Webcasting IV: The CRB Announces 2016-2020 Rates

Some uncertainties still need to be tied down, and "Small Broadcasters" may not be happy, but the new rates themselves are likely to please broadcasters

If you're a webcaster (or planning to be one between now and 2020), you'll need to know that the Copyright Royalty Board (CRB) has at long last announced the webcasting rates for 2016-2020. The result seems to be a mixed bag for broadcasters.

Those concerned with the bottom line - i.e., the rates themselves - should for the most part be happy, except for those previously eligible for "Small Broadcaster" treatment. It looks like those "Small Broadcasters" are losing the desirable $100 "proxy fee" option - but more on that below.

Here's what the rates for the next five years look like.

Commercial Rates

The magic number for 2016 is "$ 0.0017". That's the "per performance" rate to be paid by Commercial Webcasters - including broadcasters licensed by the FCC - for any "nonsubsciption transmission". This is the rate that will likely apply to broadcasters because most, if not all, of them provide only "nonsubscription transmissions", meaning that they don't charge a fee to access the stream.

The new $ 0.0017 rate is a pretty significant reduction from the $ 0.0025 per performance rate broadcasters were paying for their webcasting in 2015. How significant? Let's use SoundExchange's estimate that an AM/FM radio station simulcasting on the Internet will play 12 songs per hour, 24 hours per day, 365 days per year. At those numbers, the $ 0.0008 decrease in per performance rate translates into a savings of about $ 84 per listener per year. So if you're a radio station with an average of 50 online listeners at all times, you should end up saving about $ 4,200 per year; if you've got 100 listeners at all times, you'd save $ 8400 per year. Not bad.

There is still a $ 500 per channel annual minimum fee per year. This acts as sort of a nonrefundable deposit against royalties incurred through the year. In other words, you pay your $ 500 at the beginning of the year and nothing more until your cumulative royalties (calculated at the $ 0.0017 per performance rate) exceed $ 500, at which point you start paying the excess over $ 500. The downside: you don't get any of the $ 500 refunded if you never reach that threshold.

Interestingly, under the CRB's new rules, broadcasters will be paying the same rates as non-broadcasters like Pandora and other major streaming services. Since Pandora's per performance rate for its non-subscription advertising-based service is currently $ 0.0014, that means that Pandora's rate for that service will increase by $ 0.0003 for 2016. But on the other hand, the rate Pandora will be paying for its subscriber-based service will decrease by the same amount, from $ 0.0025 in 2015 to $ 0.0022 in 2016. (The net effect on Pandora should be an overall increase in royalty obligations, since the number of ad-based listener hours presumably dwarfs the number of subscriber-based hours.)

Noncommercial Rates

Under the CRB's Webcasting IV ruling, "Noncommercial Webcasters" will also pay a $ 500 per channel annual minimum fee and will continue to enjoy the first 159,140 aggregate tuning hours per month free. That means that a Noncommercial Webcaster with fewer than 221 listeners at any given time is not going to pay more than $ 500 per year. Should it exceed that monthly threshold, the Noncommercial Webcaster will pay the Commercial Webcaster rate for every excess performance.

Remember, in CRB-speak, the term "Noncommercial Webcaster" refers to government entities or entities organized under Section 501 of the Internal Revenue Code who are not affiliated with an educational institution or, if they are so affiliated, whose operations are not substantially staffed by that institution's students. Remember, too, that stations generally referred to as "public radio" stations have an entirely separate deal. These stations, which are part of National Public Radio, American Public Media, Public Radio International and Public Radio Exchange, have a separate agreement already in place; they can expect to be contacted by Public Radio Interactive regarding their obligations.

Noncommercial Educational Webcasters

And then there are "Noncommercial Educational Webcasters", a universe comprised of governmental entities or entities organized under Section 501 of the Internal Revenue Code which are both (1) affiliated with an accredited educational institution and (2) staff their webcasting operations substantially by students from that institution. We already know what these folks pay because they reached a separate settlement with SoundExchange last summer. Under that settlement, they will pay a $ 500 annual minimum fee, continue to receive the first 159,140 aggregate tuning hours per month free, and pay at the above-mentioned commercial rates for any excess performances. We also know that any Noncommercial Educational Webcaster with fewer than 80,000 aggregate tuning hours in the prior year can receive an exemption from the requirement to file Playlist Reports of Use.

One caveat re the term "Educational Webcasters": In its previous rules, the CRB has referred to "Noncommercial Educational Webcasters" and "Noncommercial Webcasters", but it has not separately referred to "Educational Webcasters". In its announcement of Webcasting IV rates, however, it has now included a separate definition for that term. According to that definition, an "Educational Webcaster" is

a noncommercial educational broadcast station funded on or after January 1, 1995, under section 396(i) of the Communications Act of 1934 (47 U.S.C. 396(i)), that transmits solely noncommercial educational and cultural radio programs, and that retransmits, whether or not simultaneously, a nonsubscription terrestrial broadcast.

This is obviously something new, but from what CRB has said so far, it's hard to see exactly what difference this newly-defined term makes. Ideally - perhaps when the CRB issues the complete text of its decision explaining how it determined the new fee structure - this will be explained. Check back here for updates.

"Small Broadcaster" Option

Through 2015, the CRB has permitted "Small Broadcasters" to pay a one-time $ 100 "proxy" option, in return for which they would not have to file monthly reports with SoundExchange detailing, with respect to each song played, the song title, artist name, album title/marketing label (or International Sound Recording Code) and number of performances per song. A "Small Broadcaster" for purposes of this option is a webcasting broadcaster which, during the year in which the option is sought, reasonably expects to provide eligible transmissions totaling fewer less than 27,777 aggregate tuning hours (and which, during the year prior, had provided fewer than that level). This "Small Broadcaster" option was particularly attractive because it relieved the eligible broadcaster of considerable reporting burden for not a lot of money.

Unfortunately, from the information the CRB has released thus far, it looks like this option will not be available beginning in 2016. We'll keep an eye out for further clarification on this point, but for now it appears that the CRB is eliminating the option going forward (which, truth be told, it had previously suggested it planned to do).

What Comes Next?

This is just the beginning.

There is, of course, the possibility that judicial review of the ruling will be sought. But even if appeals are filed, history shows those often take years to resolve. In the interim, the new rates will go into effect on January 1, 2016. As for future years, the CRB declined to provide specific rates for 2017, 2018, 2019 and 2020, saying instead that the rates will be adjusted each year to reflect any changes occurring in the cost of living as determined by the most recent Consumer Price Index.

In addition, all we have at this point are the regulations themselves. The CRB will be releasing the entire decision, which will have the rationale behind the final results and perhaps offer some more insights into things like the existence of the "small" or "microcaster" categories. We'll keep an eye on that and provide updates as warranted.