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65210 Federal Register/Vol. 83, No. 243/Wednesday, December 19 65210 Federal Register / Vol. 83, No. 243 / Wednesday, December 19, 2018 / Rules and Regulations LIBRARY OF CONGRESS determining the SDARS rates, the For SDARS: 15.5% of Gross Revenues, Judges relied most heavily on the as that term is defined for SDARS. Copyright Royalty Board opportunity cost approach proffered by II. Background SoundExchange, but the Judges utilized 37 CFR Part 382 opportunity cost survey data that they A. Statutory Licenses [Docket No. 16–CRB–0001 SR/PSSR (2018– found more appropriate than the data In 1995, Congress granted to sound 2022)] relied on by SoundExchange. recording copyright owners the After the Judges issued the Initial exclusive right ‘‘to perform the Determination of Royalty Rates and Determination in this proceeding on copyrighted [sound recording] publicly Terms for Transmission of Sound December 14, 2017, both Sirius XM by means of a digital audio Recordings by Satellite Radio and Radio, Inc., (Sirius XM), the lone transmission.’’ 2 17 U.S.C. 106(6). ‘‘Preexisting’’ Subscription Services SDARS, and Music Choice filed timely Concurrently, Congress limited that (SDARS III) motions for rehearing. SoundExchange exclusive right by creating two statutory filed responses opposing each rehearing AGENCY: Copyright Royalty Board, licenses that would enable certain users, motion, and Sirius XM and Music Library of Congress. including SDARS and PSS, to transmit Choice filed replies. On April 17, 2018, digitally sound recordings without ACTION: Final rule and order. the Judges ruled on the rehearing obtaining a voluntary license from each motions. See Order Granting In Part and SUMMARY: The Copyright Royalty Judges copyright owner. See 17 U.S.C. 112(e), announce their final determination of Denying In Part . Motion[s] for 114(d). The section 112 license the rates and terms for the digital Rehearing (Apr. 17, 2018). By this order, (ephemeral license) allows an entity that transmission of sound recordings and the Judges denied the Music Choice transmits a sound recording digitally to the reproduction of ephemeral motion and asked for additional briefing make ephemeral phonorecords of the recordings by preexisting subscription on the primary issue Sirius XM raised, sound recording to facilitate the services and preexisting satellite digital viz., whether the Judges should reduce transmission. Section 112(e) describes audio radio services for the period the royalty rate for SDARS set in the conditions under which an entity may 3 beginning January 1, 2018, and ending Initial Determination to a rate not lower license the ephemeral sound recording. on December 31, 2027. than 14.7% of Gross Revenues. Id. at 9. Section 114 describes limits that apply The parties filed briefs and responses to the digital transmission license.4 DATES: and the Judges took the issue under Effective Date: December 19, 2018. advisement. B. The Standards for Determining Applicability Date: The regulations Royalty Rates On October 11, 2018, the President apply to the license period beginning signed into law the Orrin G. Hatch-Bob Section 801(b)(1) of the Act provides January 1, 2018, and ending December Goodlatte Music Modernization Act, that the Judges shall ‘‘make 31, 2027. Public Law 115–264, 132 Stat. 3676 determinations and adjustments of ADDRESSES: The final determination is (Oct. 11, 2018) (MMA). That law reasonable terms and rates of royalty posted in eCRB at https://app.crb.gov/. includes a provision amending section payments’’ for the statutory licenses set For access to the docket to read the final 804(b)(3)(B) of the Copyright Act (Act) forth in, inter alia, section 114(f)(1) determination and submitted to state that ‘‘with respect to pre- (‘‘digital performance license’’).5 The background documents, go to eCRB and existing satellite digital audio radio digital performance license requires that search for docket number 16–CRB–0001 services, the terms and rates set forth by the Judges set rates and terms that are SR/PSSR (2018–2022). the Copyright Royalty Judges on ‘‘reasonable.’’ Id. In addition, section FOR FURTHER INFORMATION CONTACT: December 14, 2017, in their initial 801(b)(1) provides that these Anita Blaine, CRB Program Assistant, by determination for the rate period ending ‘‘reasonable’’ rates shall be calculated to telephone at (202) 707–7658 or by email on December 31, 2022, shall be in effect achieve four specific objectives: at [email protected]. through December 31, 2027, without (A) To maximize the availability of creative works to the public. SUPPLEMENTARY INFORMATION: any change based on a rehearing under (B) To afford the copyright owner a fair section 803(c)(2) . .’’ Id. sec. 103. As I. Introduction return for his or her creative work and the a consequence of this statutory copyright user a fair income under existing The purpose of the Copyright Royalty provision, the Judges dismissed the economic conditions. Judges (Judges) in the present pending rehearing as moot. See Order (C) To reflect the relative roles of the proceeding is to determine the royalty Dismissing Rehearing Proceeding (Oct. copyright owner and the copyright user in rates and terms applicable to Preexisting 11, 2018). the product made available to the public with Subscription Services (PSS) and Based upon the totality of the record, Satellite Digital Audio Radio Services 2 See Digital Performance Right in Sound and in accordance with the following Recording Act of 1995, Public Law 104–39, 109 (SDARS) for licenses established by the reasoning and analysis, the Judges Stat. 336 (1995). Copyright Act (Act) to utilize determine that the applicable rates and 3 Section 112 provides that a sound recording copyrighted sound recordings. See 17 terms for the period beginning January transmitter may make no more than one ephemeral U.S.C. 112, 114. The Act requires the 1, 2018,1 shall be: phonorecord, ‘‘unless the terms and conditions of the statutory license allow for more.’’ 17 U.S.C. Judges to determine applicable rates and For PSS: 7.5% of Gross Revenues, as 112(e)(1). terms every five years. See 17 U.S.C. that term is defined for PSS. 4 Specifically, section 114 excludes from the 801(b)(1), 804(b)(3)(B). statutory license transmissions by interactive services. See 17 U.S.C. 114(d)(2)(A)(i). In determining the PSS rates, the 1 In the Judges’ Initial Determination in this Judges considered proposals from both proceeding, they established rates for the period 5 Sirius XM and SoundExchange agree in Music Choice and SoundExchange as January 1, 2018 through December 31, 2022. Under substance that the Judges should conform the guideposts rather than as benchmarks the MMA, these rates shall remain in effect until SDARS regulations regarding ephemeral licenses to December 31, 2027. See 17 U.S.C. 804(b)(3)(B) (as the language adopted by the Judges in Web IV. See and determined a rate based upon the amended by the MMA). Note that all redactions in SEPFF ¶ 2371; SXMPFF ¶ 492. The Judges approve current statutory rate as adjusted to this publication were made by the Copyright this agreement and adopt it in the regulations for meet statutory requirements. In Royalty Judges and not by the Federal Register. the forthcoming rate period. See infra, section III. VerDate Sep<11>2014 19:29 Dec 18, 2018 Jkt 247001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\19DER2.SGM 19DER2 amozie on DSK3GDR082PROD with RULES2 Federal Register / Vol. 83, No. 243 / Wednesday, December 19, 2018 / Rules and Regulations 65211 respect to relative creative contribution, Recording Industry Association of ‘‘[m]onopoly and public utility aspects technological contribution, capital America (RIAA), through their counsel, are just not prevalent in this industry.’’ investment, cost, risk, and contribution to the Thurman Arnold, Esq., a well-known Id. opening of new markets for creative advocate of strong antitrust The licensees’ opposing position, expression and media for their communication. enforcement. See Hearing on S. 597, expressed by Mr. Arnold on behalf of (D) To minimize any disruptive impact on Subcomm. on Patents, Trademarks and the RIAA, contained the seeds of the the structure of the industries involved and Copyrights of the S. Committee on the standard ultimately adopted in section on generally prevailing industry practices. Judiciary, (Mar. 20–21, 1967) (Senate 801(b)(1). As Mr. Arnold testified, the 17 U.S.C. 801(b)(1). Hearing). statute should include, inter alia, Mr. Nathan criticized any proposed ‘‘accepted standards of statutory In SDARS 1, the Judges detailed the legislation that would subject the historical treatment of these section ratemaking,’’ including a rate ‘‘that songwriting industry to a statutory 801(b)(1) standards. See Determination insures the party against whom it is mechanical licensing scheme. Id. at 382. of Rates and Terms . 73 FR 4080, imposed a reasonable return on . He did not agree that licenses in the 4082–84 (Jan. 24, 2008) (SDARS I). investment’’ and ‘‘that divides the music industry should be treated There, the Judges noted that the section rewards for the respective creative differently than how ‘‘we generally 801(b)(1) factors originated in the contributions of the record producers function under competitive marketplace protracted legislative process that [the licensees] and the copyright owners bargaining arrangements whereby most ultimately produced the Copyright Act . equitably between them.’’ Id. at entities in our economy bargain for that of 1976. The SDARS I Judges examined 469. which goes into the creation of goods the legislative history of the 1976 Act Mr. Nathan criticized this approach and services and also bargain the price and noted that the motivation for on two fronts. First, he argued that the for which those goods and services are adopting the four itemized 801(b)(1) ‘‘personal service’’ nature of the sold.’’ Id. He further noted that the factors arose from an exchange between songwriting and publishing industry statutory mechanical royalty rate was in two law professors, Professor Ernest precluded application of a ‘‘reasonable part a reaction to an early 20th century Gellhorn, on behalf of certain copyright rate of return’’ requirement for concern regarding a Supreme Court users, and Professor Louis H.
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