The Copyright Royalty Board has begun the hearing phase of its proceeding to set the royalties to be paid by webcasters (or noninteractive digital music services) for public performances of sound recordings for the years 2016-2020. These are the royalties paid by Internet radio companies to SoundExchange, allowing them to play any recorded music legally released in the United States since 1972 (see our article here about issues regarding pre-1972 sound recordings), as long as the digital service pays the royalties set by the Board and observes other rules set by the Copyright Act. This proceeding began in January 2014, when the CRB asked for petitions to participate in the proceeding. After those petitions, parties had time to engage in settlement discussions before filing “written direct cases” last October – written witness statements setting out the rates proposed by each party and the justifications for those rates (see our summary of the parties initial proposals here). Since that time, the parties have been engaged in discovery, producing mountains of documents relevant to the claims made, and conducting depositions of a number of witnesses. This week, the case moved into its trial phase.
On Monday, the parties still participating in the proceeding presented to the 3 CRB judges their opening statements where their attorneys summarized what they hope to prove over the next 5 weeks of trial. During the trial, the parties will formally introduce their written statements (available on the CRB website, here, with sensitive business information redacted), which have been amended based on facts uncovered during the discovery that was conducted, and their written rebuttal testimony – testimony that was provided to the CRB in February to rebut the initial written cases (available on the CRB website, here, with sensitive business information redacted). Such rebuttal testimony has itself been subject to the discovery process. There can be various objections to the written evidence presented – including questions of hearsay or relevance to the proceeding. For virtually all of the written statements, the individual who provided that testimony will be present at the hearing to introduce that testimony, and each witness will be subject to cross examination by the other parties. As is evident by the number of exhibits that have been submitted, there will be dozens of witnesses to be heard – from renowned economists and other experts, to record label and digital music company executives, to broadcasters large and small. This hearing is scheduled to last for 5 weeks. After the presentation of the witnesses, the parties’ lawyers again stand before the Board to present closing statements, orally summarizing the evidence that has been presented and arguing where that evidence should lead the CRB. The closing statements are scheduled for Wednesday June 3. After that, parties submit “findings and conclusions” – summaries of the evidence with specific citations to the record that was developed over the 5 week trial, with legal arguments as to where that evidence should take the Board in its decision making. Reply findings, contesting interpretations of the facts and law, are due by July 10.
No winner or loser is announced during any of these proceedings – the decision is instead only announced when the CRB finishes its review of the record and issues its decision. The statute governing the CRB proceedings requires that the decision be issued by mid-December of this year. As the findings and conclusions are likely to be hundreds of pages long, and the CRB needs to distill these argumentative papers into a single summary of the facts on which it bases its decision and the legal conclusions that are reached from those facts, it is unlikely that the decision will be released much before the deadline. Based on prior cases, the decision itself may well itself end up being over a hundred pages long.
This week’s opening statements were presented by all the parties who are still participating. For copyright holders, SoundExchange and George Johnson (an individual songwriter/performer who is representing himself) presented arguments. For music services, opening arguments were made by Pandora, iHeart Media, the National Association of Broadcasters, Sirius XM (broadcasters and Sirius are parties only with respect to their streaming activities – as broadcasters do not pay of their over-the-air performances, and Sirius’ royalties for its satellite broadcasts are set in a different CRB proceeding, see our summary of the last one here), IBS (the Intercollegiate Broadcast System – a group that represents college and some high school stations) and the National Religious Broadcasters Noncommercial Music License Committee (NRB-NMLC). All made their own opening statements – splitting the time allotted to the services for an opening statement. The proceeding began at 9:30 and ran until after 5.
For someone like me who has participated in the last two CRB proceedings in 2006 and 2010, there were dramatic differences in the opening proceeding. In the past, while there were spectators in the courtroom for the opening statement, they were mostly Washington DC representatives of parties participating in the proceeding. On Monday the room was too small for the public session, as the courtroom was packed with financial analysts, journalists and other observers. In the afternoon, for the closed session (when confidential information was discussed), there was a little more elbow room. The crowd has thinned now that the actual witnesses are being presented, but there is certainly more interest in the outcome of the proceeding than there has been in the past.
Of course, in 2006, webcasting was much newer and had less adoption and interest among the general public. In 2010, most webcasters were covered by Webcasters Settlement Act agreements which reduced royalties for 2006-2010 from those set by the CRB in 2006, but also set rates for parties who signed WSA agreements for the period 2011-2015. The WSA rates (and the CRB rates for 2011-2015) are summarized here. Parties that signed WSA agreements did not need to participate in the 2010 proceeding, as rates for that period had been set under the WSA agreements (and, in fact, most of the WSA agreements prohibited services from participating in the 2010 proceeding).
But, the webcasting industry is well-represented in the current proceeding. And, with the growth of webcasting and the expiration of the WSA deals, the level of interest from observers from outside the industry is high. And it will no doubt remain high until the CRB decision in December.