1918 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Rules and Regulations LIBRARY OF CONGRESS For access to the docket to read the final parties may agree.’’ 17 U.S.C. 115(c)(3)); determination and submitted The Judges included the designation Copyright Royalty Board background documents, go to eCRB and (2018–2022) in the docket number for search for docket number 16–CRB– this proceeding for the purpose of 37 CFR Part 385 0003–PR (2018–2022). designating the relevant five-year period [Docket No. 16–CRB–0003–PR (2018–2022)] FOR FURTHER INFORMATION CONTACT: with the knowledge that affected parties Anita Blaine, CRB Program Assistant, by may agree to successor rates and terms Determination of Royalty Rates and telephone at (202) 707–7658 or by email for a different or additional period. In Terms for Making and Distributing at [email protected]. this proceeding, each party included in Phonorecords (Phonorecords III) its Proposed Findings of Fact (PFF) and SUPPLEMENTARY INFORMATION: AGENCY: Copyright Royalty Board, Proposed Conclusions of Law (PCL) a Final Determination Library of Congress. designation of the rate period as January 1, 2018, through December 31, 2022. ACTION: Final rule and order. The Copyright Royalty Judges (Judges) commenced the captioned proceeding to The Judges, therefore, adopt that agreed SUMMARY: The Copyright Royalty Judges set royalty rates and terms to license the rate period. announce their final determination of copyrights of songwriters and For the reasons detailed in this the rates and terms for making and publishers in musical works made and Determination,1 the Judges establish the distributing phonorecords for the period distributed as physical phonorecords, following section 115 royalty rate beginning January 1, 2018, and ending digital downloads, and on-demand structure, and rates, for the period 2018 on December 31, 2022. digital streams. See 81 FR 255 (Jan. 5, through 2022. DATES: 2016). The rates and terms determined Effective Date: February 5, 2019. herein shall be effective during the rate For licensing of musical works for all Applicability Date: The regulations period January 1, 2018, through service offerings, the all-in rate for apply to the license period beginning December 31, 2022. Under the performances and mechanical January 1, 2018, and ending December Copyright Act, royalty rates for uses of reproductions shall be the greater of the 31, 2022. musical works shall end ‘‘on the percent of service revenue and Total ADDRESSES: The final determination is effective date of successor rates and Content Cost (TCC) rates in the posted in eCRB at https://app.crb.gov/. terms, or such other period as the following table. 2018–2022 ALL-IN ROYALTY RATES 2018 2019 2020 2021 2022 Percent of Revenue ............................................................. 11.4 12.3 13.3 14.2 15.1 Percent of TCC .................................................................... 22.0 23.1 24.1 25.2 26.2 The Judges also adopt for the new rate treated both motions as general motions works in the making and distribution of period existing royalty floors in effect governed by 37 CFR 350.4 and issued phonorecords. 17 U.S.C. 115. For for certain streaming configurations. their ruling on the motions by separate purposes of section 115, phonorecords In the Initial Determination issued on Order dated October 29, 2018. The include physical and digital sound January 27, 2018, the Judges Judges incorporate the reasoning and recordings embodying the protected promulgated regulatory terms that made rulings in that Order and to the extent musical works, digital sound recordings changes in style and substance of the necessary for clarity, include portions of that may be downloaded or streamed on regulatory terms governing that Order in this Final Determination. demand by a listener, and downloaded administration of the section 115 The final text of the amended telephone ringtones. Entities offering regulations is set out below this licenses. In February 2018, the Judges bundled music services and digital SUPPLEMENTARY INFORMATION section. received a motion from Copyright music lockers are also permitted to do Owners (Owners’ Motion) and a joint I. Background so under the section 115 compulsory motion from four Services (Services’ license. Motion) seeking clarification of A. Statute and Regulations regulatory terms promulgated with the The Copyright Act (Act) establishes a The section 115 compulsory license Initial Determination.2 The Judges compulsory license for use of musical created in 1909, reflected Congress’s attempt to balance the exclusive rights 1 This rate determination is not unanimous. Judge 2 National Music Publishers’ Association and of owners of copyrighted musical works Strickler prepared, to a disproportionately large Nashville Songwriters Association International with the public’s interest in access to degree, the initial drafts of this Determination. together filed the Copyright Owners’ Motion for the protected works. However, Congress Notwithstanding the Judges’ concurrence on most Clarification or Correction . (Owners’ Motion). of the factual recitation and economic analysis, they Amazon Digital Services, LLC; Google Inc.; Pandora made that right subject to a compulsory were unable to reach consensus on their Media, Inc. and Spotify USA Inc. filed a Joint license because of concern about conclusions. Judge Strickler’s dissenting opinion is Motion for Rehearing to Clarify the Regulations monopolistic control of the piano roll appended to and is a part of this rate determination. (Services’ Motion). The Judges did not treat the Note that all redactions in this publication were motions as motions for rehearing under 17 U.S.C. market (and another burgeoning made by the Copyright Royalty Judges and not by 803(c)(2), as neither requested a literal rehearing of invention, phonorecords). 17 U.S.C. 1 the Federal Register. evidence or legal argument. VerDate Sep<11>2014 20:31 Feb 04, 2019 Jkt 247001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\05FER3.SGM 05FER3 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Rules and Regulations 1919 (1909); see also H.R. Rep. No. 60–2222, when the consumer purchases a a 10-year period. At the beginning of at 9 (1909). This license is often referred permanent digital copy (download) of January 2006, the mechanical rate was to as the ‘‘phonorecords’’ license, but is the phonorecord (PDD), and (3) the larger of 9.1¢ per track or 1.75¢ per also identified, synonymously, as the inclusion of a musical work in a minute of playing time or fraction ‘‘mechanical’’ license. purchased telephone ringtone. Subpart thereof. See 37 CFR 255.3(i)–(m); see Congress revised the mechanical B regulations include licenses for (1) also 63 FR 7288 (Feb. 13, 1998). license in its 1976 general revision of interactive streaming and limited In 2006, with expiration of the the copyright laws. The 1976 revision downloads. The regulations in subpart C previous settlement term nearing, the also created a new entity, the Copyright relate to limited offerings, mixed Judges commenced a proceeding to Royalty Tribunal (CRT), to conduct bundles, music bundles, paid locker adjust the mechanical rates under periodic proceedings to adjust the services, and purchased content locker section 115. On January 26, 2009, they royalty rate for the license.3 services. The current regulations issued a Determination, effective March In 1995, Congress passed the Digital resulted from a negotiated settlement of 1, 2009. In that Determination, the Performance Right in Sound Recordings the previous mechanical license Judges noted that the parties had settled Act (DPRA),4 extending the mechanical proceeding. their dispute regarding rates and terms for conditional downloads, interactive license to ‘‘digital phonorecord B. Prior Proceedings deliveries’’ (DPDs), which Congress streaming, and incidental digital defined as each individual delivery of a Until 1976, Congress legislated phonorecord deliveries (i.e., rates in the phonorecord by digital transmission of royalty rates for the mechanical new subpart B) (2008 Settlement). See a sound recording which results in a reproduction of musical works and Mechanical and Digital Phonorecord specifically identifiable reproduction by notes. In 1980, the CRT conducted the Delivery Rate Determination, 74 FR or for any transmission recipient of a first contested proceeding to set rates for 4510, 4514 (Jan. 26, 2009) phonorecord of that sound recording, the section 115 compulsory license. The (Phonorecords I). The parties who regardless of whether the digital CRT increased the then-existing rate by negotiated the 2008 Settlement included transmission is also a public more than 45%, from the statutory 2.75¢ the National Music Publishers performance of the sound recording or rate per phonorecord to 4¢ per Association (NMPA) and the Digital 6 any nondramatic musical work phonorecord. 45 FR 63 (Jan. 2, 1980). Music Association (DiMA), the trade embodied therein. 17 U.S.C. 115(d). By 1986, the CRT had increased the association representing its member Accordingly, the section 115 mechanical rate to the greater of 5¢ per streaming services. Written Direct mechanical license now covers DPDs, in musical work or .95¢ per minute of Testimony of Rishi Mirchandani, Trial addition to physical copies. playing time or fraction thereof. 46 FR Ex. 1, at ¶ 59 (Mirchandani WDT). By statute, the Judges commence a 66267 (Dec. 23, 1981); see 37 CFR The 2008 Settlement rates that the proceeding to determine royalty rates 255.3(a)–(c). The next adjustment of the Judges adopted maintained the existing and terms for the section 115 license section 115 rates was scheduled to begin rate and rate structure at the greater of every fifth year. See 17 U.S.C. in 1987. However, the parties entered 9.1¢ per song or 1.75¢ per minute of 803(b)(1)(A)(i)(V). The Act favors into a settlement setting the rate at 5.25¢ playing time (or fraction thereof) for negotiated settlements among interested per track beginning on January 1, 1988, physical phonorecords and permanent parties, but in absence of a settlement, and the CRT established a schedule of digital downloads (PDD).