determine the per-subscriber rates in step 
1 in paragraph (b)(1) of this section and the royalty floors in step 3 
in paragraph (b)(3) of this section, as applicable to any particular 
Offering, the total number of subscribers for the Accounting Period 
shall be calculated by taking all End Users who were subscribers for a 
complete Accounting Period, prorating in the case of End Users who were 
subscribers for only part of an Accounting Period (such proration may 
take into account the subscriber's billing period), and deducting on a 
prorated basis for End Users covered by an Offering subject to subpart 
D of this part, except in the case of a Bundled Subscription Offering, 
subscribers shall be determined with respect to Active Subscribers. The 
product of the total number of subscribers for the Accounting Period 
and the specified number of cents per subscriber (or Active Subscriber, 
as the case may be) shall be used as the subscriber-based components of 
the royalty calculation for the Accounting Period. A Family Plan 
subscription shall be treated as 1.75 subscribers per Accounting 
Period, prorated in the case of a Family Plan subscription in effect 
for only part of an Accounting Period. A Student Plan subscription 
shall be treated as 0.5 subscribers per Accounting Period, prorated in 
the case of a Student Plan subscription in effect for only part of an 
Accounting Period. A Bundled Subscription Offering containing a Family 
Plan with one or more Active Subscriber(s) shall be treated as having 
1.75 Active Subscribers. A Bundled Subscription Offering containing a 
Student Plan with an Active Subscriber shall be treated as having 0.5 
Active Subscribers. For the purposes of calculating per-subscriber 
rates and royalty floors under this section, Artificial Accounts shall 
not be counted as subscribers, Active Subscribers, or End Users.
0
4. Revise subpart D, consisting of Sec. Sec.  385.30 and 385.31, to 
read as follows:

Subpart D--Promotional Offerings, Free Trial Offerings, and Certain 
Purchased Content Locker Services


Sec.  385.30   Scope.

    This subpart establishes rates and terms of royalty payments for 
Promotional Offerings, Free Trial Offerings, and certain Purchased 
Content Locker Services provided by subscription and nonsubscription 
digital music Service Providers in accordance with the provisions of 17 
U.S.C. 115.


Sec.  385.31   Royalty rates.

    (a) Promotional Offerings. For Promotional Offerings of audio-only 
Eligible Interactive Streams and Eligible Limited Downloads of sound 
recordings embodying musical works that the Sound Recording Company 
authorizes royalty-free to the Service Provider, the royalty rate is 
zero.
    (b) Free Trial Offerings. For Free Trial Offerings, the royalty 
rate is zero.
    (c) Certain Purchased Content Locker Services. For every Purchased 
Content Locker Service for which the Service Provider receives no 
monetary consideration, the royalty rate is zero.

David P. Shaw,
Chief Copyright Royalty Judge.
[FR Doc. 2022-24300 Filed 11-3-22; 4:15 pm]
BILLING CODE 1410-72-P