Internet radio: The case for a technology neutral royalty standard

Virginia Law Review

Volumn 95, Issue 8, 2009, Pages 2129-2179

  Stockment, Andrew ^a  

^a NONE

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EID: 77649269701     PISSN: 00426601     EISSN: None     Source Type: Journal    
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References (280)

1. Arbitron & Edison Media Research, The Infinite Dial 2009: Radio's Digital Platforms (Apr. 16, 2009), http://www.arbitron.com/downloads/infinite- dial-2009-presentation.pdf, at 7-8 [hereinafter The Infinite Dial 2009] (reporting that 69 million Americans listened to internet radio in the past month and 42 million listened in one week in January 2009);
2. Meg Tirrell, Yahoo, AOL May Abandon Web Radio After Royalties Rise (Update 2), Bloomberg, Nov. 28, 2007, http://www.bloomberg.com/apps/news?pid= 20601103&refer=us&sid=a0pKOrcpw6yE#.
3. See, e.g., Live365 Internet Radio, Complete Genre List, http://www.live365.com/listen/browse.live (last visited Sept. 16, 2009).
4. The Infinite Dial 2009, supra note 1 (reporting that 42 million Americans listened to internet radio in one week in January 2009).
5. Press Release, SoundExchange, SoundExchange and "PurePlay" Webcasters Reach Unprecedented Experimental Rate Agreement (July 7, 2009), http://www.soundexchangeblog.com/?p=91.
6. Unless otherwise indicated, "internet radio" and "webcasting" as used herein will refer to non-interactive, non-subscription streaming of audio programming over the internet, whereby the listener plays but does not download the audio content.
7. William W. Fisher III, Promises to Keep: Technology, Law, and the Future of Entertainment 17-18 (2004).
8. See, e.g., StreamingSoundtracks.com, http://www.streamingsoundtracks.com (last visited Sept. 16, 2009).
9. A "simulcast" is a simultaneous webcast of a broadcast radio transmission - broadcast radio streamed over the internet with the same content as would be heard on an AM or FM tuner. For example, Kansas City's Greatest Hits is simulcast on 94.9 KCMO and http://www.949kcmo.com (last visited Sept. 16, 2009).
10. SIRIUS Satellite Radio, SIRIUS Internet Radio, http://www.sirius.com/ siriusinternetradio (last visited Sept. 16, 2009);
11. XM Radio Online, http://xmro.xmradio.com/xstream/index.jsp (last visited Sept. 16, 2009).
12. See, e.g., Live365, http://www.live365.com (last visited Sept. 16, 2009).
13. See, e.g., Pandora, http://www.pandora.com (last visited Sept. 16, 2009).
14. Id.
15. Pandora, supra note 11. These features do not render the webcast "interactive." 17 U.S.C. § 114(j)(7) (2006).
16. The Infinite Dial 2009, supra note 1 (reporting that 69 million Americans listened to internet radio in January 2009); Motion of Appellants Digital Media Association ("DiMA"), et. al. For a Stay Pending Appeal, at 2, Digital Media Ass'n v. Copyright Royalty Bd., 2007 WL 1724183 (D.C. Cir. June 4, 2007), http://somafm.com/pdf/Appeal.pdf [hereinafter DiMA Motion for Stay] (claiming monthly listeners of 50-70 million as of May 2007); Tirrell, supra note 1.
17. The Infinite Dial 2009, supra note 1, at 7.
18. Letter from Perry J. Narancic, Webcaster Alliance, Inc., to Steven M. Marks, Esq., Vice President, Business and Legal Affairs, Recording Industry Association of America (RIAA) (July 8, 2003), http://www.mp3newswire.net/ stories/2003/webcaster.html (last visited Sept. 16, 2009).
19. E-mail from Ann Gabriel, President, Webcaster Alliance, to author (Dec. 30, 2008, 12:40 EST) (on file with author).
20. For a discussion of the basics of webcasting, see U.S. Gen. Accounting Office, GAO 04-700, Intellectual Property: Economic Arrangements Among Small Webcasters and Third Parties and Their Effect on Royalties 5-9 (2004). For a discussion of the basic technology of webcasting, see Neil Conley, The Future of Licensing Music Online: The Role of Collective Rights Organizations and the Effect of Territoriality, 25 J. Marshall J. Computer & Info. L. 409, 430-32 (2008).
21. See, e.g., Slim Devices, Discover Squeezebox, http://www.slimdevices.com/ pi overview.html (last visited Sept. 16, 2009).
22. See, e.g., Squeezebox Boom All-in-One Network Music Player, http://www.slimdevices.com/pi-boom.html (last visited Sept. 16, 2009).
23. See, e.g., Pandora.com, Pandora for BlackBerry, http://www.pandora.com/ blackberry (last visited Sept. 16, 2009).
24. See generally Sarah McBride, Internet Radio Races to Break Free of the PC, Wall St. J., June 18, 2007, at A1.
25. Audio4cast, Car Stereo Makers Racing to be First with Internet Radios, http://audio4cast.com/2009/01/06/car-stereo-makers-racing-to-be-first-with- internet-radios/ (Jan. 6, 2009);
26. see also Posting of Chris Tutor to Autoblog, CES 2009 Preview: Internet Radio in the Car, http://www.autoblog.com/2009/01/04/ces-2009-preview-internet- radio-in-the-car (Jan. 4, 2009, 16:16 EST).
27. 17 U.S.C. § 102(a)(2), (7) (2006).
28. Fisher, supra note 6, at 39.
29. 17 U.S.C. § 101 (2006).
30. DiMA Motion for Stay, supra note 14, at 6.
31. 17 U.S.C. §§ 101, 106(4), (6) (2006).
32. Id. § 106(1)-(3).
33. Fisher, supra note 6, at 39.
34. Id. at 39-40.
35. A "phonorecord" is a material object[] in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term 'phonorecords' includes the material object in which the sounds are first fixed. 17 U.S.C. § 101 (2006). Phonorecords include digital copies of sound recordings (for example, MP3 files).
36. 17 U.S.C. § 106(3) (2006).
37. Fisher, supra note 6, at 40.
38. 17 U.S.C. § 109 (2006); Fisher, supra note 6, at 40.
39. 17 U.S.C. § 114(a) (2006).
40. Id. § 106(4); Fisher, supra note 6, at 40-41.
41. Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (1995) (codified as amended in scattered sections of 17 U.S.C).
42. 17 U.S.C. § 106(6) (2006).
43. See 17 U.S.C. § 110 (2006); Fisher, supra note 6, at 41, 43-46 (discussing various exceptions, including the fair use doctrine).
44. See generally Fisher, supra note 6, at 41-43 (discussing various compulsory licenses).
45. 17 U.S.C. §§ 101, 115(a)(1), (c)(3)(J)(i) (2006).
46. Fisher, supra note 6, at 50.
47. Id. Licensees need not obtain blanket licenses from all three PROs, but typically do so. Id.
48. Id.
49. ASCAP Experimental License Agreement for Internet Sites & Services - Release 5.1, http://www.ascap.org/weblicense/reports/pdfs/ NonInteractiveLicenseAgreement R5-1.pdf (last visited Sept. 16, 2009).
50. Posting of David Oxenford to Broadcast Law Blog, Rate Court Determines ASCAP Fees for Large Webcasters - Some Interesting Contrasts with The Copyright Royalty Board Decision, http://www.broadcastlawblog.com/archives/intemet-radio- rate-court-determines-ascap-fees-for-large-webcasters-some-interesting- contrasts-with-the-copyright-royalty-board-decision.html (May 1, 2008).
51. BMI Web Site Music Performance Agreement, at 2, http://www.bmi.com/forms/ licensing/newmedia/intemet.pdf (last visited Sept. 16, 2009).
52. Id. at 3.
53. SESAC Internet License Agreement, http://www.sesac.com/pdf/internet-ATH- 2009.pdf (last visited Aug 4., 2009).
54. See infra Sections II.C and III.A.
55. Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (1995) (codified as amended in scattered sections of 17 U.S.C).
56. Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860 (1998) (codified as amended in scattered sections of 17 U.S.C).
57. 17 U.S.C. §§ 101, 115(a)(1), (c)(3)(J)(i) (2006).
58. Id. § 114.
59. Id. § 112.
60. Id. § 114.
61. Id. § 114(d), (f), (j).
62. Id. § 114(f)(1)(B), (2)(B); id. § 801(b)(1).
63. See infra Part III.
64. 17 U.S.C. § 112(e) (2006).
65. Id. § 112(e)(4); see also Subsection IV.A.2.
66. 17 U.S.C. §§ 112(e)(4), 114(f) (2006). The CRB, consisting of Copyright Royalty Judges, was created by the Copyright Royalty and Distribution Reform Act of 2004 ("CRDRA"), Pub. L. No. 108-419, 118 Stat. 2341 (2004) (codified as amended in scattered sections of 17 U.S.C).
67. 17 U.S.C. §§ 801(a), 802(c) (2006). The constitutionality of the CRB has been questioned as potentially violating the Appointments Clause, U.S. Const. Art. II, § 2, c1. 2, but no court has yet ruled on the issue. See SoundExchange, Inc. v. Librarian of Congress, 571 F.3d 1220, 1226-27 (D.C. Cir. 2009) (Kavanaugh, J., concurring) (noting that the manner in which copyright royalty judges are appointed "raises a serious constitutional issue");
68. Intercollegiate Broadcast System, Inc. v. Copyright Royalty Bd., 571 F.3d 69, 75 (D.C. Cir. 2009) (declining to rule on the Appointments Clause challenge because the issue was not timely raised);
69. Complaint for Declaratory and Injunctive Relief at 9, Live365 v. Copyright Royalty Board, No. 1:09-cv-01662-RBW, (D.D.C filed Aug. 31, 2009) (challenging the constitutionality of the statute providing for the appointment of the Copyright Royalty Judges).
70. 17 U.S.C. § 804(b)(1) (2006).
71. See Notice of Designation as Collective under Statutory License, http://www.copyright.gov/carp/notice-designation-collective.pdf (last visited Jan. 18, 2009).
72. SoundExchange, http://www.soundexchange.com (click on "FAQ"; then click on "When was SoundExchange founded?") (last visited Jan. 18, 2009).
73. Id. (click on "About") (last visited Aug. 4, 2009).
74. Id. (click on "About"; then click on "SoundExchange By the Numbers") (last visited Aug. 4, 2009).
75. 17 U.S.C. § 114(g)(2) (2006).
76. Matt Jackson, From Broadcast to Webcast: Copyright Law and Streaming Media, 11 Tex. Intell. Prop. L.J. 447, 450-51 (2003). Although individual recording artists have argued in favor of higher internet radio royalties, the argument is primarily advanced by the record companies, which own the majority of sound recording copyrights.
77. Id; Allison Kidd, Mending the Tear in the Internet Radio Community: A Call for a Legislative Band-Aid, 4 N.C. J.L. & Tech. 339, 365 (2003).
78. See Dan Costa, The Internet Radio Death Watch, supra note 14.
79. Jackson, supra note 71, at 451.
80. Id.
81. Id.
82. Mark Fisher, Webcasters and Rising Royalty Fees: Paying the Price for Innovation?, Wash. Post, Mar. 18, 2007, at N2.
83. Douglas MacMillan, The Music Industry's New Internet Problem, BusinessWeek, Mar. 6, 2009, http://www.businessweek.com/print/technology/ content/mar2009/tc2009035-000194.htm.
84. Id.
85. Perhaps the greatest illustration of the recording industry's acknowledgement of the promotional value of broadcast radio is the now-illegal practice of "payola" - paying broadcasters to play particular recordings. See Fisher, supra note 6, at 58-59 (discussing payola). In 2005-2007, several record companies paid multi-million dollar settlements in cases where they were charged with engaging in payola. M. William Krasilovsky & Sidney Shemel, This Business of Music 380-85 (Robert Nirkind & Sylvia Warren eds, 10th ed. 2007). Record label executives have been quoted as saying "they pay independent contractors (promoters) between $200 and $300,000 per song and sometimes up to $1 million ....[which] breaks down to $500 to $2,000 each time a station adds a song to its playlist for the week." Id. at 385.
86. See Free Radio, Free Radio Alliance: Media Center, http://www. freeradioalliance.org/mediaCenter.asp (last visited Jan. 4, 2009). The recording industry enjoys the free promotion of their music over the airwaves in a variety of venues, launching the careers of rising stars and ultimately increasing the profitability for the record labels. Composers and songwriters are compensated through royalties collected by ASCAP, BMI and SESAC for the performance of their recorded music. The record labels and artists are compensated for their work in the sales of their recorded music, concert tickets and other promotional items. Id.
87. See, e.g., Kurt Hanson & Jay Rosenthal, Hype and Glory, L.A. Times, June 14, 2007, http://www.latimes.com/news/opinion/la-op-dustup14jun14,0,883289, full.story (discussing the promotional value of internet radio for Frank Sinatra's music).
88. Arbitron & Edison Media Research, The Infinite Dial 2008: Radio's Digital Platforms 11 (June 25, 2008), http://www.arbitron.com/downloads/digital- radio-study-2008.pdf [hereinafter The Infinite Dial 2008].
89. The Future of Radio: Hearing Before the S. Comm. on Commerce, Sci. and Transp., 110th Cong. 4 (2007) (testimony of Tim Westergren, Founder and Chief Strategy Officer, Pandora Media), http://commerce.senate.gov/public/-files/ TimWestergrenFINALFINAL1022505pm.pdf.
90. John B. Horrigan, Pew Internet & American Life Project, The Internet and Consumer Choice: Online Americans Use Different Search and Purchase Strategies for Different Goods, May 18, (2008), http://www.pewinternet.org/~/ media/Files/Reports/2008/PIP-Consumer.Decisions.pdf.pdf.
91. Posting of MG Siegler to TechCrunch, The iPhone Is Accelerating Music Sales For Pandora, http://www.techcrunch.com/2009/05/07/the-iphone-is- accelerating-music-sales-for-pandora/ (May 7, 2009). Twenty percent of those music sales are made using Pandora's iPhone application. Id.
92. One million direct referrals plus 3-5 million additional purchases at $1 each x 12 months.
93. Siegler, supra note 86.
94. Pandora drives sales of $48 to $72 million per year, which was 1.04% to 1.57% of the recording industry's entire revenue in 2008. Siegler, supra note 86. Because these numbers only include purchases through iTunes and Amazon.com and not purchases made elsewhere, it is likely that the true promotional impact is even greater.
95. Opinion, Static Over Royalties, L.A. Times, Mar. 8, 2007, at A22, available at http://articles.latimes.com/2007/mar/08/opinion/ed-radio08;
96. see also, Claire Cain Miller, Even if Royalties for Web Radio Fall, Revenue Remains Elusive, N.Y. Times, Oct. 27, 2008, at B4, available at http://www.nytimes.com/2008/10/27/technology/internet/27radio.html?pagewanted= print;
97. Paul Maloney, Pandora's Fight is Radio's Fight, Says Industry Research Expert, RAIN: Radio and Internet Newsletter (Kurt Hanson), Aug. 22, 2008, http://textpattern.kurthanson.com/articles/467/rain-822-pandoras-fight-is- radios-fight-says-industry-research-expert;
98. SaveNetRadio.org, Musicians - Pass the Mic, http://web.archive.org/web/ 20070702024959/www.savenetradio.org/musicians/pass-the-mic.html (last visited Jan. 7, 2009).
99. Press Release, SaveNetRadio, Artists Raise Their Voices in Support of Net Radio Legislation (July 10, 2007), http://web.archive.org/web/20070811083249/ www.savenetradio.org/press-room/press-releases/070710-rma.pdf.
100. Music and Radio in the 21st Century: Assuring Fair Rates and Rules across Platforms: Hearing Before the S. Comm. on the Judiciary, 110th Congress (2008) (testimony of Matt Nathanson, Songwriter, Performer and Recording Artist),http://judiciary.senate.gov/hearings/testimony.cfm?id=3501&wit-id= 7353.
101. Determination of Rates and Terms, Digital Performance Right in Sound Recordings and Ephemeral Recordings, 72 Fed. Reg. 24,084, 24,084 (Copyright Royalty Bd., Library of Cong. May 1, 2007) (codified at 37 C.F.R. pt. 380) [hereinafter CRB Webcasting Final Determination].
102. For rates prior to 2006, see Digital Performance Right in Sound Recordings and Ephemeral Recordings, Final Rule, 69 Fed. Reg. 5,693, 5,695 (Feb. 6, 2004) (codified at 37 C.F.R. pts. 262, 263);
103. Notification of Agreement Under the Small Webcaster Settlement Act of 2002, 67 Fed. Reg. 78,510, 78,511 (Dec. 24, 2002);
104. Notification of Agreement Under the Small Webcaster Settlement Act of 2002, 68 Fed. Reg. 35,008, 35,009 (June 11, 2003).
105. CRB Webcasting Final Determination, supra note 93, at 24,085; DiMA Motion for Stay, supra note 14, at 8. The moving parties requested the CRB to clarify the meaning of the "per station" and "per channel" component of the $500 minimum fee. The appellants also objected to the failure of the CRB to consider a percentage of revenue royalty, which the PROs offer for the performance of the underlying musical composition. The CRB denied the motion for rehearing without specifically addressing the parties' objections, concluding the proceeding did not present "the type of exceptional case that would warrant a rehearing or reconsideration." The CRB also refused to stay its decision pending appeal. Id.
106. CRB Webcasting Final Determination, supra note 93, at 24,084.
107. Id.; see also David D. Oxenford, Davis Wright Tremaine LLP, Copyright Royalty Board Releases Music Royalties for Internet Radio Streaming for 2006-2010 - Clarifying the Confusion (Apr. 12, 2007), http://www.dwt.com/ LearningCenter/Advisories?find=24816 [hereinafter CRB Releases Music Royalties for Internet Radio].
108. Intercollegiate Broad. Sys. v. Copyright Royalty Bd., No. 07-1123 (D.C. Cir. July 11, 2007) (order denying stay of CRB decision).
109. Intercollegiate Broad. Sys. v. Copyright Royalty Bd., 571 F.3d 69, 82 (D.C. Cir. 2009).
110. Id. at 76-90, 92.
111. This minimum fee was vacated by the court in Intercollegiate Broadcast System, 571 F.3d at 82.
112. This figure assumes 15 songs per hour and 1,000 simultaneous listeners.
113. CRB Webcasting Final Determination, supra note 93, at 24,100.
114. Aggregate tuning hours ("ATH") is the total number of hours of music streamed, per person. Thus, if one person listens to a webcast for 1 hour, that is 1 ATH. If two people listen for 30 minutes each, that is also 1 ATH. 37 C.F.R. § 262.2(a) (2004).
115. CRB Webcasting Final Determination, supra note 93, at 24,097.
116. CRB Webcasting Final Determination, supra note 93, at 24,096.
117. A "performance" is defined as a single song streamed to a single listener. Thus, ten people listening to a webcaster playing only one song counts as ten performances. See CRB Webcasting Final Determination, supra note 93, at 24,111. The CRB treated 15.3 songs (performances) as the equivalent of one ATH. This differential will be used throughout this Note when converting between per performance rates and aggregate tuning hours.
118. DiMA Motion for Stay, supra note 14, at 3-4.
119. Id.
120. Id.
121. DiMA's members are: Amazon.com, Apple, BestBuy/Napster, iMeem, Live365, Microsoft, Motorola, MTV Networks, Muzak, Myspace Music, Nokia, Pandora Media, RealNetworks, RightsFlow, Sandisk, Slacker, Spacial Audio Solutions, and YouTube. DiMA, About DiMA: Members, http://www.digmedia.org/index.php? option=com-content&view=article&id=49&Itemid=69 (last visited Sept. 20,2009).
122. DiMA Motion for Stay, supra note 14, at 3-4 (emphasis in original) (internal citations omitted).
123. Press Release, DiMA (Aug. 23, 2007), http://web.archive.org/web/ 20071213060858/http://www.digmedia.org/content/release.cfm?id=7229&content= pr.
124. Id.
125. Posting of Erick Schonfeld to TechCrunch, Pandora Hits 20 Million Registered Users (Via Twitter), http://www.techcrunch.com/2008/12/19/pandora- hits-20-million-registered-users-via-twitter/ (Dec. 19,2008) [hereinafter Schonfeld, Dec. 19, 2008].
126. Pandora allows users to create up to 100 channels each. Pandora, FAQ, http://blog.pandora.com/faq/ (last visited Sept. 20,2009).
127. Cydney A. Tune, Client Alert: Webcaster Royalties Update: Discount Offer for Small Webcasters, Fee Caps for the Largest, August 28, 2007, 943 PLI/Pat 117, 119-20 (2008) [hereinafter Discount Offer for Small Webcasters];
128. Posting of David Oxenford to Broadcast Law Blog, Yes We Do Exist - Claims Copyright Royalty Board, http://www.broadcastlawblog.com/archives/internet- radio-yes-we-do-exist-claims-copyright-royalty-board.html (June 25,2008).
129. Webcaster Settlement Act of 2008, Pub. L. No. 110435, § 2, 122 Stat. 4974 (to be codified as amended at 17 U.S.C. § 114).
130. Id. § 2.
131. SoundExchange is the sole "receiving agent" designed by the Copyright Office. Notice of Designation as Collective under Statutory License, supra note 66.
132. Webcaster Settlement Act of 2008 § 2.
133. Webcaster Settlement Act of 2009, Pub. L. No. 111-36, § 2,123 Stat. 1926 (to be codified as amended at 17 U.S.C. § 114).
134. Posting of David Oxenford to Broadcast Law Blog, Webcaster Settlement Act - What Does it Mean?, http://www.broadcastlawblog.com/archives/internet-radio- webcaster-settlement-act-what-does-it-mean.html (Oct. 1, 2008).
135. Three agreements were submitted under the deadline established by the Webcaster Settlement Act of 2008. Five agreements were submitted after the Webcaster Settlement Act of 2009 extended the deadline. Previously, SoundExchange had entered into a private agreement with 24 small webcasters for the period from 2006 to 2010. The agreement only covered sound recordings by members of SoundExchange. Ben Newhouse, Select Small Webcasters Embrace SoundExchange Offer, Royalty Week, Sept. 25, 2007, http://www.royaltyweek.com/? p=67; Interview with Anonymous, Signer of the September 2007 Agreement with SoundExchange (Jan. 5, 2009).
136. Notification of Agreements Under the Webcaster Settlement Act of 2008, 74 Fed. Reg. 9,293, 9,294 (Library of Cong, Copyright Royalty Office Mar. 3, 2009) (covering period from 2005-2009);
137. Notification of Agreements Under the Webcaster Settlement Act of 2009, 74 Fed. Reg. 40,614, 40,624 (Library of Cong, Copyright Royalty Office Aug. 12, 2009) (covering period from 2010-2015).
138. These rates apply to 450 public radio webcasters, including Corporation for Public Broadcasting supported stations, NPR and NPR members, the National Federation of Community Broadcasters members, and others. Public Broadcasters Agree to Web Music Royalties, Associated Press, Jan. 15, 2009, http://www.google.com/hostednews/ap/article/ALeqM5gC2S-RJm1bTc4-s7PePo- shcDCCAD95NRSF00.
139. Notification of Agreements Under the Webcaster Settlement Act of 2008, 74 Fed. Reg. at 9,294, 9,299 (covering period from 2006-2015).
140. Id. at 9,294, 9,302, 9,306 (covering period from 2006-2015).
141. Notification of Agreements Under the Webcaster Settlement Act of 2009, 74 Fed. Reg. at 40,614-15 (covering period from 2009-2015). Sirius XM's internet radio service should not be confused with Sirius XM's satellite radio service.
142. Id. at 40,616-17 (covering period from 2011-2015).
143. Id. at 40,624 (covering period from 2006-2015).
144. Notification of Agreements Under the Webcaster Settlement Act of 2009, 74 Fed. Reg. 34,796, 34,798 (Library of Cong, Copyright Office July 17, 2009) [hereinafter Pureplay Agreement]. A "pureplay" webcaster is a commercial webcaster whose entire business is internet radio. While any commercial webcaster is able to elect into the Pureplay Agreement, the agreement requires the webcaster to subject itself to a minimum royalty payment of 25% of its gross revenue. Id. at 34,799.
145. Michael Schmitt, News Flash: SoundExchange and "Pureplay" webcasters announce 2006-2015 royalty agreement, RAIN: Radio and Internet Newsletter, July 7, 2009, http://textpattern.kurthanson.com/articles/719/rain- 77-soundexchange-and-pure-play-webcasters-reach-royalty-agreement/ [hereinafter RAIN July 7, 2009].
146. Pureplay Agreement, supra note 130 at 34, 796-802.
147. Id. at 34,799.
148. Id. at 34,797-98. For the definition of ATH, see supra note 104.
149. Id. at 34,798.
150. Id.
151. Id. at 34,799.
152. Id. at 34,801.
153. Id. at 34,799-800.
154. Id. at 34,799.
155. This assumes 15 songs per hour and 1,000 simultaneous listeners.
156. Notification of Agreements Under the Webcaster Settlement Act of 2009, 74 Fed. Reg. at 34,799.
157. This assumes 15 songs per hour and 1,000 simultaneous listeners.
158. See, e.g., Claire Cain Miller, Music Labels Reach Online Royalty Deal, N.Y. Times, July 8, 2009, at B1, available at http://www.nytimes.com/2009/07/08/ technology/internet/08radio.html [hereinafter Music Labels Reach Online Royalty Deal];
159. Posting of Kurt Hanson to Kurt's Blog, Internet Radio Saved! Behind the New "Pureplay" Webcaster License, http://textpattern.kurthanson.com/ kurtsblog/720/behind-the-new-pureplay-webcaster-license/ (July 7, 2009, 12:48 EST) [hereinafter Hanson, July 7, 2009];
160. John Timmer, Ars Technica, Pandora Lives! SoundExchange Cuts Deal on Webcasting Rates, July 7, 2009, http://arstechnica.com/media/news/2009/07/ soundexchange-cuts-deal-on-music-webcasting-rates.ars.
161. Pandora has 30 million registered users. Music Labels Reach Online Royalty Deal, supra note 144.
162. Posting of Tim Westergren to Pandora Internet Radio Blog, Important Update on Royalties, http://blog.pandora.com/pandora/archives/2009/07/important- updat-1.html (July 7, 2009).
163. Id.
164. The Performance Rights Act and Parity Among Music Delivery Platforms: Hearing Before the S. Comm. on the Judiciary, 111th Cong. 7 (2009) (statement of Robert Kimball, Executive Vice President for Corporate Development & General Counsel, RealNetworks, Inc.), http://judiciary.senate.gov/pdf/08-04- 09KimballTestimony.pdf.
165. Web Radio Royalties Resolved*, http://voices.washingtonpost.com/ fasterforward/2009/07/web-radio-royalties-resolved-1.html?hpid=news-col-blog (July 8, 2009, 8:07 EST).
166. "Pureplay" Webcasters Settlement Still Stinks, http://insidemusicmedia.blogspot.com/2009/07/pureplay-webcasterssettlementstill. html (July 8, 2009).
167. Press Release, SoundExchange, SoundExchange and "PurePlay" Webcasters Reach Unprecedented Experimental Rate Agreement (July 7, 2009), http://www.soundexchangeblog.com/?p=91.
168. Digital Performance in Sound Recordings and Ephemeral Recordings, Notice Announcing Commencement of Proceeding with Request for Petitions to Participate, 74 Fed. Reg. 318 (Jan. 5, 2009). To participate in the proceedings, interested parties were required to file Petitions to Participate in accordance with 37 C.F.R. 351.1(b) no later than February 4, 2009. Id. at 319.
169. Posting of David Oxenford to Broadcast Law Blog, SoundExchange Announces 4 More Settlements Under Webcaster Settlement Act - Sirius, College and Religious Noncommercial Broadcasters and a Group to be Named Later, http://www.broadcastlawblog.com/2009/07/articles/internet-radio/ soundexchange-announces-4-more-settlements-under-webcaster-settlement-act- sirius-college-and-religious-noncommercial-broadcasters-and-a-group-to-be-named- later/ (July 31, 2009).
170. Live365 v. Copyright Royalty Board, No. 1:09-cv-01662-RBW (D.D.C filed Aug. 31, 2009) (seeking preliminary injunction to stay the CRB 2011-2015 webcasting determination).
171. Hiawatha Bray, Internet Radio Firms Say Royalties Limiting Choices, The Boston Globe, Mar. 14, 2008, at C1, available at http://www.boston.com/business/ technology/articles/2008/03/14/intemet-radio-firms-say-royalties-limiting- choices.
172. Daniel McSwain, Webcast Royalty Rate Decision Announced, RAIN: Radio and Internet Newsletter (Kurt Hanson), Mar. 2, 2007, http://www.kurthanson.com/ archive/news/030207/index.shtml [hereinafter RAIN, Mar. 2, 2007] (italicized text bolded in original).
173. CBS RADIO Makes Another Investment in Internet Radio, Takes Over Yahoo's Launchcast, Audio4cast, Dec. 3, 2008, http://audio4cast.com/2008/12/03/cbs- radio-makes-another-investment-in-intemet-radio-takes-over-yahoos-launchcast.
174. Tirrell, supra note 1.
175. Press Release, AOL, CBS Radio Signs Exclusive Agreement to Power AOL Radio, One of the Nation's Most Listened to Online Radio Networks (Mar. 7, 2008), http://coro.aol.com/press-releases/2008/03/cbs-radio-signs-exclusive- agreement-power-aol-radio-one-nation-s-most-listene;
176. Press Release, Yahoo!, CBS Radio to Power Yahoo!'s LAUNCHcast Radio Providing Listeners with Access to an Additional 150+ Stations (Dec. 3, 2008), http://yhoo.client.shareholder.com/press/releasedetail.cfm?ReleaseID=351938.
177. Bray, supra note 155.
178. Peter Whoriskey, Giant of Internet Radio Nears Its 'Last Stand', Wash. Post, Aug. 16, 2008, at D1 [hereinafter Giant of Internet Radio Nears Its Last Stand].
179. Id.
180. Posting of Tim Westergren to Pandora Blog, A Sad Day, http://blog.pandora.com/pandora/archives/2008/10/a-sad-day.html (Oct. 16, 2008, 13:48 EST).
181. Giant of Internet Radio Nears Its Last Stand, supra note 161.
182. Bray, supra note 155.
183. Id.
184. DiMA Motion for Stay, supra note 14, at 4.
185. RAIN, Mar. 2, 2007, supra note 156 (italicized text bolded in original).
186. Id.
187. CRB Releases Music Royalties for Internet Radio, supra note 96. Although SoundExchange reached an agreement with the Corporation for Public Broadcasting on January 15, 2009, that agreement only covers 2005-2010. See Notification of Agreements Under the Webcaster Settlement Act of 2008, 74 Fed. Reg. 9,293, 9,294 (Library of Cong, Copyright Royalty Office Mar. 3, 2009). Thus, the significant increase under the previous CRB may manifest itself again in the next CRB decision for the 2011-2015 rate period.
188. See supra note 93 and accompanying text.
189. Id.
190. See id.
191. CRB Releases Music Royalties for Internet Radio, supra note 96.
192. See supra Subsection II.C.3.
193. See infra Section III.B.
194. Kimball, supra note 148. See supra note 42-51 and accompanying text.
195. Press Release, SoundExchange, SoundExchange and "PurePlay" Webcasters Reach Unprecedented Experimental Rate Agreement (July 7, 2009), http://www.soundexchangeblog.com/?p=91.
196. Michael Schmitt, SoundEx wants double in 2011 what they're getting under current pureplay settlement, RAIN: Radio and Internet Newsletter, Oct. 5, 2009, http://textpattern.kurthanson.com/articles/792/rain-108-soundex-wants-double-in- 2011-what-theyre-getting-under-current-pureplay-settlement/.
197. 17 U.S.C. §§ 112, 114 (2006).
198. NASDAQ: SIRI.
199. Ruthie Ackerman, Sirius XM Fights the Static, Forbes.com, Sept. 10, 2008, http://www.forbes.com/2008/09/10/sirius-xm-satellite-markets-equity-cx-ra- 0910markets41.html.
200. Id.
201. Id.
202. See supra note 14 and accompanying text.
203. DiMA Motion for Stay, supra note 14, at 4-5.
204. Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed. Reg. 4,080 (Library of Cong, Copyright Royalty Bd. Jan. 24, 2008) (to be codified at 37 C.F.R. pt. 382) [hereinafter CRB Satellite Radio Final Decision].
205. Music Choice - About Us, http://broadband.musicchoice.com/mcbroadband/ mso/player/about.html (last visited Jan. 17, 2009).
206. See infra note 195 and accompanying text.
207. 17 U.S.C. §§ 114(f)(1)(B), 801(b)(1) (2006). Although § 112 ephemeral license royalties are to be determined under the "willing buyer, willing seller" standard, the § 112 royalties were deemed to be included in the § 114 royalties in all the most recent decisions. See, e.g., CRB Satellite Radio Final Decision, supra note 187.
208. CRB Satellite Radio Final Decision, supra note 187.
209. Id.; 37 C.F.R. § 382.12 (2008).
210. 37 C.F.R. § 382.12 (2008). The U.S. Court of Appeals for the District of Columbia Circuit upheld the CRB rate determination as to the § 114 royalties, but remanded the case to the CRB to determine a separate § 112 royalty. SoundExchange, Inc. v. Librarian of Congress, 571 F.3d 1220, 1226 (D.C Cir. 2009).
211. 17 U.S.C. §§ 114(f)(1)(B), 801(b) (2006). Although § 112 ephemeral license royalties are to be determined under the "willing buyer, willing seller" standard, the § 112 royalties have been deemed to be included in the § 114 royalties in all the most recent decisions. See, e.g., CRB Satellite Radio Final Decision, supra note 187.
212. Adjustment of Rates and Terms for Preexisting Subscription and Satellite Digital Audio Radio Services, 72 Fed. Reg. 71, 795 (Library of Cong, Copyright Royalty Bd. Dec. 19, 2007) (to be codified at 37 C.F.R. pt. 382) [hereinafter CRB Digital Cable Radio Final Decision].
213. Id.
214. 37 C.F.R. § 382.2(c) (2008).
215. Id. § 382.2(a) - (b).
216. Copyright Royalty Board - Docket 2005-5, July 16, 2008, http://www.loc.gov/crb/proceedings/2005-5/;
217. Digital Performance Right in Sound Recordings and Ephemeral Recordings for a New Subscription Service, 70 Fed. Reg. 72,471 (Library of Cong, Copyright Royalty Bd. Dec. 5, 2005) (announcing commencement of proceeding).
218. 17 U.S.C. §§ 114(f)(2)(B), 801(b)(1) (2006).
219. Copyright Royalty Board - Docket 2005-5, supra note 199.
220. Digital Performance Right in Sound Recordings and Ephemeral Recordings for a New Subscription Service, 72 Fed. Reg. 72,253 (Library of Cong, Copyright Royalty Bd. Dec. 20, 2007) (to be codified at 37 C.F.R. pt. 383) [hereinafter CRB Digital Radio Satellite TV Final Decision].
221. 37 CF.R. § 383.3(b) (2008).
222. Id. § 383.3(a).
223. 72 million listeners x 12 x $0.0250 = $21,600,000. See supra note 14 and accompanying text.
224. 17 U.S.C. § 114(d)(2) (2006).
225. Press Release, SaveNetRadio, Performance Royalty Rates Topic of Discussion on Capitol Hill: House Judiciary Subcommittee Considers Value of Music for Broadcasters (June 11, 2008), http://www.savenetradio.org/press-room/ press-releases/080610-performance-royalty-rates.pdf.
226. See supra Section III.A.
227. 17 U.S.C. §§ 114(d)(2), 801(b)(1) (2006).
228. Id. § 801(b)(1).
229. CRB Satellite Radio Final Decision, supra note 187, at 4,082.
230. 17 U.S.C. § 116 (2006). Note that these royalties are for the public
231. 17 U.S.C. § 115 (2006). For the definition of a "phonorecord, " see supra note 32 and accompanying text.
232. Id. § 115. See generally Skyla Mitchell, Reforming Section 115: Escape from the Byzantine World of Mechanical Licensing, 24 Cardozo Arts & Ent. L.J. 1239 (2007) (discussing the history of § 115, its deficiencies, and proposed improvements).
233. Joshua Keesan, Let It Be? The Challenges of Using Old Definitions for Online Music Practices, 23 Berkeley Tech. LJ. 353, 355 (2008).
234. 17 U.S.C. § 115(a), (c)(3)(D) (2006); 17 U.S.C. §§ 115, 801(b)(1) (2006).
235. 37 CF.R. § 385.3 (2009).
236. 17 U.S.C. § 115(a) (2006).
237. Jonathan Potter, Executive Director, Digital Media Association, Testimony before U.S. House of Rep, Subcommittee on Courts the Internet and Intellectual Property, Hearing on "Internet Streaming of Radio Broadcasts" Balancing the Interests of Sound Recording Copyright Owners with those of Broadcasters" (July 15, 2004), http://www.judiciary.house.gov/Legacy/ potter071504.htm [hereinafter Potter, July 15, 2004].
238. Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (1995) (codified as amended in scattered sections of 17 U.S.C).
239. 17 U.S.C. § 106(6) (2006).
240. Digital Millennium Copyright Act of 1998, Pub. L. No. 105-304, 112 Stat. 2860, 2890-91,2898 (codified as amended in scattered sections of 17 U.S.C).
241. Pub. L. No. 104-39, 109 Stat. at 340-41.
242. Potter, July 15, 2004, supra note 219, at 48.
243. 17 U.S.C. § 114(f)(2)(B) (2006).
244. Id. § 114(f)(2)(B).
245. "To afford the copyright owner a fair return for his or her creative work and the copyright user a fair income under existing economic conditions." Id. § 801(b)(1)(B).
246. To reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication." Id. § 801(b)(1)(C).
247. Id. § 801(b)(1).
248. Id.§ 114(f)(2)(B).
249. See supra Section II.B.
250. See supra Section III.B.
251. While the rate for digital radio via satellite TV was the result of a negotiated agreement, the parties were negotiating in the shadow of the "willing buyer, willing seller" standard. Because the "willing buyer, willing seller" standard had recently been applied by the CRB in determining the royalties for internet radio, the negotiating parties knew that they could expect a similarly high royalty rate if negotiations broke down.
252. See supra Section III.A.
253. Lydia Pallas Loren, The Pope's Copyright? Aligning Incentives with Reality by Using Creative Motivation to Shape Copyright Protection, 69 La. L. Rev. 1, 6 (2008).
254. U.S. Const. art. I, § 8, c1. 8. This clause is also the basis of authority for the Patent Act.
255. Edward C. Walterscheid, To Promote the Progress of Science and Useful Arts: The Background and Origin of the Intellectual Property Clause of the United States Constitution, 2 J. Intell. Prop. L. 1, 51 (1994); see also 1-1 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 1.03 A (2009).
256. Dotan Oliar, Making Sense of the Intellectual Property Clause: Promotion of Progress as a Limitation on Congress's Intellectual Property Power, 94 Geo. L.J. 1771 (2006).
257. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975).
258. See Subsection IV.A.3.
259. The same applies to broadcast radio, except that the situation is even worse for broadcast radio because unless the listener happens to listen long enough to hear the announcer say the name of the song that was played, he would not know the name of the song or the recording artist. Satellite radio transmissions are at least capable of displaying the name of the song and the artist.
260. For example, in 2007 the small commercial (medium size) internet radio station AccuRadio reported selling $40,000 worth of CDs per month via links to Amazon.com for the songs being played. Fisher, supra note 6. The music sales generated by larger stations, like Pandora, are almost certainly much greater.
261. E.g., (1) Click on the "menu" button in the Pandora player, (2) Click "Buy Amazon MP3", (3) Click "Buy MP3 song with 1-Click." (Steps tested Jan. 18, 2009).
262. 17 U.S.C. § 801(b)(1) (2006). Both providers of digital radio and the public are "copyright users." However, in the context of the digital audio transmission of sound recordings, it is the digital radio services that "use" the digital audio transmission right that the public "consumes."
263. 17 U.S.C. § 114(f)(2)(B) (2006).
264. Id. § 114(f)(2) (B)(i).
265. Id. § 801(b)(1). "The rates ... shall be calculated.... [t]o afford the copyright owner a fair return for his or her creative work and the copyright user a fair income under existing economic conditions." Id.
266. Kurt Hanson, Behavior Economics May Explain Royalty Rate Increase, RAIN: Radio and Internet Newsletter, Feb. 21, 2008, http://textpattern.kurthanson.com/ crb/276/behavioral-economics-may-explain-royalty-rate-impasse;
267. see also Elizabeth Kolbert, What Was I Thinking?, The New Yorker, Feb. 25, 2008, at 78, available at http://www.newyorker.com/arts/critics/books/2008/ 02/25/080225crbo-books-kolbert.
268. Hanson, supra note 248.
269. Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions 127-35 (2008).
270. Id.
271. Id. at 133.
272. Kolbert, supra note 248.
273. Id.
274. Id.
275. Hanson, supra note 248 (emphasis in the original).
276. Id.
277. 17 U.S.C. § 801(b)(1)(A) (2006).
278. A slightly different method of amendment was proposed in the Internet Radio Equality Act (IREA), H.R. 2060, 110th Cong. (2007); S. 1353 110th Cong. (2007). The amendments proposed by the IREA, however, are incomplete because the bill does not amend § 801(b)(1), which limits that standard to §§ 114(f)(1)(B), 115, and 116.
279. U.S. Const. art. I, § 8, c1. 8.
280. See, e.g., Live365 Internet Radio, Complete Genre List, http://www.live365.com/listen/browse.live (last visited Sept. 15, 2009).